Open thread June 16, 2015 Dan Crawford | June 16, 2015 12:22 pm Comments (60) | Digg Facebook Twitter |
CBO out with its long-term outlook. Lots of info. I looked at SS. Not much change YoY (slight deterioration). Some highlights:
given CBO’s projections, actuarial balance could
be achieved for Social Security through calendar year
2089 if payroll taxes were increased immediately and per-
manently by 4.4 percent of taxable payroll, if scheduled
benefits were reduced by an equivalent amount, or if some
combination of tax increases and spending reductions of
equal present value was adopted
So the E&P # is now up to 4.4% of taxable payroll. Some perspective – 4.4% of 2014 TP = $267B. It is not possible to raise taxes (or cut spending) by this amount without causing a significant slowdown. The drag comes to 1.5% of GDP.
if current laws remained unchanged, Social
Security outlays would exceed the program’s revenues by
almost 30 percent in 2025
A 30% cash shortfall? In 9 years?
In CBO’s extended baseline, the combined
OASDI trust funds are projected to be exhausted in
calendar year 2029.
So when would the TF ratio hit 1:1? About 2 years earlier – 2027. Given that nothing of significance will happen with SS (DI will get funded by OASI) till 2017 it means that there is only 10 years left to create a fix. Not much time to work with.
In 2030, the year after the combined trust funds are
expected to be exhausted, revenues are projected to equal
72 percent of scheduled outlays. Under those circum-
stances, payable benefits would be 28 percent less than
So a 28% cut – across the board – is what is “programed” in by CBO. This is larger than other estimates I’ve seen. This is an untenable outcome.
The CBO report:
The propaganda hasn’t worked – the culture is ours. 55% of Americans under 30 years old approve of labor unions — only 29% disapprove. Even among Republicans under 35, approval edges out disapproval 45% to 44%.
Now we just have to give labor organizing laws those little extra working mechanisms that they are so obviously missing: dentures. Crushing use of economic pressure to obstruct employees right to establish their price setting mechanism clearly needs to be made a felony. Labor market fixing is nothing short of as injurious as anything as the Rockefellers or Carnegies ever carried off — while atrophying the political sinews of the 99% on the side. Baby teeth will not work — and right now all most organizing laws have left are what amount to gums.
Making union busting a felony at the state level (job loss is not the main injury — denial of fair market participation is) opens up the potential for federal RICO prosecution. 33 states have their own RICO laws.
“But when Pew sliced and diced its responses (which Gallup did not), it found that young Americans were unions’ most fervent supporters. While 46 percent of its respondents in each of its three older age groups (30 to 49, 50 to 64, and 65-plus) viewed unions in a favorable light, fully 55 percent of Americans aged 18 to 29 held a favorable view of unions, while just 29 percent held unfavorable ones. Pew even found that a slim plurality of Republicans under 35 thought well of unions: 45 percent held positive views, 44 percent negative. For that matter, 65 percent of Democrats (of all ages) thought favorably of unions, and given the towering share of Democrats (or left-of-Democrats) working in the media, new or old, the Gawker vote should have surprised no one.”
“It is not possible to raise taxes (or cut spending) by this amount without causing a significant slowdown.”
This is assertion not analysis. Taking money from people who would spend it and giving it to other people who would spend it has no first order effect on economic growth.
“only 10 years left to create a fix” “Not much time to work with.”
I agree with you that it would be good to deal with it in a timely fashion, and you are correct that the rate at which the TF will be declining is worse than in 1983, but based on 1983 and on meaningful analysis, 10 years is plenty of time.
Unfortunately, I also think they won’t deal with it in 2017 either.
“In 2030, the year after the combined trust funds are
expected to be exhausted, revenues are projected to equal
72 percent of scheduled outlays. Under those circum-
stances, payable benefits would be 28 percent less than
That’s a 15 year look into the future. How many economic prognostications that far out can we rely upon? I can tell you now with little need to comb through slightly accurate payroll and population estimates 15 years hence that most roads and bridges in the country will need significant repair. Let’s start preparing now for that eventuality. Let’s raise the marginal rates on all incomes, of whatever kind, to 65% now and we won’t have much to worry about 15 years ahead, or even 5 years ahead. So why the focus on a healthy Social Security Trust Fund? Maybe the economy will improve and more people will be put to work at higher wages. That’s another way to assure that the Trust Fund receipts will grow and prosper. Maybe the common people will wake up some time soon and vote all the lying scum out of the Congress and the income distribution imbalance will begin to get a genuine focus of attention. That would also improve Trust Fund receipts indirectly by improving wages. Maybe the Congress will stop pissing away the money spent on continuous warfare in order to enrich the weapons industry.
You see Krasting there are lots of what ifs looking 15 years into the future.
Krasting actually the year over change in CBO’s numbers is pretty huge 4.4% from 4.0%.
More interesting in context is WHY CBO’s 2015 is higher than its 2014 and WHY CBO is higher by some 1.5 points (also huge) than SSA. Taking the later first the major difference is different projections of mortality with CBO simply assuming improvements at the same rate in the future as in the last fifty years. To me that sounds doubtful, a lot of low hanging fruit in the way of decreasing mortality due to cancer have already been achieved, but at least it is something that we can debate. Using the underlying numbers. The smaller factor is differing assumptions on interest rates. Which we can also debate – using actual numbers to decide whether CBO should be preferred to SSA on this particular front.
On the year to year change, which I repeat is very large in context, CBO puts half of it to changes in future interest rate assumptions compared to last year and the other half to a drop in ‘covered’ earnings (which is to say earnings subject to FICA) from 82% of all wage income to 78%. Which is to say, and something they admit in their own words, that income inequality will continue to increase AND that no policy change will occur that would adjust the cap formula to capture the same or higher percentages of wage income than today.
But when it comes right down to it I am leary of using CBO numbers to start with. I didn’t use them before 2008 when they were much more favorable to Social Security than SSA OACT was. Because all of what limited reporting there was on Social Security that actually cited numbers used those of the SSA Reports. And I am reluctant to use them today because there has been a series of large and in my eyes undermotivated changes in assumptions that have driven up their projections of the actuarial gap up 4X since 2008, from just over 1% to over 4% when that hardly seems justified by the main economic numbers of employment and inflation.
So for know I am going to stick with SSA numbers, assuming that is that they ever release the 2015 Report, currently 2 1/2 months overdue from its statutory deadline of April 1.
Ok Webb – you’re right. the YoY change is 10%. So it is a big deal.
I don’t think that % rate assumption are that important in CBO’s 75 year outlook. It assumes that TF goes to zero in 15 years and remains zero for the next 60. (this is not a realistic assumption. The TF needs to be 1:1)
I think that SSA will stick with its mortality assumption this year. Mortality is an unknown. We could continue to see big increases over the coming decades, or there might be a flu that changes the equation. It that is the case, then the big gulf between CBO and SSA will remain. If we can’t agree on measuring the problem, how can policy makers craft solutions?
This CBO report (re) confirms to me that it is a waste of time/thinking/worrying about a 75 year horizon. A better focus for policy would be 25 years.
CBO estimates that the E&P number for 25 years is 2.8% of payroll. Still a big hill, but manageable with a combo approach. Gone is the notion of achieving 75 yr actuarial balance.
Well since the difference in interest rate assumptions explains a big part of the difference between a 75 year gap of 4.4% (CBO) and 2.9% (2014 SSA) I can’t say they are NOT important.
But I agree that policy would be better focused on the 25 year numbers. One reason why it wasn’t in the past, say in the 1983 Greenspan Commission time frame, is that Social Security traditionally only used two official time periods to quantify solvency: Short Term Actuarial Balance which uses the same 10 year time frame as used for almost all purposes by CBO and OMB and Long Term Actuarial Balance which used a 75 year actuarial window.
But these days both CBO and SSA produce 25 year numbers. So we can shake hands and agree on SOMETHING.
That said the enemies of Social Security went the other direction and introduced Infinite Future Horizon projections with the 2003 Report and did so for a reason. They help make their case for ‘crisis’ in ways that 25 year numbers don’t. And until we find some way to get around that the fact that Lion Krasting and Lamb Webb are sharing the meadow in peaceful agreement doesn’t get us far. Because Big Bad Wolf Biggs still wants to eat me up.
As usual, Bruce Webb focuses on the “Trust Fund” without considering the status of the payer of the Trust Fund: the Federal Government
“.The Budget Office, a nonpartisan in-house think tank for Congress, projected that the federal debt is set to rise from 74 percent of economic output today to 103 percent by 2040, driven by spending on government healthcare and retirement programs and interest payments on the debt..” http://www.washingtonexaminer.com/budget-office-u.s.-debt-picture-has-worsened-dramatically/article/2566337
So to assume that SS will be unaffected is what he so often accuses others of doing: unsupported assertion.
Sammy where did I claim the Trust Fund would be “unaffected” and by what?
I’ll check out the article in the meanwhile to see if I can make heads or tails of your complaint but as of now it doesn’t make sense at all. Wanna spell it out slowly?
Alright Sammy let’s start to reconstruct that WashExaminer piece, starting by where they buried the lede.
“The projection issued Tuesday, which is subject to significant uncertainty, is a slight improvement from last year, when the budget office estimated that debt would hit 106 percent by 2039. The outlook has gotten brighter, if only trivially, because financial markets now expect lower interest rates in the future, which will lower the cost of servicing the debt for the Treasury.”
Hmm, so we have “slight improvement” juxtaposed with headline “worsened dramatically”. How do we square that circle?
Well this helps a little:
“The long-term outlook for the federal budget has worsened dramatically over the past several years, in the wake of the 2007-2009 recession and slow recovery,” the Congressional Budget Office reported in its long-term budget outlook for 2015 released Tuesday.”
Because certainly the outlook worsened from the pollyanna predictions of the Bush Administration in 2007 and early 2008 to the reality in 2009. But have things really worsened SINCE 2009?
And then we get this alarming news:
“Spending on Social Security, Medicare, Medicaid, Obamacare subsidies and other healthcare programs will rise from an average 6.5 percent of gross domestic product over the past 50 years to 14.2 percent of GDP by 2040.”
Lets see 2015 minus 50 years gets us back to June 1965. That rings a bell, let me check “History for Dummies” aka Wikipedia to see what I can find. Well this is interesting:
“In July 1965, under the leadership of President Johnson, Congress created Medicare under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history.[”
“The Social Security Amendments of 1965, Pub.L. 89–97, 79 Stat. 286, enacted July 30, 1965, was legislation in the United States whose most important provisions resulted in creation of two programs: Medicare and Medicaid. The legislation initially provided federal health insurance for the elderly (over 65) and for poor families.”
So 50 years ago before we had Obamacare, Medicaid or Medicare we spent less on those non-existent programs plus Social Security and some other health programs than today. Well THAT is crack reporting. I spent less on my mortgage in 2000 than I did in 2001. Probably because I bought my then condo in the latter year and was renting previously.
So your cited article is just a confused mismash of cherry picked nonsense. And doesn’t really address Social Security in isolation at all.
For those who care about numbers.
Social Security consumes about 4.9% of GDP today and has beneficiaries amounting to 17% of the population.
Per CBO Social Security will consume about 5.7% of GDP in 2040 enroute to 6.2% after mid-century. As its beneficiaries grow to about 25% of the population.
The question people need to ask is whether this country should grow expenditures on Social Security from 4.9% to 6.2% so as to provide the majority of retirement support for a population representing 17% today and 25% then. Which is to say actually devoting LESS GDP per capita per beneficiary.
Well some I guess would say
yesabsolutely not, that’s too much. Probably the same people who would be eager investors in the first round of venture capital for Soylent Green LLC.
Now Medicaid and Medicare are another story. It is reasonable to believe that we cannot just keep throwing more and more money at doctors and hospitals. Because after all that is where those program dollars go. And the answer there is to find ways to deliver health care nationally that is both more effective and more efficient and not in just denying care to the old and the poor. Unless I guess you are one of those early investors in Soylent Green LLC and are worried about lack of supply.
But sociopaths aside, it is important for the rest of us to separate out programs lumped under ‘Entitlements’. Because treating dollars sent to seniors and disabled people for housing and food are NOT in the same moral or economic position as dollars sent to high paid physicians to provide a service to those same people. Those issues can and should be treated separately and certainly not used to cross-justify cuts to one program or the other.
A 10% increase in a 4% projected increase is four tenths of a percent.
Krasting suffers from what I call percent paresis. You can scare yourself stupid with percents if you don’t know what you are talking about.
This is about how to pay for your own goddam retirement. No one else is going to pay it for you. If your wages are going to go down, the percent of your wages that you pay for food is going to have to go up.
Social Security provides a way for you to protect your savings from inflation and market losses… and loss of wages due to death or disability, or simply failure to ever make enough money to save enough to be able to retire.
Still, it’s your money, and your retirement. If you are going to make less you will have to save more as a percent of what you make in order to have enough to retire.
Your social security money is not a “tax” you never see again. You get the money back with interest. It is not money that “comes from the government” it doesn’t have a damn thing to do with the budget or the deficit. Raising the amount you save via Social Security is not a drag on the economy. Because it is pay as you go the money goes right back out into the economy. Krasting cannot understand this.
It is absolutely critical that you do understand this, and explain it to your congress and president.
It is not necessary to pay the whole increase all at once. A one tenth of one percent increase in your payroll “tax” each year would solve the problem by subtracting about one dollar a week from your paycheck.
This number is up from the eighty cents I used to tell you… because over the years i have been trying to tell you, average wages have gone up.
So now its a dollar a week. An extra dollar a week to make sure you will be able to retire when you are too old to work or no one will give you a job.
You can play the Krasting game of fooling yourself with numbers you don’t understand, or you can try to understand that what we are talking about is how much YOU will need to SAVE so you can retire.
The money is not going to come from the tooth fairy.
Please don’t get confused about the 4%. That is the combined employee share and employer share. Most worker will only see an ultimate 2 (or 2.2) percent reduction from a paycheck that will be about 25% more in real money than today’s.
That is, if you make a thousand dollars a week today your Social Security deduction is $62. In 20 years at the predicted slow rate in the increase of wages, you would be making about 1,250 dollars per week. Out of that, with the 2.2% increase in the tax, you would pay about $105 for your Social Security. This year you have 938 dollars a week after paying for your Social Security. Twenty years from now you will have $1145 a week after paying for your Social Security.
AND you will get that money back two or three times over because of the “interest” that comes automatically from pay as you go financing in a growing economy.
Which means you will always have more money after paying for your Social Security than you have today PLUS you will have that extra money “in the bank” for a retirement that is expected to last 20 years or more.
If you want to double the SS deduction because you think the “employers share is really the employees money” remember to add the employers share to your before tax income. You’ll see that it doesn’t change the answer.
So, see what twists and turns of logic you can come up with to make this look like a crisis, or even a bad deal.
Coberly – I thought you were a math teacher? 0.004 divided by 0.04 is 10%. What % increase to you believe this is?
Cobery comes up with his $1 a week thing. A question for him. Assume we have a married couple, two children. Mom works at a dental office makes $60k a year, Dad is a self employed plumber, He makes $80k a year.
These people make $140k. But they are not rich. They are middle class Americans.
In the Coberly plan what would those people be paying in year five? 10?
To get to equivalency to the CBO’s 4.4% E&P number Coberly would have to increase payroll taxes by 0.02% every year for the next 30. That’s a plan?
Top 5% of the Household Taxpayers isn’t exactly middle class either. Husband and wife would be maxing out for SS payroll taxes as the upper limit is beyond each of their salaries.
Well it is a plan. And for a guy lecturing on arithmetic I would note that 0.02% X 30 = 0.6%
Whereas (as you meant I think to point out) to get the equivalent of 4.4% E&P you would need an increase of 0.2% x 30 = 6%. (edit and BK should that be ‘I&P’ for ‘immediate and permanent’? I think phonetics lets us down here)
Which brings up two points. One you have to put that in the context of Real Wage increases over that same span which under IC are projected at about 1.15% per year over that period.
Which would make the question whether you were willing to devote about 16% of your increase in Real Wage to avoid a 28% cut in retirement benefit. The answer is not obviously “No” so we would have to conclude “Yes this is a plan. Maybe not THE plan, but a plan”.
The second point is whether we put so much weight in that 4.4% to begin with. Me I a sticking with the Trustees numbers mostly for reasons of methodology and because under current law they are the official scorekeepers rather than CBO (which scores bills for Congress). We will have to see what the actuarial gap projected by the SSA Office of the Chief Actuary. I would be surprised if it is anywhere near CBO’s 4.4%, that would mean a change of around 7X what would be a fairly large jump compared to years past. For example the entire change in 75 year actuarial gap between the 1996 Report and 2005 Reports was 0.4 (2.29 to 1.89) whereas somehow CBO found ways to have that happen in a single year.
But getting back to the point. If that couple making $140k get a Real Wage increase of 1.1% a year then their inflation adjusted wage would go up $154. But their nominal wage would go up by that plus the rate of inflation, which at say 3% would mean a wage increase of $575. So yeah taking their half of a 0.2% increase right out of that gain would be a chunk. But how does that compare to having to work two or three extra years? Which seems to be the default plan of the other side.
So yes Coberly has a plan. And one that in many ways is a worst case plan. Because any improvements in Real Wage and to labor share overall lowers the cost of Northwest. Which has methods built in to ratchet down future increases in FICA as justified by actual numbers. As well as plans to ratchet up if numbers get worse. Which in fact they have since we first published NW in 2009.
There might come a point where a payroll tax only fix using the current cap formula stops working. But we are not there even using CBO numbers. Which I for one am not yet willing to do.
Sir, you have the patience of a saint.
Social Security is not in crisis. And the ‘chicken littles’ who cry that the sky is falling don’t care about what happens when the Social Security Trust fund is depleted.
The ‘chicken littles’ are extremely concerned about how the federal government will repay all the money the general fund has borrowed from the Social Security Trust fund.
They want Social Security contributors to pay that bill because otherwise the federal government will have to raise taxes for the general fund.
They are extremely concerned that their taxes will increase.
And as long as the conversation is about Social Security, we are not discussing the FAST TRACKing of the secret TPP treaty. The TPP treaty which is protectionist legislation to benefit patent and copyright holders. You know, the treaty to protect the naked and starving drug companies and their poor executives!
Why doesn’t everybody see medicine as the growth industry of tomorrow — export proof, rust proof, inherently evenly spread geographically, robot resistant, real tech skills pay off at real jobs.
Look at the wonderful new products coming along even now:
Sovaldi, which could wipe out Hepatitis C;
a new injectable can save people with genetic high and may cut heart disease deeply for the wholel population;
a study of 2644 transplant patients shows 8 (eight) cases of Alzheimer’s — seems an immune suppressing drug does the trick; now have to experiment with lower doses for all.
Sovaldi, if we want all infected persons treated, cost: $300 billion.
Heart disease miracle: talking $12 billion for genetic sufferers, already talking $150 billion for all.
What wont we be willing to pay the drug extorters for a cure for Alzheimer’s? The drug companies are going to own everybody’s homes — or else. Or else the gov sets prices — but that will have to await enough union supported cash and lobbying.
Alzheimer’s: new ultrasound technique ‘restores memory’ in mice
Nanoparticles that ferry dopamine to the brain offer potential Parkinson’s treatment http://www.medicalnewstoday.com/articles/292848.php
Scientists ‘incredibly excited’ by asthma treatment breakthrough
Everybody ought to read Medical News Today online — it’s just a cornucopia of new stuff coming out all the time. Much or most gov funded research — the gov wont fund copy cat drugs.
i used to teach math to college students. I found that most of them could not learn math, though some of them could learn arithmetic.
And almost all of them could read, sort of. You don’t seem to be able to read or think. What was the point of your dividing four tenths of a percent by four percent to arrive at ten percent. Do you think that is different from taking 10% of 4% and finding that it is four tenths of a percent? And what is your point?
MY point was that the “10%” increase you were crying about was a ten percent increase of a four percent increase… or four tenths of a percent.
Is there any chance that you will be able to see we are saying the same thing. Except that I understand what I am saying and you don’t.
MY point is that a four tenths of one percent increase in a guesstimate of the tax increase that will be needed to pay for social security over the next twenty years is about another half percent of income. An amount of money a sane person would not notice over twenty years, especially if his income was increasing about 25% over the same time, and he knew he would get the entire increase back two or three times over when he retires and will need it more than he does today.
I pity anyone who thinks you are making sense.
Krasting’s mythical couple is making 140 thousand dollars a year. Their combined payroll tax increase would be $6160 dollars per year. If they paid this amount for 35 years, they would pay 823 thousand dollars. They would expect to get a combined 42,000 dollars per year for twenty years in retirement, or about 840 thousand dollars. This is assuming constant dollars and no average increase in real wage (which would increase their pension by pay as you go financing with wage indexing).
Now, is 820 thousand dollars a reasonable price to pay to guarantee getting 840 thousand dollars when you have no other way to get money?
Well yes. You could get more, but remember first you have to get enough to pay for inflation, which the SS figure will do. And second you would need to get a “real” interest over inflation, which SS will also do if there is an increase in real wages, as expected.
Now, you still might get more…. but what are your chances in an economy which is not growing (that’s why there is no increase in real wages)? And what “no risk” investments are you going to be able to make that keep up with inflation?
Finally, note that Krasting’s couple has earnings about four times the average earning of ordinary workers. What is the chance of an ordinary worker making four times the average for 35 years? SS is NOT designed to help the rich get richer. It is designed to protect the ordinary worker from loss of his savings to inflation, market losses, or FAILURE TO EARN ENOUGH TO SAVE FOR RETIREMENT.
And it does it all with the workers’ own money. Yes, even though Krasting’s couple “only” breaks even, they don’t lose any money and they were insured against the losses that nearly everyone else would suffer over a lifetime.
Krasting can’t help himself. It is the nature of a professional liar to change the terms in the middle of the “argument” and hope you don’t notice.
I’m not sure where Krasting arithmetic gets 30 years to increase the payroll tax 0.2% (not .02%) per year to get 4.4%. I get 22 years. I also note that Krasting has switched to talking about the “combined” tax. Most workers would only see a 0.1% per year increase. This would be about 80cents per week for a worker making 40k per year.
Meanwhile trying to fasten your mind around the fact that THIS IS WHAT IT WILL TAKE TO PAY FOR YOUR OWN GODDAM RETIREMENT… if the CBO projections are correct. Neither CBO nor Krasting has a magic way to guarantee you will be able to retire without SS insuring your savings. If you are going to be making less … as CBO projects… and be living longer… as CBO projects…. you are going to have to save more AS A PERCENT OF YOUR WAGES.
That’s just arithmetic.
you won’t need a 6% increase. I don’t know where CBO gets its 4.4% immediate and permanent.. but that is twice as much as was being predicted a few years ago. Nothing has changed to justify that big an increase… unless they know something about TPP that they are not telling us.
For my money… or for Mr Petersons money… the CBO is wringing every possible “bad news scenario” it can’t find in order to panic the congress (who are no smarter than the people) into cutting SS NOW!
before it’s too late and the numbers start to come in much better than they are predicting.
we can go ahead with a gradual increase in the tax as called for by the “short term actuarial insolvency” prediction by the Trustees. If things do get a lot worse, it could always be increased a little over one tenth of one percent per year, or run a little longer than twenty years according to what looks reasonable AT THAT TIME. Cutting benefitsd now based on CBO, or even SSA, predictions twenty, or seventy, years ahead is stupid. Criminally stupid.
Jim H thanks. But ironically I’ll have to patiently deconstruct and reconstruct the following. Because while it is not entirely wrong it would be misleading to a lot of readers.
“Social Security is not in crisis. And the ‘chicken littles’ who cry that the sky is falling don’t care about what happens when the Social Security Trust fund is depleted.
The ‘chicken littles’ are extremely concerned about how the federal government will repay all the money the general fund has borrowed from the Social Security Trust fund.”
The shortest (tho maybe not least confusing) answer is to point out that the two events mentioned here represent the same thing: the date that the Social Security Trust funds are depleted is the same date that the General Fund FINISHES paying off the money it borrowed. That is the assets in the Trust Fund, all $2.8 trillions worth are made up of debt instruments that are themselves interest earning Special Treasury bonds.
Let me back up a step. What we call THE Social Security Trust Fund is really TWO Trust Funds, the OAS (Old Age/Survivors) TF and the DI (Disability Insurance) TF. And these two Trust Funds are in very different states at this time. OAS is on the cusp of ‘Shortfall’ while DI is well into ‘Redemption’ and on track for ‘Depletion’ late next year
So let me back up another step and talk TF life cycle.
Up until 2005 both Trust Funds were taking more revenue in from FICA contributions and tax on benefits than they were paying out in benefits. The surplus cash actually extracted from the real economy was converted into Special Treasury Bonds at an interest rate calculated from a range of current 10 year Bonds. This new principal plus interest on it and old principal added to the Trust Fund balance while at the same time creating a debt obligation.
Let me post and resume here.
Coberly I don’t buy the 4.4% either. But I do know where it came from. Feel free to dig into the Long Term Outlook document with or without the hints I gave above and find good reasons to argue why it is out of line. I have mine, at least tentatively, but maybe you can find better ones. By the way our mutual friend Nancy A kind of asked me to get after this so you would be doing both of us a favor to dig into the numbers.
But yes phasing in a 4.4% PV gap would require something like 6% if phased in over 30 years. Perhaps you can supply a more precise figure for the phasing.
Maybe Krasting suckered me.
Go back and check… I bought the Krasting scenario enough to start talking about the magic couple’s combined income and combined tax. Divide the tax by two (people) and then by two again… if they are ordinary workers they will see (pay) only half the tax.
So each ordinary worker would only pay about 120,000 (8.4% of 40k for 35 years) to get 320,000 over twenty years in retirement. That assumes no inflation. SS will automatically take care of inflation.
Can one person live on 16k in retirement. Well, better than he can on nothing. but it would be smart of him to have his house paid for by the time he retires.
last time i looked at CBO they did not give enough details for any “analysis”. If you have a copy of last years spread sheet for “northwest” i think it says about 22 years at one tenth percent (each) increase will pay for the SSA projected shortfall…. forever. They give an “immediate and permanent” increase which, besides being a bit of a shock (but no real hardship) contains hidden factors that affect the final result: firsst, by paying more than is needed now, they build up a trust fund that pays interest enough to hold the ultimate tax level below what it would actually need to be to pay for then current costs. But that trust fund runs out at the end of the seventy five year window. Then they come and say ominously that further significant increases will be needed.
But NW takes care of the needed increase “as we go,” resulting in no shock, and no need for a “significant increase” at the end of the actuarial window.
Could the ultimate increase be 6%? Maybe. I don’t know. And neither does CBO. But if it should go that high, I would still leave it to the people alive and paying taxes at that time to decide whether it was “worth it” in terms of the benefits they will need when they retire. My guess is that they will say yes. In any case they should be allowed to make that decision with honest current information and not the hysterical and misleading projections of an Office of dubious honesty, not to say competence.
Back to Trust Fund Life Cycle
The link is to Table VI.A2 (you may need to scroll), operations of the DI Trust Fund from 1956 to 2013.
The first five columns are Revenue from right to left: Total, From Contributions, (Ignore), Tax on Benefits, Interest. The sixth column is Total Cost. Alright Contributions and Tax on Benefits are collected from the real economy in cash and as long as these exceed Total Cost the Trust Fund is what they call ‘Primary Surplus’ which is to say cash flow positive. Interest is credited to the Trust Fund but is not actually extracted from the real economy. Still it counts as Revenue and as long as Interest plus Contributions plus Tax on Benefits exceed Total Cost the Trust Fund is in ‘Surplus’ and Trust Fund balances go up. But once Total Cost exceeds those three Revenue sources the Trust Fund goes to ‘Deficit’ and the difference is made up by redemptions of Trust Fund assets or in other words by the General Fund starting to pay back the money it borrowed. That we call ‘Redemption’. When all Trust Fund assets are exhausted the Trust Fund balance goes to zero ‘Depletion’ and the General Fund has paid off all obligations.
On inspection of the Table we can see that Primary Surpluses disappeared in 2005 as Contributions and Tax on Benefits fell behind Cost. But the Trust Fund remained in Surplus because Interest more than filled the gap. Until 2009 when Total Revenue fell below Total Cost and principal started to be redeemed. Leading to a shrinkage in Trust Fund assets or as noted a repayment of money previously borrowed. Under current projections all Disability Insurance Trust Fund assets will be cashed out in late 2016. Which from the perspective of DI beneficiaries represents a true crisis but from the point of the General Fund the instant that all debts are paid off.
So it is not true that the ‘chicken littles’ are not afraid of the time when the Trust Fund is depleted. They are, but not because that marks the time where their repayment STARTS. In fact as to DI that is where it STOPS. What they are afraid of is that we will demand they make up the difference between Total Cost and then Total Revenue with new tax dollars.
Enough for now.
Coberly I was using some top of my head arithmetic that held that if you could match a PV gap of 2% by 20 years at 0.2% for a resultant of 2.2% it would take a resultant of something like 6% to make up a PV gap of 4.4% over 30 years. This could be checked via any financial calculator and I was assuming that BK had done so.
Ignoring the fact that you reject the starting point, what would it take to phase in a fix to a 4.4% gap over 30 years? If not an end total of 6% then what would it be? Surely over 5%.
i don’t think PV applies to a “percent.”
In order to meet a 6% gap in 30 years you would have to raise taxes 2 tenths of one percent per year. But that is a nearly meaningless calculation: What year do expenses exceed income, assuming the current tax rate, or the immediate and permanent 4.4% increase, or the one tenth percent each per year increase. I don’t know without knowing the interest rate on the trust fund and how fast the income shortfall is increasing,
If I get enough information that i can develop an answer, i’ll try to do so. But I really really hate to be stampeded into giving meaningless answers to every lie CBO and Krasting can cook up.
I missed the D and the assumption that Congress would dip into the OASi trust fund to fund Social Security Disability.
Jim Okay, and that was not and is not a bad assumption.
But the bottom line is the same. If you combined the Trust Funds and had a new date of TF depletion of 2033 that would still be the time that the General Fund FINISHED paying off the Trust Fund.
There is some belief that there is some crisis point that happens when the ‘repayment’ starts. But that is a non-event. In that it already happened for DI in 2005 or 2009 depending on how you define it and is happening for OAS right now when it comes to ‘primary surplus’. That is DI is already tapping into principal and OAS into interest. And nobody noticed except a few bomb throwers at AEI and Cato.
There in no mechanism whether legal, practical or political that would or could prevent the payback of the “Phony IOUs”. Except for ones that actually fix the system on the revenue side like Northwest.
It is one of the abiding ironies of this debate that Coberly devised a plan that if put in place back when he proposed it (a couple of years before it got morphed into Northwest) Social Security would be fully funded through the 75 year window, all at the expense of current workers, and not a single penny of the Trust Fund would have needed to be paid back. That is if we had listened to Dale the General Fund AND THE BILLIONAIRES would have been held harmless. They would have had their near $3 trillion in borrowing FOR FREE.
Now that wasn’t the intent, but that would have been the effect. And it would still be the effect if we put Northwest in place today. Instead everyone is pissing around trying to cut benefits and meanwhile starting the payback on the Trust Fund. That is trying to screw the poor and footing the bill for it besides.
as of the last Trustees Report (for 2014) this was still true. It will change a bit, however, as we push into the “short term actuarial insolvency” which, last Report, would have begun in 2015 (that is for OASDI).
Even letting that magic date pass, or even if the forecast comes in a little worse, it won’t make much difference. a few hundredths of a percent more per year (a dollar instead of 80 cents per week for a 40k yearly income), or a few more years to reach equilibrium… the income projected equals the benefits projected Forever… at a slightly higher tax level (2.2% instead of 2% Each).
But the most important point is that there is NO other way to buy retirement SECURITY. So until the cost becomes “excessive”, or the rich agree to pay for it, or you can get more jobs at higher pay, there really is no point discussing all the maybes and might be’s. Even “realistic” ones better that the Krasting “i don’t know what I’m talking about but it’s scary and we need to do something now, but I don’t know what” ones.
Maybe later I’ll try to show what a 6% ultimate increase would look like. I hate to do it because people who can’t think about numbers-in-the-future will be scared by the answer, but with any luck some of them will sit down and think, “gee, even THAT wouldn’t be so bad. Considering what you get for your money and the fact that you can’t get it any other way.
Coberly – I gave you the assumptions. The guy is a self employed plumber. He pays SECA – the full 12.4% plus anything you add on. The wife is employed and she pays 6.2% plus your add on.
In year ten the plumber will pay 2% more. In today’s dollars that is 1600. The wife pays 600. The combined increase is $2,200 – $42 a week.
In twenty years the combined increase is $82/week IN TODAY’S dollars.
In Year 30 it comes to $115/week IN TODAY”S dollars.
And yes, I did a crunch of the numbers. Based on CBO % assumptions it would take 33 years of annual increases of 0.02% to be equivalent to a 4.4% E&P.
So when you pound the table about 80 cents a week you are giving a very narrow view of who will pay what.
It the 4.4% were done immediately and permanently the cost to the middle class family would be $4,840 a year, or $93 a week.
and the self employed guys second 6.2% SS tax is tax deductible.
Coberly – You pose a question:
is 820 thousand dollars a reasonable price to pay to guarantee getting 840 thousand dollars ?
The answer to this is that it would be stupid for anyone to pay 820k over 40 years to get back 840k. That is a terrible investment return.
Coberly – This is one of your special ditties:
I’m not sure where Krasting arithmetic gets 30 years to increase the payroll tax 0.2% (not .02%) per year to get 4.4%. I get 22 years.
“I get 22 years” ??? Huh? You know better than that. You have spread sheets that you have built that prove that .02% a year for 22 year is not equivalent to a 4.4% I&P. The time value of money is a factor – you know this.
Are you confused? Or are your trying to confuse others?
Krasting you are very persistent in being an idiot. I already answered your example, and you did not understand the answer.
For a worker making 40k per year, the needed increase is still 80 cents per week in today’s money. Per year. That will add up. Do you think retirement is going to be free? The point about the 80 cents per week per year is that it is a gradual increase, with each 80 cent per week increase per year corresponding to about an eight dollar per week increase per year. The “gradual” is the key point. And it means the ultimate “about 2%” increase will fall at a time when wages will have increased about 25%.
You think you have refuted this by offering TW”O people with a combined income of FOUR times the average wage and looking at the increase after 20 years. Of course it is going to be larger. I hope no one but you was stupid enough to think it would not be. On the other hand it is still very payable. The worker… including your high end workers… will still have more money in their pocket after paying the increased tax, AND they will get their money back two or threefold when they will need it most.
Keep ignoring the main point, and making up stupid examples and pretending that $82 dollars per week is a huge increase for a couple who will be making $3,365 per week, and who will get their money back at least twofold when they retire.
Meanwhile you haven’t told us what you will do so working people will have enough to be able to retire if their wages are not going to go up as fast as they have been and who will be living at least 20 years in retirement?
I don’t buy your 6% increase because the CBO shows a flattening of the growth curve (growth of the “deficit”, after reaching a 4.4% deficit in less than forty years.
And you still don’t understand that .02% is not 0.2% You don’t know a damn thing about numbers except how to punch them into a calculator and go “oh, that was a BIG one!” with no knowledge whatsoever of what they mean.,
“And you still don’t understand that .02% is not 0.2%” I was wondering when some one was going to jump on that one. Neither does .02% equal 1% in 5 years.
No, Krasting. It is you who are confused. I have laid out the costs in great detail many times over the years. Even here I have been quite frank about the costs according toYOUR projections andyour attempt to shift the “cost” from “per average worker” to per TWO high income workers after twenty years.
And you can’t seem to understand that if you increase a tax by two tenths of one percent (not .02%) per year, it will take 22 years to reach a 4.4% increase. Time value of money has nothing to do with the arithmetic.
It is true that the gradual increase will not collect as much money over 20 years as the “immediate and permanent” increase, but that is not what you said. I don’t know what calculations you have that show that an increase of 6% would be needed, after 30 years to equal the 4.4% immediate and permanent. It is not an unreasonable guess… but their are factors that need to be taken into consideration that you don’t know about. Neither do I. And CBO didn’t mention them.
Moreover, you still miss the key point: whatever the ultimate increase will be… in 20 or 30 or 75 years… it is still what people are going to have to pay to have enough to live on in retirement. Where else are they going to get the money? By making the increase “immediate” you shift the burden to people now making less and not expected to live as long. By making the increase gradual, instead of hitting people tomorrow with an unneeded 880 dollar per year increase with no increase in pay, I “hit” them with a 40 dollar per year increase each year while their income is increasing an expected 400 dollars per year.
It would be nice if you understood this.
If the needed increase DID turn out to be 6% in 30 years, there are some other things you might need to keep in mind.
The increase in wages over that time will be about 39%
So a person making 40k today would be making about 56 thousand a year by then.
The person making 40k today is paying 2480 dollars a year for his Social Security (sounds like a lot doesn’t it? try to live on less savings than that for twenty years or more when you retire.)
With NO change in the tax rate, that person making 56k in 30 years would pay 3,400 dollars for his SS. With a 3% tax increase (his share of the 6%) he will have to pay 5106 dollars per year for SS.
Note, his income has increased by $16,000 per year. His tax has increased 1700 dollars per year. This means he will have $14,300 MORE AFTER paying the tax than he has today. AND he will get that (whole) tax back two or three times over when he retires.
Krasting can’t understand this. Somebody help him.
He looks at the tax increase and his brain freezes. He can’t understand that the tax increase is needed to pay for a more expensive retirement (gonna live longer) out of a wage that is not growing fast enough to keep up with the increased retirement cost.
It’s like “you will need the money” is a black blur his brain can’t even see much less comprehend. Somehow he feels the pain of the money being sucked out of his pocket. But he is just sure that when he needs to retire the money will be there for him, a gift from the tooth fairy… or the magic of the market. That might work for him, but it will NOT work for most people.
Now we can sit back and wait for more Krating mathemagic tricks, which, by only leaving out the things you don’t want to think about, will magically supply the money you will need.
Go back up and try to understand that his “6% tax increase we are all going to die” means that the average worker is going to shift about 1700 dollars a year from his “spend today” account to his “spend when I am retired account, with at least enough “interest” to cover inflation and probably about 2% real “interest” over that. Something Krasting CAN’t guarantee any other way. AND what else he can’nt guarantee is that IF you DON’T get the wage increase, SS will pay you MUCH more than you paid in… that’s the insurance part. IT also covers death benefits and disability pay. Which the bond market does not.
AND IF you CAN make “more” on the market. There is nothing stopping you from investing some of the other 52.000 dollars you will be making.
i should have known better than to give you the 800,000 dollars to get back 800,000 dollars. You didn’t read the rest of the argument.
The money the couple puts intp SS comes back to them “wage adjusted”, which means they would get back everything they put in plus enough to cover the cost of inflation. I don’t think an ordinary saver can do even that well today. Since this is a high income couple I don’t think they would see more than about a 1% real return on their “investment” in SS. But on the market they could just as easily see a 100% loss.
Most people will get at least a 3% real return, and some will get 10% even without collecting death or disability benefits after paying the tax for only ten years.
This really gets too complicated to explain in short paragraphs, and it gives the Krastings a chance to jump on every half-argument and claim that they have refuted the whole argument.
I like to think I have explained enough for any honest person to get the idea, but I probably haven’t. tired now.
I created an example above to illustrate a point about paying a tax just equal to the benefit that you would get. I did not make clear enough for Krasting that this example included “the time value of money” by holding the earnings “constant” over time. Since the example failed to teach the lesson I had hoped. I will here explicitly include the “time value of money” from a calculation i did based on the 2013 Trustees Report that gives the expected wages over the next 35 years.
Over that time a high earner (at 1.6 the average wage) would earn from about 67k the first year to about 255k the 35th year, for total wages over the whole period of about 4,940k. Over that time, assuming he pays the combined tax and the combined increase in the tax (two tenths of one percent of income over about the first twenty years) required to keep SS “solvent,” he would pay about 652k in taxes.
Then he will get benefits that are essentially an annuity of 1million 351 thousand dollars at 5% interest per year. In order to save enough to pay for an annuity of this size he would have had to invest his taxes in an instrument paying about 5.2% annually over the 35 years.
In this example the PV of the taxes he paid equals the PV of the benefits he expects at a 5% discount rate, about enough to cover 3% inflation plus 2% real interest.
Please note the value of the “annuity” is about twice the value of the taxes he paid in current dollars. This is the “time value of money” that Krasting thought I had left out.
Now, while it is true that with reasonable luck you might earn more than the 5% interest the SS is effectively paying, with not unusual bad luck you could earn a lot less. Moreover, if you are NOT a high earner, SS will pay an effective interest of more like 10% for low income workers who work the whole 35 “best years” that wages are counted (and taxes paid) to determine initial benefits.
And that’s the point. The high earner is NOT “out” any money, though he may think he “could have” made more on his own. But those.. including many who thought they were high earners until they were not… get a very safe reasonable or better than reasonable return on their money. It’s insurance. That high earner can easily take part of the other 60,000 dollars (about 85%) of his money and make his millions by investing that…. If his luck holds out, he can keep reinvesting more and more until that 7000 he was putting into social security is a mere dot on the horizon behind him.
But he won’t be happy until he has YOUR money to invest, and you end up in old age with no money to retire so you have to keep working until he says you are old enough to quit. Then you will be means tested and given about 300 dollars a month to live on for the six months you have left.
Coberly slips this in:
(two tenths of one percent of income over about the first twenty years)
But Coberly the 2 tenths mus go on for more than 30 years to be equivalent to an E&P of 4.4%.
You know this. You built the models to prove it. You shared them with me and others. The terminal rate increase for the NW plan is about 1.5Xs the E&P estimate. So 4.4 x 1.5 = 6.6. 6.6% / 0.2% = 33 years.
You should just say that CBO is all wet. You can’t fix an E&P of 4.4% with the NW plan alone.
Is the new director using Fair Market Valuation as he stated he would in his recent paper?
quit trying to fake it. you don’t know what you are talking about and you try to come up with answers based on about a zero percent analysis of the situation. I’m pretty sure if you go back through what i have written on this thread you will find out i have shown that even 6% is not a terrible burden. Now, will you let me talk about the 4% or 4.4% that the Trustees projected in their last report. It is hard enough (impossible) to talk about all the complications of SS finance (the finance is simple, the complications are complicated) in a series of short paragraphs without having to answer your nonsense every step of the way.
Incidentally 6% GRADUALLY introduced over 30 years has what effect on the present value of taxes paid by the people over that thirty years as compared to the 4.4% immediate and permanent?
And what effect does it have on the national debt?
Coberly – you say:
“even 6% is not a terrible burden”
A terrible Burden? Well, it is a terrible idea. You would stand up and ask Congress to pass laws that would raise SS taxes every year for the next 30? Laughable. You worry about SS. Raising regressive payroll taxes for 30 years would sink SS.
Coberly you have done PV work. I’ve seen it. So you know the answer to your question. A dollar of taxation in 30 years has a fraction of the value of a dollar of taxation today.
You also know that SS does not have a consequence on national debt. So why ask?
PS You say:
“will you let me talk about the 4% or 4.4% that the Trustees projected in their last report”
The Trustees did not project 4.4% in their most recent report. CBO did. You confused?
Run – No – CBO does not use fair value when looking at SS.
Fair value has to do with credit risks. There are no credit risks with SS.
I think I have already answered all your questions. Try reading what I have already written on this thread and see if you can find the answers.
It would help if you stopped thinking of SS as a “tax,” and started thinking of it as “insurance.”
Using the projections of the 2013 Trustees Report and adding 0,2% to the tax each year they would otherwise project short term actuarial insolvency results in NO insolvency ever at a final tax rate that is 4.4% higher than today’s (combined). This would be a final… and permanent over the infinite horizon…. tax rate of 8.4% for the worker, and not be reached for about fifty years… because the one tenth percent increases each would not be needed every year.
The 2013 Report? Why not use the 2008 report? That had a very rosy outlook.
It is 2015 and we are talking about a CBO report that puts E&P at 4.4%.
If you, like Webb, have an argument with the CBO report that is fair. But to throw irrelevant data from a three year old report does not advance things at all.
the 2014 report shows the same 4.4% increase in the tax needed, reaching that level in 2070, and then not increasing for the rest of the actuarial window.
the 2015 report is not out yet.
anything else you need to know?
oh, yes, 2015 minus 3 is 2012, not 2013. And I think you meant I and P. or was it A&P?
Stop being an ass. Try to think of Social Security as insurance, which it is, and not a tax, which it isn’t. And stop finding irrelevant tiny “facts” and telling us we are all going to die.
If nothing else worthwhile comes out of Charleston can we at least put the NSA’s illegal surveillance out of commission?
Warrantless extralegal wiretapping didn’t identify Dylann Roof as a terrorist any better than it did Elton Simpson and Nadir Soofi in Garland last month. Or the Tsarnaevs in Boston in 2013. Or either attack on Fort Hood, one of which was perpetrated by an actual jihad crazed islamic radical.
Can we get the plug pulled on this multi billion dollar scam that isn’t really keeping anything safe except contractor profit margins?
It seems we met and talked like this before. The words we are saying are the same words now as then, but who knows where of when. Bruce, Dale, why entertain Krasting to the extent that you do? Yes, I realize that Krasting presents a challenge to the facts, but allowing the conversation to go on as it does provides our friendly Mr. K. with a sounding board from which to broadcast his misrepresentation of the facts. That he is challenged does not negate the potential harm done by allowing it to appear that there is a debate going on and Krasting’s misinformation is a legitimate part of such a debate. Shut him down when he begins to broadcast his version of reality. Would you debate Hannity or O’Reilly? Krasting is just as much a waste of gigabites on a website.
You do have a point and anyone can conflate.
you are quite right. in fact it is worse than that. I end up saying “mean” things to K, and that wins him sympathy with people who don’t understand the subject but have learned that it is not nice to be mean… even to a bad person. worse, it increases the chances that i will say something that is wrong or appears to be wrong, and that wins “points” for K.
still, letting him go entirely unanswered allows him to say “coberly had no answer to my argument!”
i can only hope that some people will learn something from my effort to correct his “errors.” but i am not optimistic.
Yes, by all means, go have a conversation with yourselves, and then you can all agree what clever and intelligent people you are.
You have Webb, who I am quick to admit is very knowledgeable about all aspects of SS, advocating something that makes no sense to me. He recently wrote that Progressives should unite behind a plan to raise regressive taxes. His plan is to do it over 30 consecutive years.
Webb could have been a player in the debate about what needs to happen with SS. But he chooses to marginalize his voice by backing something that simply can’t happen.
There are no simple/easy steps that can be implemented that would stabilize SS for the balance of the Boomer years. It will take a combo approach. That is obvious to the Trustees and also the vast majority of people who look and think about SS. Yet Webb hangs his hat on the single solution approach. There is no single solution. Period.
Cobery is fun to debate with. Here you have a college level math professor who seems not to understand numbers. He goes on and on about 80 cents a week. Either he misunderstands what he is saying, or he is just spinning numbers so that it looks to an uniformed reader that he has found a miracle cure. When I point to the errors of his calculations he shoots back with rude comments. Does he think I care? Actually, it is what I seek.
I was the one who started this thread. I pointed to the results that CBO produced. As I’ve said, I have no issue with someone taking issue with CBO’s methodology/conclusions. But one can’t respond to CBO’s 4.4% I&P by saying “We’ll just have to add another ten years onto the .2% tax increases”.
The debate about what to do with SS is simmering. But nothing will happen until after the next presidential election. By then even SSA will be north of 4% on its I&P and CBO will be pushing 5%. (by definition the outlook gets bleaker with every year of inaction)
I am quick to acknowledge that SS is a central part of the US economy. It’s important to do the “right things” with SS at this time in history. The biggest mistake that could be made is to pretend that it is 1934 and that Roosevelt’s dream can still be sustained. Those who want to keep this program from running off the tracks have to take a true progressive approach. And there is no way that the progressive approach is to raise taxes on workers for the next 30 years.
Possibly the best solution is that I just be banned from commenting at AB. That would solve the problem for Coberly. No dissent permitted. No alternative views allowed.
I don’t believe in banning or censoring.
I find it very frustrating to deal with you because you never show any sign of having read any answer you get to your nonsense.
A simple,if trivial, case in point. You repeated your “.01%” mistake (for 0.1%) after having it pointed out to you.
More pernicious, you completely ignore the fact that SS is an insurance program that the people need. You keep calling it a tax.
Well it is a “tax” only in the sense that it is an involuntary payment that the government collects. But it is an insurance payment that the government collects because experience has shown that otherwise half the people in the country will find themselves in dire poverty when they get old. You get your money back when you retire… so that you can retire…. at least twice over. That’s an effective interest that at least pays for inflation and for most people provides a real interest of about 2% and for some up to about 10%, not counting the “windfall” of getting death or disability benefits without having paid very much into the system at all.
You create an imaginary scenario where the cost of that insurance might have to be raised one tenth of one percent each year over thirty years. The official projection (not prediction) is for only about twenty years… for a 2% increase TWENTY YEARS FROM NOW. meanwhile wages will have increased 25 to 40 percent.
You take an example created for your own benefit in which the “return” on your “tax” is “only” zero percent after adjusting for inflation and scream that that is a horrible return on an investment. And so it would be, but the point of the example was that SS is NOT an investment. It is insurance. And a “zero percent return” is also a “100%” return.. in that you get ALL of your money back when you need it…. something that otherwise cannot be done at all.
That is, when you make an “investment” you take a risk that you will lose money instead of gain it. That happens to most people. It is better for them that the government hold their money for them and protect it from inflation (and in the real world pay them real interest, if not as much as they MIGHT get from from an “investment.” That is what SS does, and it has kept most old people out of terrible poverty now for eighty years.
But you come in here repeating your nonsense and completely ignoring what SS does, and having no idea how to replace what it does.
So, yes, I get frustrated and use real words to describe what you are doing… stupid to the point of general paresis or korsakoff syndrome.
The “outlook” for SS does not get “bleaker” with time. The RATE at which a GRADUAL adjustment in the “tax” rate… really its a savings rate…. does get steeper with time. What the hell else would you expect? Say you need to save 10 thousand dollars by the end of the year. You can do it by saving a hundred dollars a month if you start in the next two months. But if you wait six months to start you will need to save two hundred a month. This is not “getting worse.” This is just “math.” Something you have no concept of.
I am not a college professor. I did teach math to college students. For the most part they never got the “math” either, but they could be taught to jump through the right hoops. I didn’t realize that was what I was up against here. Though it wouldn’t have made much difference. I still had to try to tell people the truth. If those few people who got it…. and there are a few… could have spent their time teaching ordinary people “the hoops” the people would have “understood” by now that they could save social security by increasing their own tax about eighty cents per week per year (most years at first and then, gradually, only about once every five or ten years, depending on how soon they started.)
Instead, those who know the truth are out trying to force “the rich” to pay for SS. And those who don’t know anything keep coming to AB and writing letters like Krastings.
“Korsakoff syndrome is most commonly caused by alcohol misuse, but can also be associated with AIDS, chronic infections, poor nutrition and certain other conditions.”
“Those with Korsakoff syndrome may “confabulate,” or make up, information ”
Above, Coberly says:
“they could save social security by increasing their own tax about eighty cents per week per year (most years at first and then, gradually, only about once every five or ten years, depending on how soon they started.”
Once every five or ten years??? Coberly – you know better than that. You have proven it to yourself, you have published those results. So who is it that is making up information? That would be you…..
You go on ad infinitum regardless of the truth of a matter. You are a troll in the truest meaning of the word. You are clever enough to disguise your bull shit with a torrent of data, but not all data provides a path to the truth. As they used to say, statistics don’t lie, but statisticians do. I’d modify that to …economists do. There is enough data to “prove” any point so long as that data measures gross behavioral activity. It’s far enough from accurate to be easily manipulated. That’s one of the reasons that real science subjects its findings to critical review in the scientific literature. No, I’m not talking about popular science publications like Science and Nature. Economics doesn’t even reach that level of validity and reliability. Your rants are a perfect example of all that is lacking in economic debates. As I said earlier, what result of human activity can be predicted fifteen years into the future. To even suggest such an absurdity is to walk far off from demonstrable facts. I suggest you apply to the Cato Foundation for a supportive grant, or even a job. They welcome any bull shit that supports their reactionary point of view. Or should I say, David and Charles Koch’s point of view?
yes, I have published the results. you should read what I wrote.
as far a “prediciton,” I don’t predict. I show what the Trustees projection “not a predictioin” actually means in terms of what the worker pays and what he gets.
he would pay about 80 cents per week out of a 40k per year wage. increased every year by another 80 cents per week as his wages increase by at least 8 dollars per week. (real wage, real 80 cents. inflation would be also covered automatically.)
what he would get is a “pension” worth about 20k per year in TODAY’s terms. That is, if the real wage increased to 80 k after 40 years, his pension would be about 40k… again, real dollars. inflation is taken care of automatically by pay as you go financing.
what he gets over and above what is about a 5% nominal (more than that if inflation is higher, or real wages grow faster) interest rate. something an ordinary worker can’t get even in ordinary times, and can’t even hope to get under the CBO projections without Social Security. also, if the worker ends up making less than an average income over a lifetime, he will get a boost from SS that raises his “effective interest” to as much as 10% (about 7% “real.”) and if he is disabled he gets a benefit equal to about what he would have gotten if he had kept working until he reached retirement age. and if he dies, his family will get a benefit equal to about what he would have gotten if he worked until retirement age….adjusted for inflation.
this is a good deal no private insurer can touch.
Meanwhile Krasting keeps coming up with “proof” that SS can’t work, based on his own math and his own previous statements.
I made an error in a comment above: If you had to save 10k in a year, you could do it by saving about 1k per month if you started right away. If you waited six months you would have to save 2k per month.
I do make errors. All the time. That’s why I check my work. The basic facts that I present (80 cents per week per year… in today’s money for a 40k income) have been checked by me and by others whose job it is to check such things.