The Social Security Trustees Report
by Dale Coberly
The Social Security Trustees Report
is out. SS now in “short term actuarial insolvency” Much (lies) will be made of this. The Report does not lie, but it does obscure the fact that a 2% increase in the payroll tax will still solve the problem. the one tenth percent per year gradual approach will now need to be a little bit higher… increasing each year we delay, but at the end of the day no higher than the 2%.
The biggest reason for the projected “insolvency” now has nothing to do with SS itself, but predicted increase in employers shifting pay to non taxable health care benefits.
I may be able to write more about this but not very motivated since no one seems to listen.
Also it is getting harder for me to find the energy and correct the typos.
2% is the cost to workers. employers pay another 2%. people who like pointless arguments will argue this is “really” a 4% increase.
doesn’t matter. the workers will only “see” 2%, and even a 4% increase is cheap for what it buys.
sorry for the tone of this. it was originally intended as a personal note to some friends. i will try to write a more formal post in a few days.
Committee for a Responsible Federal Budget has already published a “we are all going to die” analysis of the Report. they don’t exactly lie about the facts, but they bury them in hysterical rhetoric designed to lead people to believe the only hope is to “fix” SS by cutting benefits to a point where SS can no longer function as meaningful insurance against poverty in old age… insurance paid for by the workers themselves and has NO effect on the Federal Budget at all.
Social Security, Cities’ tax base, States tax base, … all vestiges of the past industrial age. Look at Chicago, … Look at pension plans everywhere.
Smaller Cities first looked to Shopping Malls. Then came Walmart, then came Amazon.
i have no idea what you are trying to say here.
pension plans everywhere are under assault. as far as i can tell, from the big financial interests, or perhaps just those who expect to profit from keeping people poor and forcing them to work into deep old age.
the beauty of SS is that it is worker paid. so…at the end of the day… are most pension plans, but the link is less obvious where the pension budget comes out of general taxes. in either case the assault is always an appeal to ignorance and stupidity.
Coberly, been a long time since you and I have had a discourse:
I think that Social Security and other New Deal social Welfare programs addressed Capitalism’s failures; and, of necessity, compromises were made’
Pensions worked well when there were large workforces making decent wages and large industrial corporations paying taxes into cities’ coffers. Today, those corporations are either offshore or automated, probably half of the workforce is gigging or are in other low paying jobs.
Those industrial age pensions were premised on things staying the same. The Cities revenue models no longer work.
We need new fixes. How should it be in this new, Age of Technology economy?
Your “new Age of Technology” economy is simply recognizing taxes DO NOT fund government spending. FICA tax funding of an SS trust is nothing more than a meaningless politician-created spreadsheet.
GDP is the measure of our PRODUCTIVE economy. GDP is the sum of household, business and government spending (and likewise the income of those sectors equals that spending, because ALL spending is someone else’s income). Our economy depends on household spending (2/3 of GDP). That spending is limited by household income (which comes only from those three sectors). Business provides that income to the extent demand (business opportunity) exists, and government provides the rest. All that’s important to the economy is maintaining this flow, and with a fiat currency (whose value, by definition, depends ONLY on currency-users perception), there are no limits other than that perception.
The household spending in GDP includes EVERYTHING that people (including the elderly) buy to consume – food, housing, healthcare, entertainment, etc. Looking at the income side of GDP, you find that neither Federal borrowing nor income taxes (nor FICA taxes) are part of that income – so they DO NOT (and never have) paid for (or “funded”) that spending. If you want proof for any of this, just pull up the GDP Primer at https://www.bea.gov/resources/methodologies .
I am not sure this is the Age of Technology as much as it is a new age of slavery,,total control by the owners of capital.
But I don’t have any special qualifications to talk about the future of history or the desirability of the way things are going.
All I am really competent to address is the facts about Social Security as compared to the lies… deceptions… people are being told by the politicians and the pundits.
That said, I don’t see any “compromises” in the worker-paid insurance design of Social Security. It is the most reasonable way for people to be sure they will not starve in old age. It has always been the case that people depended on a system of “saving,” by taking care of their
children as well as their neighbors’ children, so that, by gratitude or sheer cynical calculation, those children would grow up to take care of them… just as they took care of their own “grandmothers” and “grandfathers” in their turn (grandfather/grandmother being terms of respect not necesarily implying direct line of descent). What the industrial age contributed to this system was to effectively destroy the family’s ability to reliably care for their elders, as well as to destroy the “tribe” that guaranteed that neighbors would support neighbors without direct blood linkage. Government pensions helped to make up for this when they were finally invented. FDR insulated the retirement system from both the government and the marketplace by insisting up on the “worker paid” feature. Today we have the owners of the Market essentially owning the government and very close to eliminating “government” pension systems and protections of all kinds.
It is a growing evil. But meanwhile Social Security is still the best protection we have for retirement security, and I think likely to be the best protection we ever will have… whatever the future economy turns out to be like. Unless it is strictly subsistence and survival of the fittest… where “fittest” means the strongest and most violent and not necessarily those smart enough to learn to cooperate. People cooperating is another word for “government,” always a dangerous thing, always a necessary thing,
Pardon me, but your understanding of money and economics is a product of your willingness to blind yourself with ideology.
It is funny that you are able to say “ALL spending..” and then turn around and say that government taxes and borrowing aren’t part of that income.”
People do things for money because it gives them the right to buy things (that people do) with that money. This is true whether the money flows from hand to hand in the “market,” or by “borrowing” (both government and market), or by taxes.
In the case of SS the money flow from each person to his later self is rather direct, unless you don’t believe in contracts enforced by law.
and just to help you with a little confusion generated by the Big Liars: the fact that each greasy dollar bill that is paid out in benefits came in that day from someone who paid it in… to buy a contract for future delivery… does not alter the fact that those benefits were paid for years ago when the current beneficiary bought his contract for future delivery. interest has always been a part of contracts for future delivery. in the case of SS the “interest” is a direct consequence of growth in the economy… or only of the growth in inflation, if it comes to that. and the current taxpayer is not being cheated because his benefits will have more or less (as much as anything remains the same in prices over time) the same real value, as a percent of his income, as the money he paid in,
feel free to pick this apart if you wish. but you will be picking apart my language and not the reality of what is going on,
The 2020 SS report is a waste of time. The numbers presented do not reflect CV19.
The WSJ quotes a Treasury Official:
“The actual status of the program in the near term is almost certainly somewhat less favorable than is presented in this year’s trustees’ report. It’s clear that employment, earned income and payroll-tax revenue will be significantly affected, and lower for at least a portion of 2020 than estimated for the report. Additional claims for retirement, disability and survivors’ benefits might increase costs.”
The flawed 2020 report says that the SSTF will be 1:1 with benefits in 2029. Next year, when real numbers are presented, the 1:1 ratio will be 2026. That’s only five years before the SHTF.
Coberly – there ain’t enough time to fix SS with your “Dribble Tax” plan. Sorry.
while i am aware the coronavirus and the congress’ response to it are likely to change the projections quite a bit next year, that does not mean this year’s projections are “a waste of time.”
except maybe time wasted on you.
the likely earlier depletion of the Trust fund does not change the fundamental facts:
The Trust Fund was always going to run out, It was designed to run out as the Boomer generation retired.
Social Security was always going need to raise the tax… about 2% to balance income with needed benefits. this is not a huge burden, it is in fact no burden at all. just the cost of paying for your future groceries.
It is better to raise the tax gradually than to wait and raise it the whole 2% at once. Almost anyone with a functioning brain would understand that if it was explained to them, As I have tried to explain it to you scores of times. People can pay an extra dollar or two a week without even noticing it. They will notice an extra 20 dollars or so a week if it hits them all at once. The increase will still be only about a tenth of the expected increase in wages by the time it is needed. Even if wages do not increase as expected, the increase in saving via SS (FICA) will still be the best and cheapest way most people will have to pay for their future groceries.
A gradual increase takes advantage of the “time value of money” so that the ultimate 2% increase will be needed many, many years further in the future than the 2035 projected date, or the possible 2026 projected date you suggest.
Senator McConnell has just said that he’d rather see the states go bankrupt than lend them any federal money to see them thought the virus-recession. This after giving Trillions of dollars to Big Businesses to see them thought the virus-recession.
It seems to me that McConnell is saying that all along his goal was to destroy the federal government’s power, but now that that job is nearly complete, it’s time to turn to destroying the state governments’ power, because the only power he wants in America is the power of Big Business.
He seemed particularly contemptuous of the states for providing pensions for their employees. an honest man who knew anything about economics would know that state pensions are just a way to defer part of workers pay to a time when they would need it more, and the state (because of growth) would be in a better position to pay.
But Big Business has taught the people to think of pensions as some sort of gift, or graft, “paying people for not working.”
The Feds have the power to create money. Let them create money to pay future benefits without going through the charade of taxing us or borrowing to get the money they could create at will. I simply do not understand how a government with the power to issue money can run out of the money it can issue.
“through,” not “thought” (both times)
This has nothing to do with ideology. It should be plain as day to anyone able to read.
Go up to the BEA site, the agency that compiles the GDP. Read what household spending (which they call “personal consumption expenditures) includes (ie, what I said it did above) & read where that data comes from (which are the monthly/annual reports all retailers are required by law to submit – you’ll need to go to their 500+ page Handbook for that). Then look at the income side of GDP & you’ll see that it includes no Federal borrowings or income taxes. QED
borrowing as opposed to just printing helps the accounting.
also there is some need to coordinate the amount of money with the amount of available good and services, and to direct it to the most “deserving” according to some theory of justice, which in America has generally been the job of the “invisible hand,” but not entirely, since people began to notice that the invisible hand was giving too much to those who had too much while those who had too little were in serious distress. i suppose on the theory that even poor people might turn out to be useful some time in the future if they didn’t die of starvation in the meanwhile.
finally, i think the government does “just print” money as we speak: operations of the Federal Reserve (which it lends, like all banks, and keeps an accounting of) perhaps in times when there aren’t enough people willing to lend money to the government, so the government lends money to them. but i am very much not an expert in how this works.
I’m not an expert in the accounting required to estimate the payout annually of SS benefits. But assuming SS funds are part of the federal budget, I have a good idea how those payments are paid. Congress allocates the required amount of funding, as per the accounting of the SS Commission, in the budget. That’s it. You can add or subtract Treasuries that do not actually exist, other than for bookkeeping purposes I suppose. But issuing debt is not intrinsic to any funding of Congressional spending. Congress creates new currency when it pays a bill. It has a Constitutional monopoly over the spending and taxing of the currency of record. The US is a monetary sovereign nation. You can use any financial paper you desire in order to produce an accounting spreadsheet. For 400 years the British used ‘tally sticks’ or wood as the currency of record. Anyway, as for the employer and employee fees, they are taxes that reduce the spendable income of the recipient. They have nothing to do with the future SS benefits, which are paygo. So, if Congress decided to increase SS benefits 10% they need only to approve the SS trust fund with an additional 10%.
you are right you are not an expert in how SS is financed.
i have learned that people who say it’s as plain as day to anyone who can read are blinded by their ideology.
GDP accounting is for a special purpose. try to think about what is actually going on: you know, people working for money, people spending money.
oh my god. worst typo of all time: i saw herbert and by the time i typed your name it had become “spencer.”
Talk about being blinded by ideology!!!
Totally correct. And the FICA taxes are taking money from businesses & people who need that money – for NO rational reason. At the top of my desired-legislative-changes list is to abolish FICA taxes.
“no rational reason”? like giving it back to them with interest when they need it most?
i think you may have a different idea of “rational” than i do.
please go find a website where you can all reason together in perfect harmony.
To let workers fund basic income for when they are old is the most rational program for most workers.
In the first place SS is not part of the Federal budget. SS pays benefits as claims come in, out of the money paid in from FICA. When income is higher than benefits, the money goes into a Trust Fund where it is lent TO the Federal government by buying bonds. When benefits exceed FICA income, SS cashes some of it’s bonds.
The payroll tax was raised above immediate needs to create a large enough Trust Fund to help pay for the Boomer retirement… with money collected from the Boomers while they were still working.
This Trust Fund will run down to effective zero more or less when the boomers are no longer a factor. But by that time, the increasing life expectancy will require a need to increase the FICA tax about 2% (for each the worker and the employer). This was also expected by the 1983 reform.
Only the campaign of lies has obscured this fact of life from the people so that there is a good chance congress will cut benefits rather than raise the tax. This is financial nonsense and only serves the insane greed of the Big Money interests. It also serves their desire for complete power by restricting the power of government… by shrinking it to the size of government to where they can “drown it in the bathtub.”
I have no idea what the rest of what you are saying means. I suspect it is wrong, but I KNOW it has nothing to do with SS.
Coberly….I understand why it was set up this way, the history goes back to the creation of the FED itself. In essence, the system we have today insures that money is created using debt instruments which locks in interest payments as a way for banks to survive. It is a game rigged by banks and for banks. There is no need to borrow money from any of us to pay debts owned by the issuer of currency unless you do not trust the issuer of currency (this is a real concern which led us to an independent FED) and the rise in inflation. The first threat is still real especially with a President like Trump who could abuse it without anyone stopping him. Inflation though is tied to supply of goods and services and the amount of money chasing them. Well, the banking sector has created so much credit in the hands of everyone over the last 40 years yet we see no inflation to speak of really. As long as we have plenty of capacity, we can buy at will until such a time when all of us want more stuff then the world can provide us. Then we start bidding against each other and inflation happens. Now I might be totally off here, I know I am on a board with real economists but this layman sees the world of money as an endless game of monopoly, the bank never runs out of dough as long as dad can find another dollar somewhere to give to the players to keep the game alive.
i have no real argument with what you are saying here. i think most people have no idea what money really is. It doesn’t matter much. They use it exactly for what it is. They only get in trouble when they think about it or talk about it.
I have been able to miss most of the direct effects of the monopoly game in my life. I am however subject to the systemic effects over the long run, as in declining real wages, declining value savings (low interest rates) recessions, and the ruining of people i know by grand larceny bank fraud.
watching the congress and the pundits talk about social security which they appear to know nothing about at all is also not good for my digestion either,
i think we see no inflation first because it is not reported honestly. but also because the working person doesn’t have enough money to buy anything at inflation aiding rates. that money is sucked off by the rich who buy stocks at inflated prices, and gamble it away.
but this is pure bull session. i don’t know that much, except about Social Security: it is not paid for by the government, it is paid for by the workers who will get the benefits… at a fair price they can easily afford forever.
as for Zimmer, GDP does not include buying and selling financial instruments, or work done by a housewife. does this mean they are not important. I don’t know how they parse out income taxes, but they do count wages paid to government workers, and they do count “indirect business taxes.”
they don’t count “transfer payments” and it would be reasonable to count SS as a transfer payment… it is a transfer from your young self to your old self. or they could consider as a transfer from the FICA tax payers to the SS beneficiaries in order to keep the accounting “for the same year.” but however they consider it, it is what it is and it is not “for no rational purpose.” I don’t think they count bank deposits and withdrawals either, though they may count interest.
saying QED doesn’t prove you are smart, or right, or even understand what you are talking about.
Herbert Spencer turns out to have been solidly of the Republican persuasion:
“the poverty of the incapable, the distresses that come upon the imprudent, the starvation of the idle, and those shoulderings aside of the weak by the strong, which leave so many ‘in shallows and miseries’ are the decrees of a large far-seeing benevolence.”
Social Security is our society’s money based accounting system for fulfilling our society’s basic obligation to take care of old people. Social Security does a good job at this despite all the greedy bastards who want to destroy it. We’ve already screwed up our society’s basic obligation to take care of young people and sick people and a lot of greedy swine have done very well out of it.
No, seriously. Tell us how you really feel about them.
Actually I couldn’t agree with you more,
but I’d like to point out, it’s “our” society’s way. Other societies have slightly different ways… mostly getting the money directly from taxes paid by the greedy swine.
Roosevelt had a genius idea: get the money from the workers while they are working, and give them their money back with interest when they need it to live on when they retire. That way, he said, “no damn politician can take it away from them.” The “interest” comes from the fact that each generation will be paying into the system more money that the last due to growth in the economy.
This has worked for 80 + years so far, but Roosevelt may have underestimated the persistence of damn politicians and greedy swine, and overestimated the intelligence of the workers or the people who claim to represent them.
The people who claim to represent the interests of the workers are now calling for forcing the greedy swine to pay for workers’ pensions, and non workers’ pensions, and they want more money… strangely enough what the greedy swine were calling Social Security already while hoping to turn it into welfare as we knew it. And we know what happens to that: “We have the will but not the wallet. ha ha.”
“No matter how cynical you get, it is impossible to keep up.”
― Lily Tomlin
Wooley Bully and other MMT-ish fellow travelers,
Uncle borrowing supports private banking (lending reserves) and foreign trade (surplus trading partner currency reserves) with safe assets. It ain’t a great system, but it is a system that works for the middlemen, the very wealthy middlemen. The US once had an advanced industrial economy, but middlemen have more rentier arbitrage opportunities than industrialists. True though that there are less rigid constraints on a sovereign fiat currency in a closed economy with socialized banking.
I suppose I shouldn’t encourage more nonsense from Coberly, But his “GDP doesn’t include comments need correction. GDP does not include some activities that some might consider productive, like unpaid housework. But so what. It includes all the goods & services people buy & consume in their daily lives & that’s all it purports to measure. It doesn’t include transfer payments when they’re made, but it does include them when their spent – just as it should.
The income side of GDP does include the wages paid to government workers (just as it should – they’re people too) & does include taxes that go into the direct costs of the products/services people buy, like sales taxes. But it does not include personal or corporate income taxes or personal property taxes or the government’s borrowing – so those taxes obviously don’t fund that spending.
It’s understandable how upsetting some of these MMT-like realizations can be. To find that much of what you have believed for years about money is untrue certainly engenders cognitive dissonance. But a monetary sovereign does not have the the same financial constraints as individuals & businesses (or your local/state governments) & never did.
That’s just been hidden from us for years out of fear of what politicians would do once they realized their spending is unconstrained. MMT didn’t create this, they just shined a light on it. But it’s Trump that brought it into clear public view – first the gigantic tax cut for the wealthy & now the spending of multi-trillions responding to the pandemic.
Whereas MMTers hoped this unveiling would encourage left-wing causes (like building a better safety net for people), as Trump is showing, it’s equally applicable to right-wing causes. (Most of this current spending is going into compensating the wealthy for the losses the pandemic is exposing them to). As Michael Hudson said the other day, “In the debates with Bernie Sanders during the spring, Biden and Klobuchar kept saying, ‘What we’re paying for Medicare-for-All will be $1 trillion over 10 years.’ Well, here the Fed can create $1.5 trillion in one week just to buy stocks.”
Another data dump from SSA this AM:
LIFE TABLES FOR THE USA
This is a 186 page beast. If you’re interest in how long you might live, or what you might die of this will give some answers.
The data covers 1900-2100. There are many tables and graphs that show how devastating the 1918 flue was. The average expected life fell from 65 to 48 in that year.
(Only if you’re bored):
I don’t see where you correct my nonsense. Does that mean yours is nonsense too?
There is a lot I don’t know about GDP accounting. But it looks to me like you don’t understand what you know.
If GDP does not count stock sales, or “transfer payments” why does that make FICA nonsense? Do they count bank deposits and withdrawals?
What are they trying to measure? What does that have to do with Social Security?
Now I have opened myself up to nonsense from you. Try to think carefully and make the best of it.