Dana Milbank Joins Parade Of WaPo Hysterics Over Social Security And Medicare
Barkley Rosser at Econospeak writes an op-ed on the Washington Post’s reporting:
Dana Milbank Joins Parade Of WaPo Hysterics Over Social Security And Medicare
Dean Baker has posted on this more completely and effectively than I shall do here (and his url is so long on this one, I shall not link directly, sorry), but I simply want to throw in my two cents completely supporting him on this. As several of us have been doing for some time, we have been criticizing a bunch of Very Serious People (VSPs) at the Washington Post (WaPo) for their repeated rantings and ravings to the effect that the US faces an awful future due to its future liabilities with regard to both Social Security and Medicare, with somehow these people usually focusing on cutting future Social Security benefits now, because if we don’t, eeeeek, we might have to in the future (and they somehow also think that this is easier to achieve politically than other budget adjustments.). Those in this parade have long been led by editorial page editor, Fred Hiatt, who often does columns under his own name as well as unnamed ones officially for the Post, on this matter. His most regular follower on this has been the long execrable Robert J. Samuelson, although Ruth Marcus is also part of this group. It is sort of funny that most of these people are nominal liberals, sort of, but it means that WaPo’s house conservatives such as George Will can ignore this issue to prattle on about other stuff, given that these people spout conservative lines on this matter.
So now we have yet another of these sort of nominal liberals joining this pathetic parade, Dana Milbank, and he makes an even bigger spectacle of himself than most of these others do, waxing seriously hysterical about the matter.
What is really funny, and Dean is great on the irony of this, is that the report that triggers this outbreak of panic by Milbank in fact is an optimistic one, the CBO now projecting slightly smaller budget deficits in the future than awhile ago. A decade from now the debt to GDP ratio is expected to be 77%. This sets Milbank into a frenzy of fear, “bone-chilling” he calls it, and, one of my favorite words, “catastrophic.” Yikes, we should all run for the hills faster than we can put our pants or other lower body wear on.
Of course, not only is this lower than was previously forecast for that time (and not much higher than our current ratio), it is well below what we see in most other high income nations. With a few exceptions, most of these nations are having no problems financing their ongoing budget deficits at quite low interest rates. Milbank’s hysteria is ludicrously misplaced, quite aside from the silliness of it responding to a report that says things will be a bit better in the future than we recently thought. All I can think is that Hiatt is really coming down on his minions to toe the paper’s party line on this, and somehow Milbank is sufficiently insecure about his position that he has to fall in line spouting the prevailing line, although maybe even Hiatt might realize that the trigger for this silly report is really quite absurd. But, as Dean Baker notes, it is policy at the Post to punch old people in the face rather than suggest any reductions of income for drug companies or other beneficiaries of our out-of-control medical establishment, with it obvious that the really effective way to reduce future budget deficits would be too seriously rein in medical care costs in the US.
Barkley Rosser
I thought I permanently solved the problem of social security retirement funding a few weeks ago — I guess it didn’t get all around yet.
Right now the FICA cap is at ABOVE 83% income level. But, the Income Tax cap (income tax being how the Trust Fund bonds would be cashed) would be BELOW 50% income level — and the tax level would grow to almost 40% as income goes to the top.
What’s the realistic political likelihood of that going into effect — double-reversing the cap (at least if the Republicans have anything to say about it)? As a practical political likelihood social Security retirement will be permanently sustained by raising the cap as needed. You heard it here first. ;-O
***************
While we are on the subject:
if one generation needs a Trust Fund, why aren’t we building other funds for other generations?
according to the best authority I know, Bruce Webb (because I only understand about half what he explains to me) if working wages had kept up with productivity over past decades then there would still be a a surplus produced by the difference between what FICA is bringing in and what retirement payments go out — meaning the Trust Fund could conceivably grow forever;
according to me if the FICA rate had started out lower, the Trust Fund could have come into play and been drawn almost down by now (except for cap reversal — see above) …
… making the whole Trust Fund thing (in so far as it is supposed to be a savings mechanism and not a temporary bridge mechanism for temporary revenue shortfall) a very arbitrary, un-thought-out beast.
Dennis,
I think you are a bit confused about the purpose of the Trust Fund and its long term financial viability.
well, speaking as chopped liver
i have tried to explain to Denis and everyone that the Trust Fund is doing fine as a bridge over troubled Baby Boomers. and that when the rest of us decide that our Social Security is worth paying an extra eighty cents a week for, the whole goddamn Social Security “crisis” disappears.
But the liberals, even the real ones, can’t bring themselves to say that in public. So they leave the playing field completely clear for the phony liberals and the bad guys to run around screaming “we have to cut Social Security a little bit now so we won’t have to cut it a big bit later.” The bad guys are completely “correct” in their arithmetic, but highly dishonest about it: tapering in the cut will make it less noticeable than waiting and cutting it all at once. but that still leaves you with a cut of 25% below survival levels. on the other hand, raising the tax one tenth of one percent per year “now” will make the tax increase less noticeable than the 2% increase that will be needed “then.” but at that point you would have Social Security fully paid for forever at a cost that would have no effect on your lifestyle whatsoever.
but our liberal friends can’t bring themselves to say this. they’d rather stick with “nothing; the tooth fairy will come.” or “tax the rich”… thus adding to the hysteria.
do not mistake me… the bad guys… the ones who want to cut SS… are really really bad. as for the liberals, well some of them look pretty bad to me, either because they are stupid, or because they have an agenda they are not being honest about,
so once again for those of you who don’t know, and for those of you who’d rather write Bob Dylan type songs about it without knowing:
The “fix” for Social Security is simply to pay what it will cost. That is not a lot of money… about eighty cents more per week each year until you reach about 2% (more) of your income. Actually it adds up to a lot of money. But a lot of money is what it is going to cost you to live at even a basic level when you can no longer work. Struggling to come up with… or just believe in… some magic fix where you don’t have to pay for your own retirement is insane… or just the common form of stupidity that made social security necessary in the first place.
WaPo, WSJ, Fox, etc work for people who think SS should remain the same % of US government outlays as the pentagon.
There are beginning to arise pundits (and Heritage) resumes who say the answer to the waste, fraud and ineptitude in the military industry congress complex is make sure they get a budget that stays at XY% of the US economy.
Screaming about red herring SS/Medi issues is taking the heat off $1500B in waste for the F-35 competing with SS/Meids.
Ilsm
with respect…because I know you are one of the good guys… but it needs to be said.. just in case somebody gets it:
SS is ZERO percent of US government outlays. The SS “tax” goes into a fund that is legally dedicated to pay SS benefits. That is, it is the workers money. The workers pay for their own benefits. Changes in SS taxes and benefits will have NO effect on the US budget deficits or debt, or spending on other programs.
Except to the extent that the US borrows FROM Social Security.
Coberly,
My cab driver understanding:
The workers money is “saved” by diverting FICA collections to paying for things Income Tax would usually pay for — in exchange for Trust Fund bonds (not saying there is anything wrong with that in itself).
The money is later on to be “spent” on the retired workers by raising extra Income Tax to cash those bonds — which will have an effect on deficits and other spending programs (not saying there is anything wrong with that in itself).
Of course if you go by my cab driver theory above — the only thing ever likely to be raised will be the FICA cap. ;-O
Denis
your facts are more or less correct, but your understanding of the relation between them is neither necessary nor sufficient.
you can make a rationalization (my mother called them lies) around the fact that the government has to PAY BACK the money it borrowed FROM Social Security and call that “SS having an effect on other spending and deficits”
but don’t try this at home. people will look at you funny.
in general the workers money is NOT “saved”, it is used to pay current retirees benefits… that is, it is used to pay BACK the taxes. plus interest, that the current retirees paid in their turn.
i am afraid i have worked this to death. creating no understanding but some resentment. nevertheless when you understand something it is painful to watch those who don’t.. make up “just so stories” to make themselves feel better.
well, i should try to say a little more
the fact is i have gotten sick of trying to explain it to people who can’t let go of their pre conceived ideas.
you are hung up over words. is it “savings” or is it “pay as you go”…
is it a wave or a particle? is it a candy mint or a breath mint?
it is both. for the most part and by design it acts exactly like a savings account… including the fact that someone else spends your money while you are waiting to get it back. but is also an insurance policy… if you don’t earn enough to save enough to retire on the insurance will kick in a booster to help you get buy. [if even the booster is not enough… there is SSI, a welfare program, but most people can’t seem to remember that.]
but the Trust Fund doesn’t have much to do with the “savings”. by design, the “savings” takes place by the magic of “pay as you go with wage indexing.” the Trust Fund is essentially merely a balancing mechanism to even out the cash flow. because of the baby boom, or the 1983 fix which amazingly provided for the baby boom without intending to so in spite of all the actuaries, and actuarial predictions more or less exactly predicting the baby boom… because of the baby boom the Trust Fund was allowed to become a kind of “pre funding”, but not the kind you get from market based retirement systems. and in fact the trust fund could disappear overnight and make no significant difference to SS. the actuarially predicted need for a 2% increase in the tax to keep benefit levels high enough for SS to work as a meaningful retirement guarantee.. would imply have to occur sooner than otherwise… without doing anyone an injustice, as those paying the higher tax will get their money back in their own longer retirement
but i have said all this before. no doubt I could say it better. but you’d have to want to think about it or it wouldn’t matter what i said.
Even if the money is borrowed to pay off the SS bonds, it does not increase the debt. It simply trades one debt for another, kind of like paying off one credit card with another one.
Social Security is not the problem.
(As many people have explained, a minor adjustment would assure that
SS continued for future generations.
Medicare is the problem— or more accurately was the problem, until 2010.
Up until 2010, Medicare spending was rising by 8% a year.
This meant that, as a percent of GDP, it would continue to grow.
But since 2010, Medicare spending has slowed sharply. IN particularly,
Medicare spending on hospitals (Medicare’s biggest expense) has
slowed drastically. We’re now spending $1,000 a year less per
beneficiary.
Hospitals new that under reform, Medicare would be trimming reimbursements to hospitals, and penalizing hospitals that were
wasteful & inefficient.
So in the spring of 2010, hospitals began tightening their belts. The bills
that they send to Medicare are no longer rising at a breakneck pace.
It looks like we will be able to slow the growth of Medicare spending so that
it is rising no faster than GDP.
This will solve the problem. (Paul Krugman wrote about this in the NYT
last week-end. I’ll be writing about it in more detail on HealthBeat (and probably here in AB) soon.
The Social Security Report provides a model set of economic and demographic assumptions that would fully fund scheduled benefits without any increase in FICA. It is called ‘Low Cost’. Now Low Cost is itself an artificial construct in that it assumes that all variables favorable to solvency move that direction even though only a few of those variables naturally move together. In particular you could and perhaps should put together an alternate Low Cost model that incorporates its economic assumptions but leaves the demographic ones in line with the more pessimistic overall standard Intermediate Cost alternative.
If we took this route then this alternative Low Cost would not necessarily deliver full solvency, on the other hand it would represent a positive policy outcome, or if you will a good start. In this model the most important variables are productivity, employment, inflation, and real wage and these do in fact tend to track- or did historically. That is a combination of higher productivity AND higher employment will drive GDP and with controlled inflation will drive Real GDP. The only missing step is to find a way to capture some of that labor productivity in the form of Real Wage and Bob’s Your Uncle: Social Security self funds. The relations between theses variables and their combined effects on SocSec solvency are clear enough on inspection in the Reports. That is you don’t HAVE to trust me that the policy that best implements a version of Low Cost/full solvency is in fact sum-able in five words:
More Jobs. At Better Wages. The numbers work, they run. And any tiny gaps remaining can easily be picked up by taxing a fraction of the resultant increases in Real Wage.
Maggie Mahar
SS is not the problem. SS is not even “a” problem. But the bad guys want to kill SS for reasons of their own. They have made SS a problem.
One that we can solve by agreeing to pay for what a basic retirement (insurance) will cost. It would be nice to key that cost to actual “near term” projections of costs. Then when the near term projections says “do nothing”, we can do nothing.
So far that is still true. But we are at a point where we should be talking about what we should do when the near term projections says “do something.” The something we should do at that time is raise the tax one tenth of one percent. And the time that time will come looks now to be in about 2017.
Of course we can always plan to have more jobs at better wages… but somehow the details of that plan have escaped me.
Dale the main reason the details of possible approaches to MJ.ABW. escape you is that you have for years rejected any attempts by Barkley Rosser and/or me and others to make the case for any other approach to Social Security than your preferred plan. At best you have conceded that making attempts to raise minimum wage or tax the rich to finance infrastructure improvements would have positive effects on Social Security solvency and MIGHT even allow dialing back on the schedule of FICA increases you have been advocating from Day One (and well prior to the modification of that to NW.) But only post facto Dale.
That is your rhetorical position has always been “Do my fix first and neuter the Bad Guys. And then maybe address your economic justice issues. But any move on that front prior to adopting my $1.50/week plan as is is somewhere between dangerous and stupid”
It is not that your proposal wouldn’t work or wouldn’t have substantial structural political advantages as against various proposals for “progressive taxation”, after all it wasn’t for nothing that I signed onto Northwest to start with. But at this point you are in the position of a man wearing blinders and having stuffed cotton in his ears saying “I can’t quite see or hear your proposal”
Well of course not. But no one slapped on those blinders or inserted those cotton wads but you. If you want details on my plan for Enhanced Northwest (as I might call MJ.ABW.) then partially unplug an ear.
Bruce
well, no doubt. but i still don’t see exactly how you are going to create more jobs at higher wages and bring universal justice for all.
not to mention live happily ever after.
Meanwhile
if you would raise the payroll tax one tenth of one percent each whenever the trustees project short term actuarial insolvency you would
stop the hysterics and insure… remember that word “insure”… that you would be able to retire whatever happens.
and that’s about eighty cents per week out of the paycheck of the average worker. forty cents for a low income worker. oh, and full disclosure: as much as three dollars a week for a self employed high wage worker. staggering, i know. but it’s what it’s going to cost to pay for a retirement that may last 20 or more years and pay benefits that allow you to live in the same world as the one you worked in… and for… not the “cost of living” of 1936.
oh, and did i point out
that when you create all those jobs at higher wage, the tax increases will stop being needed. see… it’s really a “do nothing” plan, with an insurance policy. just in case, you know.
More jobs at higher wages solves all sorts of problems and is a worthy goal, BUT while trying to achieve that, we need a more targeted approach to SS, an approach that can be adjusted as more lofty goals are achieved.
The NW Plan is just such an approach.
Jerry the question is whether promoting Northwest requires suppression of all other aspects and proposals.
This is particularly problematic for me in that I helped shape NW at least in regards to ‘triggers’ with the understanding that efforts to move trigger points were in order and in fact implicit in the overall plan.
Now I did start calling the FICA first version the ‘Coberly Plan’ only to have that rejected by Dale. But if I am not going to be allowed to introduce a MJ. ABW. component into NW then I’ll just start referring to it as something else.
I certainly hope that promotion of the NW Plan does not prohibit the discussion of the introduction of other aspects and proposals. I would be interested in hearing them.
But, More Jobs At Better Wages at this point sounds like a campaign slogan. Of course the economy as a whole would benefit from more, higher paying jobs, not only SS. But what additions to the NW Plan do you propose. And equally important, do these additions make it easier or more difficult to get the plan through Congress?
The NW Plan is straight forward. Raise the FICA and you raise more money, and it is done in a way that the people paying get the benefits.
A job and wage program is much more iffy. At this point, without any details, it seems to be that these objectives (SS and MJ.ABW.) are better pursued separately and adjust SS and the benefits of MJ.ABW. materialize.
“A job and wage program is much more iffy.”
Here we are in 21st C. America and even the folks on a progressive web blog believe that raising a tax is easier to legislate than improving the crap state of affairs in jobs and low wage income. In case it has escaped everyone’s notice it is the dismal state of affairs in the job market sector wherein most American’s participate, as measured by numbers employed and individual median income, that is the primary factor in near-term and long-term and out to the horizon term projections for social security financial dysfunction. Now I’m not saying that we shouldn’t raise the FICA % rate, or the cap for that matter. Just saying that we’ve come to accept the cause of the problem as politically insurmountable and instead accept what ever jerry rigged solution that will make up for the pathetically skewed wealth and income distribution of our economy. Sure we should pay for our own retirements. We do need a life time of fair wages and jobs that pay them in order to do that. Where is Robespierre when he’s needed most?
Jerry
I did not reject anything that Bruce did. I did question his “explanation” of some terms best forgotten. He is mad at me about that.
Nor have I ever attempted to suppress any discussion of any idea whatsoever about SS. On the contrary, it is the idea that workers can pay for their own Social Security, forever, just as their parents did, just as FDR insisted.. that has been suppressed.
By a peculiar twist of thinking, Bruce regards any presentation of my ideas, much less an argument with his, as “attempting to suppress” other idea. I think the psychologists call it projection.
I have no idea what Bruce means by shifting trigger points. I can remember NO discussion whatsoever with anyone re what Bruce calls the Northwest plan. From my point of view it grew quite naturally out of playing a game of “what if” with my computer. On the other hand I was quite grateful to Bruce for calling it to the attention of NASI, naming it, and championing it.
Jack
as I recall Robespierre fell victim to “do unto others as you would have them do unto you.”
I heartily agree that American wages and jobs need to be fixed. But I don’t think it is very intelligent to “do nothing” about Social Security while waiting for that to happen.
As for “jerry rigged,” well jerry was named Frankln Delano Roosevelt and he did have to go in and “rig” his own committee’s report to avoid the fatal error of making Social Security “government paid” (that is paid for by taxes on the rich).
There is nothing unnatural about people paying for their own retirements. That’s what people save for. All SS does is provide a way for them to save part of their money so they will have at least enough to retire on when they get too old to work… by protecting that money from inflation and market losses, and insuring themselves against living a whole working lifetime without ever making enough to be able to save enough to be able to retire.
So by all means fix the economy, tax the rich to pay for government. but don’t destroy Social Security by trying to turn it into welfare.
“So by all means fix the economy, tax the rich to pay for government. but don’t destroy Social Security by trying to turn it into welfare.”
Yes! We need to remember, FICA pays for Social Security ONLY. We pay for government with our other taxes, which in turn are NOT used for SS.
Dale,
I wasn’t disagreeing with any of your points. Paying for our own retirement includes Social Security which is increasingly a critical portion of retirement income in our country. I use the term jerry rig to emphasize that it is necessary to bend over backwards to over come the distortion in income distribution in order to assure retirement for workers is not a death sentence. Yes, do all that can be done to prevent the vultures from destroying what little workers have to rely on in retirement. But also keep an eye on the need to rebalance income distribution and restore well paying jobs to our economy.
And Robespierre actually fell victim to his own pathology regarding his need to “cleanse France.” Factional disagreements disrupt most revolutionary movements. Yet another flaw in human social behavior.
Jack
thanks for the clarification. i agree with you wholeheartedly.
my part of the battle is to keep pointing my little bb gun at the enemy in front of me. i certainly hope the generals are working on the big picture, but i can’t see where i would help the cause by putting down my gun and listening to fairy tales around the campfire.
How ’bout we just let the old folks take money directly from their children and grandchildren, and get the wasteful government bureaucrats out of the picture?