Social Security
Dan here…Via the LA Times and LA Times and Common Dreams comes information on the first day of the new Congress on Social Security. Old ideas re-emerge in the variety of coverage in media. Here is an excerpt on the issue.
According to:
Nancy Altman and Eric Kingson, authors of the book Social Security Works! and members of the advocacy group of the same name, what would otherwise have been the “dry, mundane exercise” of adopting new rules in the House was “turned into a stealth attack on America’s working families.”
Like previous “stealth attacks” on Social Security, write Altman and Kingson, the small rule change shows “the groundwork is being laid in advance” for a larger attack on the program as a whole and described the tactics of Republicans determined to destroy the program, regardless of the costs, as “hostage-taking.” In their analysis, the GOP ploy involves playing disparate groups within the system off one another with the ultimate goal of drastically reducing the program for everyone—current and future beneficiaries alike. They write:
One of the strengths of Social Security is its universality. It is based on the principle that we are stronger together. It is an old tactic of the program’s opponents to seek to divide and conquer. They seek to turn young against old by falsely claiming that too much is being spent on the old. They seek to turn African Americans against whites with the preposterous claim that Social Security is unfair to blacks. (We document and refute these and many other claims in our new book). This time they seek to drive a wedge between retired workers and disabled workers by claiming that reallocation helps the disabled at the expense of the old – another preposterous claim. All of these divide-and-conquer strategies are intended to turn Americans against each other so that all of their benefits can be cut.
Are the steps taken by the Republicans in the House designed to “preserve” SS or destroy it?
What the House did was much to the benefit of those now (and in the future) who are/will receive SS retirement checks. The House has put a ring-fence around OASI at the expense of DI.
Let’s face it – DI is busted in 20 months! Something has to happen, right? Current law requires that DI benefits get cut, or taxes must be raised. The third option is to raid the retirement Fund.
The “raid plan” was always just a temporary band aid. (Or was the assumption that the raid would last forever?)
DI needs more revenue, that or benefits have to be cut. I understand that these are terrible choices, but choices have to made none-the-less.
Do the folks at Angry Bear have an alternative plan? Do you folks really support a long-term raid of OASI? And if you favor a short-term raid, when does the long-term solution for OASDI have to be found? Never?? (“Never” is not a correct answer).
If you think the raid is ‘forever’, then you must accept that both DI and OASI benefits will have to be cut, or regressive payroll taxes increased significantly sometime before 2030. Fifteen years may sound like a very long time, but actually it is right around the corner.
Don’t like the House plan? What’s the alternative?
Mornin’, BK. You’re here nice and early and at it again. Obviously, the thing to do is reallocate part of the OAS Trust Fund to DI as has been done frequently in the past. That’s why the incoming Repubs made it impossible to do so. Because sick people on SSDI malinger and fake illness, of course. Right.
Now that they’ve thrown a brick through the front window, it remains for the Dems and the public to make them back off. Otherwise, we have another hysterical mess on our hands–thanks to and for the benefit of the TP’s in the Republican ranks. Buckle up, people. It’s gonna be a bumpy ride. NancyO
OK. We’ve heard from Nancy. She is a staunch defender of SS. She likes the idea of a raid on the OASI fund to cover the shortfalls of the DI fund.
What is it that Nancy likes so much? The raid would drain the OASI fund by a HALF A TRILLION dollars between today and 2030.
The OASI fund is now $2.7T. Nancy wants to give 20% of that away??
All of those folks who paid weekly into the SS retirement fund now have to see a big chunk go out the door. Their nest egg is going to DI? How popular will that be?
I doubt that Liz Warren would favor the raid. She wants to strengthen SS by increasing tax revenues, No cuts, no stealing from OASI. She wants to increase taxes on high end income.
I don’t like that plan, but I don’t see another one that works other than raising payroll taxes. Warren would never back that. The last thing that’s needed now is more regressive taxes.
A CBO report on cash shortfalls at the DI fund:
https://www.cbo.gov/sites/default/files/cbofiles/attachments/43890-2014-04-Social_Security_Trust_Fund.pdf
Where you been all day, BK?
Of course I support SS programs. I know they work to keep American families together. Based on Coberly and Webb’s work, I also know that a small increase in FICA contributions would keep the program going forever. You have been around here for years and know the arguments on each side. No need to rehash all that old stuff.
So we come to Sen. Warren. She takes the progressive view that to even out the inequality in income distributions over the past 30 years, we should extract greater taxes from upper income people and use new revenue sources to fund increased SS benefits. I don’t agree, but I’m one of those New Deal types who think that the people who benefit most from SS ought to pay for it. I’m just odd that way.
Webb and Coberly are around somewhere and I expect they’ll be dropping by. TTFN. NancyO
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/congress-starts-the-new-year-off-by-kicking-the-disabled
Note the link. Dean Baker says that $1.60 a week in increased FICA will fix the DI Trust Fund’s shortfall and then some. Coberly and Webb think it’s less, depending on how computed. But, Baker is quite influential in the Village. FYI. NancyO
Krasting
you called?
the answer to the SSDI shortfall is to raise the payroll tax by a dollar sixty per week to cover the increased cost and incidence of disability.
This is what any insurance company would do, except that they call it a “premium” instead of a tax.
Calling it a “tax” is wrong. Calling it a “progressive tax” is stupid. With all Social Security programs the “poor” get a better return on their “tax” than “the rich.” It used to be that only liberal college professors called SS a progressive tax because they believe the rich should pay taxes and the poor should not.
FDR had a better idea: SS is not a “tax.” It’s insurance, and like all insurance the premium is fixed to match the risk, The payout on the other hand is always “progressive” in the sense that if you have the fire you get more money back from the insurance company than if you don’t have the fire.
Still, most people think it’s better not to have the fire. But they still buy the insurance.
Meanwhile stop hyperventilating about “HALF A TRILLION DOLLARS!”
That works out to about two dollars a week per person. See, it works like this: youv’e got a big country… 300 million people… and a small dollar… it won’t buy a loaf of bread. So any time you talk about the cost of a program that affects 300 million people it’s going to take a lot of dollars. People who are innumerate can go crazy over big numbers.
That’s why the Big LIars use them to fool people like you.
btw
calling it a “raid” is alarmist language designed to stop people from thinking.
Transferring some of OASI money to DI would not currently affect retirement benefits at all. It would advance the date that the Trust Fund “runs out of money.” But that event has always been expected though never very certain as to the exact date because the factors vary unpredictably.
In any case it seems kind of stupid to refuse to spend the needed money on disability so that people starve who become disabled before they reach retirement age.
That “advance” in the date is, however, the date you have been hearing all along… the end of the combined Trust Funds. Without DI the OASI fund would last another two years or so. Not a material difference.
The honest, simple fix to the whole “problem” is just to raise the payroll tax… about one tenth of one percent per year (eighty cents per week per year)… until the premium matches the expected cost.
The workers can afford this. In fact they wouldn’t even notice it if it weren’t for Big LIars and hysterical Krastings. In fact AFTER the tax increase the workers will have more money in their pockets than they have today (because incomes will be increase one full percent or more… about eight dollars per week… over the same time.
The question remains how long the Big LIars can keep fooling the people… including those who think the answer is to “tax the rich” to pay for it. FDR was smarter than that.
Coberly – Only a $1.60 per week? Where did you get that number?
I provided the link to the CBO estimates for the DI shortfall. It will be around $31B in 2015 and rises every year thereafter.
There are about 150m people contributing to SS on a weekly basis (not quite the 300m you suggest) Multiply that by a $1.60 a week and it comes to,,,,,,$12,5B a year!
So your plan of a $1.60 a week covers about 1/3 of the shortfall. A flawed plan perhaps?
PS I love it when you say stuff like:
“Big LIars can keep fooling the people… including those who think the answer is to “tax the rich” to pay for it. FDR was smarter than that.”
Coberly wants to tax the little guys to bailout DI? He thinks that’s what FDR would do? Come on Coberly – putting the burden on lower income workers is not a reasonable approach. FDR would not have agreed to that. DI did not exist in FDR’s days. DI started in 1956.
Regardless of 1.60 or 3.20 that would represent the smallest rate increase in any health insurance plan.
Then we have a very low cut off for contributing SS, which should be corrected.
Beene – It’s not heath insurance. It’s Disability Insurance. Quite a different thing.
The last time I heard of disability it was health related and covered by health insurance.
Krasting
I did the arithmetic quite carefully a couple of years ago. Things may have changed, but I got the $1.60 from Dean Baker’s article in Huff Post. Baker is usually right about the numbers. I can’t say the same about either Krasting or CBO.
As for “taxing the little guy,” it’s INSURANCE for the little guy. Are you suggesting the little guy find a rich friend to pay for his insurance?
I don’t think you are. I think you are saying whatever comes into your head that you think will confuse the little guy so your rich friends can kill Social Security entirely.
Looking at the 2014 Trustees Report we see the “balance rate” for DI in the next two years to be close to -.5 (percent of payroll). After that it falls back to -.25 over the next thirty years (roughly).
When I made my original calculation there was still a Trust Fund for DI which would have provided interest to make up the difference between the expected tax income and the expected benefit payout.
Letting the Trust Fund run to zero instead of raising the tax at the time of “short term actuarial insolvency” wipes out that income from interest. That’s something I tried to point out at the time.
Nevertheless, Deans .2 percent still looks close enough to me for a reasonable estimate of a dollar sixty a week to fully fund DI. or call it two whole dollars per week.
Krasting apparently wants to use raw numbers to scare you into giving up your Disability Insurance in order to save two dollars a week.
This is not what an honest financial adviser would call prudent. But it is the way the Big LIars try to kill Social Security.
Without looking too hard at Krastings “math” I suspect that what he is doing is comparing the cost over the next fifteen years with the income this year and hoping you will forget that income will rise along with the costs over that time so that two tenths of one percent of income will still pay for the shortfall.
This could be an honest mistake on Krasting’s part. He tends to be a premature ejaculator when it comes to numbers But a steady history of “honest mistakes” begins to look like a knowing lie when the mistakes are never addressed.
Beene
disability insurance is not quite the same as health insurance.
if you get too sick to work, health insurance will pay your medical bills; you would need disability insurance to pay your rent and groceries.
but don’t get hung up on words. you should have both kinds of insurance. it is an unfortunate fact that they are expensive. but they are expensive because the chances of needing huge payouts are not small.
thing is we, most of us, make enough money that we can afford to pay for insurance and still live a lot better than our grandparents lived.
and with Social Security OASI as well as DI the premiums are adjusted to what you CAN afford even if your income is low, and the payout is much larger as a percent of what you paid in if your income has always been low. that is something that private insurance can’t do.
This is an example of how Krasting’s mind works … how he confuses himself or just hopes to confuse you with nonsense:
“Coberly wants to tax the little guys to bailout DI? He thinks that’s what FDR would do? Come on Coberly – putting the burden on lower income workers is not a reasonable approach. FDR would not have agreed to that. DI did not exist in FDR’s days. DI started in 1956.”
FDR insisted that Social Security be worker paid.”That way no damn politician can take it away from them [the workers].” DI was added to Social Security to fill the gap between “retirement security” and security from disability before retirement age. While we can’t know what FDR would have said about that, I feel fairly confident he wouldn’t have called it “taxing he little guy.”
Or making the little guy “bail out” DI. Krasting talks as if “DI” were some entity like a corporation or government office that sucked in money and lost it irresponsibly. DI is a plan that enables workers to pay for their own risk of becoming disabled. The cost is exactly a function of the risk. If you don’t pay for the cost you can’t expect to get the benefits.
Krasting has no plan to pay for the costs. He is not serious about taxing the rich to pay for it. And there is no way workers could pay for private insurance that would cover the risks at a premium they could afford… including the “risk” of not making much money in the first place.
So putting the burden on the little guy (incomes below about $118,000 per year) is no different than putting the burden on the little guy for paying for his own groceries or his own rent.
Of course we have welfare for those who can’t afford even that, but in general America works best when we each pay for our own needs… even if sometimes the best and cheapest way to pay for those needs is by buying a government run insurance plan.
There are two kinds of true believers in this country. One believes that “private enterprise” will solve every problem. The other believes that “tax the rich” will solve every problem. They are both wrong.
Some problems are better solved by government… defense and Social Security. Some are better solved by private… or personal… enterprise… like working to pay for your own groceries and…even… your Social Security.
Some, maybe most, human beings have trouble not thinking in absolute (artificial) categories.
Coberly, this is one of those arguments that SS is a tax an not a insurance payment. As you say those who can afford disability should have it just in case. But for the very poor SS does provide early retirement for disability.
Beene
well, is it a tax or an insurance payment? that’s one of those artificial categories that makes it hard for people to think clearly. it’s a tax if you mean an involuntary payment to the government. it’s an insurance payment if you mean the money goes directly to a program that insures you for disabilty or against not having enough money to retire.
For most people it’s better to think of it as an “involuntary” insurance payment… but one they need far more than they realize.
Social Security has been critical to solving the old age poverty problem in America… and provides a critical income to over half of the population, and a significant “comfort” income to over 80%. Most people don’t really understand it, and the bad guys use that lack of understanding to try to kill the program.
Hard to say just why the bad guys want to do this. Most of them, I think, are just ignorant, or paid by a small group of bad guys who are basically insane. They can’t stand the idea of anyone getting money they did not work for on that day: they regard all retirement benefits, private as well as government, as a kind of gift or welfare. The only retirement they think is legitimate is that made possible by direct , at your risk, “investments” in what amount to gambling schemes in which they are “the house.”
Coberly, you may enjoy a YouTube video by a Libertarian speaking on our form of capitalism.
Coberly – You can’t fight the numbers. The DI shortfall is about $31B today, it will rise every year from now on. The DI TF will go to zero – there will be no interest income.
$31B comes to about $4 per worker per week on average – about $210. If you think that’s chump change for the vast majority of workers, then do me a favor and send me a check for the $210.
Krasting
I don’t have to “fight” the numbers; I understand them. You don’t.
Dean’s 2 tenths of one percent turns out to mean “each”, so that’s 3.60 cents per week. You shouldn’t object to this because the “employer’s share is “really the worker’s money” according to the “most economists” your side quotes when it is convenient to them.
I already pointed out the lack of a Trust Fund to make up the small difference between expected taxes and expected benefits. A fully funded DI trust fund would supply about one tenth of one percent (each) of the required income to DI.
I also pointed out that when you say the cost of DI will keep going up, you forget that so will the wages that are paying for it, keeping the “percent of wages” required nearly constant at 0.25% (that’s one quarter of one percent) over about the next forty years. The exception appears to be a rather high cost over the next two years due to factors related to the recession caused by the criminal behavior of the financial services industry. So the cost as a percent of wages does not keep going up; it actually goes down over the next four years and then stabilizes for as long as anyone can make a reasonable prediction.
I am perfectly willing to let the people in 2040 adjust their insurance to suit the needs of their own time.
Krasting would rather run around screaming the sky is falling, the sky is falling. Cut off your heads today and save the cost of tomorrow’s dinner.
actually the cost for the worker for Disability Insurance is about 0.9% of income (matched by his boss). Call it one percent of 40k for the average worker. That’s 400 dollars per year or about eight dollars per week.
Raising the tax 2 tenths of one percent of payroll adds about a dollar sixty to the cost that the worker pays, or about eighty dollars per year.
Even so, while I would gladly pay an extra 200 dollars per year for disability insurance if that’s what it cost. I would not send Krasting 200 dollars for his next bottle of fine scotch. It is bad for his thinking.
Perhaps with better healthcare coverage and improved worker safety, we will not need as much DI as is projected.
Jerry,
perhaps. and when the need/cost comes down so will the premium.
meanwhile the states with the highest incidence of disability are in the South, where, of course, wages are too low for people to afford the cost of private disability insurance.
one could hope that when the Republicans succeed in destroying DI the South will rise against them. but given the history of the South, one would be disappointed.
well, i found my earlier calculatons
in 2009 i calculated that the then short term actuarial insolvency (this is a term of art and does not mean the same as insolvency) in the DI trust fund could be fixed by a one half of one tenth percent increase in the payroll tax… that’s forty cents per week…in each of 2010, 2011, and 2012. and that would be the entire increase needed until 2045 when another one half of one tenth of one percent might be needed.
That would have been a total of dollar and twenty cents per week increase in the tax for the reasonable future, with a possible 40 cents more (in today’s money) 36 years down the road.
what has changed since then is that the trust fund has been further eroded so the interest that would have helped out with the premiums is no longer as much help as it would have been. and there has been a short term increase in the rate of disability due to the recession (mostly because there were no jobs that the partially disabled would otherwise have found taking them off the DI rolls).
Maybe Dan will let me repeat this in its own post. I will not be polite to Krasting if he shows up with more of his pernicious nonsense.
adjective: pernicious: having a harmful effect, especially in a gradual or subtle way.
A little help please. Just how am I harming you?
DI is more about population then geography. DI beneficiaries:
California: 704,000
Texas:567,000
Florida 537,000
Louisiana: 154,000
S. Carolina: 177,000
Mississippi: 132,000
California has a big number, but the incidence rate is only 1.84%. In Louisianan it is 3.4%.
Guess which State has the highest indecent rate?
Puerto Rico at 5+%.
Puerto Rico is a state? Wow. Maybe you are smarter than the rest of us. I don’t think we knew that.
Krasting
there is something wrong with your brain. “harmful” is not the same as “harming me.” it might be the same as “trying to harm Social Security.”
and it is interesting that even though you know that California has one of the lowest per capita rates of DI, you choose to report it has having the highest number of cases. something about “per capita” eludes your thinking entirely. that’s why you always scream about “trillions of dollars” that turn out to be pennies per week per capita.
So, far there have been only two responses to my question, “What should be done to fix DI?”
Nancy spoke up for the Raid plan. Not very fiscally responsible. But an option that will, in the end, probably be the way this story turns out. When is this going to come to a big fight? A month or so before DI runs dry. That would be right in front of the next presidential election. The weasels in DC will vote to kick the can, rather than to make a vote.
Coberly, on the other hand, is a pillar of fiscal responsibility. He wants to raise payroll taxes. DI would go paygo (no trust fund), but it would have sufficient revenues to meet current and projected benefits. The Coberly plan would increase DI taxes by about 1/2% (1/4% each for workers and employers).
The Coberly plan fixes things, but it will not be the route than congress takes. (In front of an election who is going to vote for an increase in middle class taxes?)
Coberly points out that this increase is not such a burden. I don’t agree. Take a family of 4, both spouses working, doing well. The combined income is $120k. The Coberly tax for them is $300 a year. And it is not correct to assume that there are no consequences when the employers also kick in another $300.
Me? I would “fix” it with new laws that puts any DI shortfall ON THE BUDGET. Fund this with General Revenues. Don’t kick the can. don’t raise payroll taxes.
The DI shortfall is “only” $31B – less than 1% of the budget. This change is more of a rounding error.
Possibly we can agree on one thing? Cutting DI benefits across the board is not an option.
Some politician is already trying to address tax code and have a more progressive income tax. Of course this like Obamas paid college is good election year politician.
Krasting
well at least you have a “plan.” Turning Social Security into welfare as we knew it has long been a plan by the Big LIars to put Social Security where they want it: just another program that can be quietly strangled in the bathtub.
As long as Social Security, including SSDI, remains “worker paid” is is protected… to the extent workers can remember that they are paying for their own benefits.
You insist upon trying to confuse people with number tricks. A “family” making one hundred and twenty thousand dollars per year can afford to pay 160 (more) dollars a year to insure themselves against a disability that would leave them unable to work. Anyone too stupid to understand this needs someone to manage his financial decisions… someone honest.
If you turned it into a general “on budget” tax, the worker would still have to pay it.
But let’s try to cut the cute. Krasting needs to talk about two workers’ tax in order for his numbers to look big enough to be scary even to the innumerate and improvident. The tax increase needed to make DI “solvent” would be a dollar sixty per week. One time only increase.
That’s for an average worker making 40,000 dollars per year. That’s 80 dollars per year for those who think in terms of their yearly budget.
Those people might be shocked to learn that that buck and a half in change they don’t bother to keep track of every week can add up to eighty dollars in a year. My god, that could buy a college education, a new car, a bigger home! An extra half gallon of gas a week. A bottle of cheap champagne for New Year’s eve! Yes, entirely foolish to waste it on insurance in case you become disabled and can’t work.
Better to just make “the rich” pay for it. Except of course that Krasting is just lying about this. He only hopes to confuse the poor into thinking that if they let Congress cut or kill Social Security the kind and generous rich will just step in and pay for all their needs. We have seen how that works out.
Oh, full disclosure: the payroll tax for Disability Insurance is 0.9% for the worker. That’s closer to 400 dollars per year. Add the tax increase needed to pay for the increased risk and costs of disability and it comes to almost 500 dollars per year or ten dollars per week. I guess out of an income of 800 dollars per week, that ten dollars could be a real burden. After all, what is money for? Save some for your old age? Nah, you’ll never get old. Buy insurance in case something bad, and expensive, happens? Nah, can’t happen to you? How about a new car or a trip to Vegas? NOW you’re talking.
That’s why Social Security had to be made a “tax.”
As for Krasting saying the Reid plan is “not very fiscally responsible” that works with his groupies for whom “not fiscally responsible” is an orgasm producing soundbite. They don’t have to know what it means, it just sounds so good when you say it.
Krasting relies on repeating the same nonsense even after it has been refuted, secure in the knowledge that most people won’t remember that it has been disproved.
Sadly, he is quite right about that.
Beene
I don’t like “progressive tax code” in the context of Social Security. SS is not a “tax” in the normal sense of the word. It is an insurance program from which the poor get a far greater advantage than the rich.
calling it a regressive tax was some nonsense that liberal economics professors who don’t understand Social Security went around saying because they believe the rich should pay for everything. FDR knew that doesn’t work. So he made SS “worker paid” “So no damn politician can take it away from them.”
Now the right has taken to callng SS a regressive tax because they think this will weaken the support that workers give to it. They may be right, because the workers are easily fooled.
The current tax code is probably progressive enough if the very rich did not find ways to avoid taxes altogether while finding ways to steal money from the poor and pay their workers less and less every year.
All I can say is be wary of slogans and magic words and try to find the actual evil and fight against that.
Meanwhile there is not a damn thing wrong with Social Security. If we are going to be living longer… and paid less… we will need to contribute about an extra eighty cents per week each year to our own Social Security (and that included the disability insurance). This is not a huge burden. Or any burden at all. You will have more money to pay it with as time goes by, AND you will get ALL of your “tax” back with interest when you retire. And a LOT more if you become disabled.
Krasting said
“So, far there have been only two responses to my question, “What should be done to fix DI?””
When I used to teach math there was generally only one correct answer. I gave that. If Krasting wants a variety of responses from people who don’t know what they are talking about, he should go back to his own blog.
What should be done to fix DI is an immediate raise in the payroll tax of about a dollar and sixty cents per week. This would fix DI permanently (as far as the eye can see).
This is a pretty cheap price to pay to keep you disability insurance.
But the Krastings, and the Congress, and, alas, the Progressives want to keep you confused. That is the entire purpose of everything they say.
This would, by the way, have a Present Value over the infinite horizon of about $4,000.
For folks who like to diddle themselves with Present Value, this can be a fun fact to confuse normal people who get scared by big numbers.
oh, damn. that would be the Present Value for each worker. For the whole country it would be 800 billion dollars.
scared yet?
[for those who can’t detect irony, i am offering this as an example of the nonsense of present value and “for the whole country.”
which, if your luck is really, really bad, you could get back ten fold.
just when you need it in the worst possible way.
you, dear friend, are only on the hook for the dollar sixty a week