The first is that basically this is a repeat of the deadlines reported last year, 2034 still the year estimated for the trust fund comes to an end, the moment when the baby boomers arguably stop paying for their own retirement, as was put in place back in 1983, the year of the last major change in the system. So, no new news on those fronts, although most of the media did not note this. This was supposed to be dramatic new revelation.
The second is that there actually is a piece of new news, and it happens to be good. It is that the Disability System seems to have become financially stabilized. This was probably the part of the system that had been recently in the worst financial shape, but now it is doing much better. However, this good news was downplayed, to the extent it was reported at all. This would have distracted from the bad news stories, which the VSPs like to push so as to suggest cuts in benefits so those tax cuts for the rich can be preserved.
Barkley Rosser
Barkley
for anyone who doesn’t know VSP stands for “very serious people” (I think). I think it was David Brooks who first said something like “all the serious people know SS ..” is broken or words to that effect. Or maybe he got it from someone else. thing is these guys get all their ideas from talking to those “serious people.”
I forgot to mention the improvement in the Disability Insurance projections in my own Angry Bear post. Probably because I don’t take the projections very seriously… we know they will change. And we also know that Social Security will probably need a little more income in the future. So I merely point out that the “huge looming unfunded 15 Trillion Dollar Deficit” doesn’t amount to much (about a dollar per week) when you break it down to per person per year,
And then I keep telling people that none of this has anything to do with the FEDERAL deficit and does not affect the taxes rich people pay.
But even the serious people don’t understand that.
Coberly,
Yes, VSP stands for “Very Serious People.” I am not sure who coined it, but indeed for a long tine in Washington “Serious People” has long been used without self-irony as a way to distinguish who should be listed to “seriously” and whom not, with an especially silly and egregious story long pushed on this regarding Social Security.
I am not totally opposed to Coberly’s tax suggestion, but I think if it really is needed, I thin simply raising the cap would do it and get a lot more support.
https://fas.org/sgp/crs/misc/RL32896.pdf changing the cap
Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range
deficit in the Social Security trust funds. For example, phasing in an increase in the maximum
taxable earnings to cover 90% of earnings over the next decade would eliminate roughly 30% of
the long-range shortfall in Social Security.
If all earnings were subject to the payroll tax, but the
current-law base was retained for benefit calculations, the Social Security trust funds would
remain solvent for over 60 years. However, having different bases for contributions and benefits
would weaken the traditional link between the taxes workers pay into the system and the benefits
they receive.
Dan,
I think a certain amount of cap raising could happen without breaking that link. Obviously there are lots of variations on these proposals. What hardly anybody supports, although people like olsm are right that both Clinton and Obama have been open to somewhat as supposed parts of “grand bargains” pushed by VSPs has been some cuts in benefits. It is the hallmark of VSPdom to link a fica tax increase with some sort of benefits cut. This is the stuff that makes VSPs eally know Who They Are, even though the public does not remotely support benefit cuts, and if push comes to shove supports some sort of tax increase to cover it, even a majority of Republicans. This has simply always been the case. But the VSPs know better, or so they think.
Rosser
i am not sure what i gain by arguing with people who are friends of Social Security, but
“simply” raising the cap gets you 60 years of solvency. and huge political opposition from the people with power and money. and it changes the very nature of SS from insurance for workers paid for by workers, to welfare for workers paid for by “the rich.”
simply increasing the payroll tax by one dollar per week per year gets you solvency forever and no opposition … from anyone sane… because it preserves Roosevelt’s idea of “not the dole.”
Rosser
what is it you find so attractive about raising the cap?
is it because you don’t think workers can afford to save (via the payroll tax) and extra dollar per week?
or because you think people who have never paid into the tax should be able to collect the benefits (“expand Social Security”)?
or because you think as a matter of cosmic justice the rich ought to pay for the poor. like say show your tax returns at the grocery check out counter, and if you earn “too much” money you have to pay for the groceries of the next ten people in line?
or because you think the working class would rather live on the dole than have the pride and moral high ground that comes with “I paid for it myself”?
Maybe you would consider raising the benefits to SSI (a welfare program that is NOT Social Security) which “The rich” could pay for as part of their contribution to the general welfare, not to say national security.
Why do you want to break the legs of Social Security by forcing it to bear burdens it was not designed to do?
Putting your political energy into a fair minimum wage would be more honest. And safer.
SS has worked for 80 years because it is NOT the dole. It has been “the third rail of politics” because the workers can say “I paid for it myself!”
Rosser
if i read Dan’s comment correctly it would take taxing ALL income over the cap to get your 60 years of solvency. That doesn’t sound like “a certain amount of cap raising.”
And in case you missed it… getting to that cap at 90% of earnings… that would eliminate 30% of the projected actuarial deficit (not THE deficit) doesn’t sound like a complete solution… merely a way to annoy “the rich:” and make sure even the not insane rich come out against SS. Another much overlooked fact is that you could achieve the same result imply by removing the tax exemption from the benefits given to high earners in lieu of payroll. This tax dodge is a big cause of the Social Security actuarial deficit… and it could be fixed, fairly, without even mentioning Social Security.
But we have created a generation of … ah… people… who can’t think honestly about what they need and what they should pay for themselves if they can, or pay for collectively if that’s the most efficient way. Instead it’s all a game of tax dodges and political lies and self deception and frankly a kind of insanity that seems to affect the poor as well as the rich.
I think what Barkley likes is to capitalize on a successful program to help solve a real issue. If there were no risk, it would make sense. But coberly has pointed out the real risk.
When the rich have the ability to get Trump’s tax cut passed in the face of no broad support, trying to use SS to reverse that is just bad strategy.
The cost of labor is a reason why managers of capital lowered the share of income going to the workforce, a staggering drop in thus share compared to the late 1970s.
The payroll taxes of all our governments does place a hurdle affecting the number of workers and the wages paid to them.
Knowing that the payroll tax regime would have such an effect, is Social Security to accommodate for this, in the spirit of the law designed to effect economic security. Yes, imo.
The law offers an insurance aspect for those where death or disability harms a household’s security through no fault of their own. The law also provides retirement earnings, in essence a return on their work, as if this work however valued were a capital investment. Such earnings compensate for the expectation that wages alone would not reflect the value to the economic status of the US in great part because management’s incentive alignments were to lead to labor costs being controlled. The designers did not expect this control to be so successful.
I think too, that the designers of the system expected life expectancies to improve but could not guess at this well. But they knew it to be most likely, and understood that economic security meant an income while you lived.
So we have the actuarial assumptions. Let us remember the spirit of this law. The Social Security system is an economic arbiter spanning generations to provide income in retirement according to its value to the wealth and income flows we see but well aware of its burdening of the labor costs for the current workforce.
Let us protect it, and fully fund it, and see it, and honor it as the economic security arbiter it is meant to be. And that is no defense for seeing it as only a payroll tax ledger-based system. It was and is much more.
JF
i have trouble following much of your logic. but i’d like to comment on part of it that i think i understand.
whatever the designers of Social Security thought they were doing and why (and I think Nancy Altman’s book The Battle to Save Social Security would be a good place to begin understanding that) and whether or not “the employers share” is “really the workers money” [it is and it isn’t, and the bad guys use it both ways as it suits their purpose] the current fact is that SS provides retirement insurance for workers that they would not have otherwise.
certainly the cost of living in old age, or with disability, comes out of the entire production of the economy. by definition those retired or disabled are not currently contributing to that production. but this is not a reason to consider them as welfare clients. they produced in their turn, and SS provides a way for them to divert some of their production from current consumption to future consumption. the deferred current consumption adds to the current consumption available to the population at large… or more specifically to those who in their turn have already retired, having made their contribution while they were still working.
i have no doubt the employers would “lower the cost of labor” to the bone if they could get away with it. SS iimits the extent to which they can get away with it… assuring that the cost of labor includes enough more than bare current survival of the worker that he can save enough for a retirement. and SS is mandatory in insure that the worker does actually save enough (defers enough consumption) so he won’t be a charity case when he gets too old to work.
because it’s probably an inevitable fact of human nature that employers will not pay workers enough, and workers will not save enough, to avoid terrible poverty in old age. this is one area where we need “government” just as we need traffic laws, not to mention laws against robbing banks. though we could use better laws against banks robbing people.
the actuaries predicted life expectancies rather closely. the politicians understood, correctly in my opinion, that it was better to raise the payroll tax to compensate for increasing life expectancy as it actually happened, to avoid the complications of building up too big a Trust Fund, and to avoid too high a payroll tax before it was needed.
and i don’t think you should take too seriously business claim that SS is a “jobs killing tax.” as far as business is concerned, wages are a jobs killing cost. businesses are perforce short sighted and greedy… not as a moral sin, but simply in part a limitation of human intelligence and a fact of survival of the fittest: competition is “now”. the guy who wins now survives to face the perhaps diminished possibilities of the world not made better by cooperation. but thats a law of nature that can be ameliorated to some extent by government enforced cooperation.
Life expectancy average was under 62 in 1935, and a male who had attained 21 years of age had a bit better than a fifty-fifty chance of making it to 65. So they did not understand this. They did not anticipate that income shares might depart from the norms they knew whether productivity gains benefited labor wages or not (these productivity to wage ratios also moved away from labor).
Even as I certainly don’t want to match the life expectancy norms of that time (do we just pay earnings or insurance outlays for 12 years as expected then, as that is all that could be earned, actuarily??), the point is that tying the system to payrolls brings flaws and imo harms the accomplishment goals of the system. People live and contribute still to this economy and society, and the claims should be paid as they are lawful.
But we can think differently about the payroll tax, the assumptions made then were not correct, and they ought not bind the more understood
future. Do no more harm to the economic security of the current workforce population to pay the lawful claims for retirement and insurance outlays as earned as part of the economic security posture if that generation (though these earnings are not calculated well now either because of the misunderstandings at the time). At least, try something else than furthering the misdirections that the payroll tax embeds, first.
Before we have the next downturn that may cause even more fearmongering about the system being broken, even then as the economy still exceeds $100 Trillion in net wealth.
Save the spirit of this law not bury it using its accounting arcana. Please.
JF
according to my sources the actuaries predicted life expectancies very accurately. the need for a future tax increase was well understood in 1983. there was no point in enacting the forseen tax increase until it was actually needed… which is now. or next year. or in about 16 years depending on how easy you want to make the transition.
when SS was designed, life expectancy after age 65 was not very different from what it is today. the difference in overall life expectancy since then is due to improvements in death rates among children and young people…. who haven’t paid much into Social Security anyway, and certainly don’t need retirement benefits.
Social Security is insurance… you pay for it in case you do reach 65 without enough money otherwise to live at least a minimally decent life. the probabilities of that happening are well understood and reflected in the premium aka “payroll tax.”
what is pretty stupid is those who complain about not living long enough to collect, or having too much money to have needed SS. this is a little like demanding your fire insurance premiums back if you don’t have a fire before you sell the house.
i think your heart is in the right place. but the way SS is paid for… a tax on wages… is the least complicated way, and the fairest, that i know about.
adding people who did not work and pay the payroll tax will turn SS from a very simple and cheap “you paid for it you get it” system to something like welfare with all the expense of “examining” for fraud that that has meant.
a system of “state pensions” similar to what works in Europe might work here, but we are not politically ready for it. and if we were we should not call it Social Security which works and has worked well as worker paid insurance for workers. a different concept… one that Americans, so far at least, understand and prefer.
Coberly, you continue to advocate to use this law to burden the incidence of labor in the US and lock this in so contributions are not made by other ways/means. We see in retrospect how a policy environment fosters an unbalance, effective control by managers of capital move income shares away from the workforce, these are known economic facts.
You can have a wage contribution to financing, I agree, but you do not have to fail the spirit of this system by blind advocacy fir the payroll tax, unless this is your point; namely to ensure that it is used to burden labor no matter the actual history or economic facts. Yes, my views are well meaning, and thanks for noting that. I ask you to look more sentimentally at your own views.
You also continue to use the ‘insurance’ meme to make some distinction. Yes, the overall law does offer a financial insurance against disability and a survivor benefit for children and spouses, and these can be seen as insurance-type risk situations. The retirement aspects, however, are not insurance, they are investments of human capital, as financed via wages paid (whether fair or not at the time), and these contributions then earn a return. Sure, insurance companies offer similar arrangements, but these are not the same thing, at all.
The spirit of this law is economic security as earned by contributing to the building, maintenance and sustainment of the economy AND in recognition of the fact that wage compensation has not in fact reflected the earned values that should be paid while we also serve society’s interests in honoring work and in being fair generationally or in having an appropriate balance of income shares between managers of capital and working households. Let us keep the spirit of this law.
I do not believe this law requires faith and allegiance in a federal payroll tax alone for its financing, and see such a view to be pure advocacy for a position that is utterly contrary to the spirit of this law. We can consider other approaches. We can and should.
JF
no point in my arguing with you. but just in case anyone else is still out there… you can check with a little reasearch
the payroll tax is THE central feature of Social Security, put in there by Roosevelt himself, “so no damn politician can take [Social Security] away from [the workers].
paying for your own retirement does not “burden” the worker, unless you believe that getting someone else to pay for your basic needs is a fundamental law of the universe.
owners will do whatever they can to direct wealth into their own pockets at the expense of workers under any system of economics. Social Security just sets up a system whereby a part of the workers wages are set aside,,, and guaranteed… for retirement, disability, and death with dependents.
and it has always been understood as insurance.
so your ideas are completely wrong. not your fault you have been lied to. but you seem to have confused yourself even further.
that also is not unusual. it is the result of normal human thinking not disciplined by unavoidable facts.
JF,
I see in you someone who wants to fix Social Security. I think you see areas that seem to be broken. I think it is not broken. The designers of the system saw that it would need adjustments. I can do math and read reports, and I don’t think Congress should be particularly proud of their management of those adjustments, but they have been good enough.
SS provides for people with a career in the workforce. It does not do everything you might want to do for the economic security of everyone who is part of our society. If you try to change it so that it will, you may break it.