the best way to address retirement security is to continue reforming 401(k) plans and to expand Social Security—but only for low-income workers. Middle-class workers are generally doing reasonably well, and certainly as well as they did in the past. We don’t need a massive and expensive expansion of Social Security for everyone, but we do need to make Social Security more generous for the bottom quarter or so of the population that’s doing poorly in both relative and absolute terms. This is something that every liberal ought to support, and hopefully this is the bandwagon that President Obama in now on.
Alan Greenspan Forecasts Extremely Low Economic Growth for Germany, Finland, Norway, Denmark, Sweden, Holland and Canada
Alan Greenspan, the former chairman of the Federal Reserve, weighed in last week on one of the pressing issues facing the incoming Trump administration and the country — slow economic growth. Greenspan’s explanation is novel and bound to be controversial. To preview: He blames the welfare state and overall uncertainty for the slowdown. …
By scouring economic statistics, Greenspan thinks he’s discovered heretofore hidden relationships that explain weak productivity growth.
by Dale Coberly
SOCIAL SECURITY TRUSTEES REPORT
An Overview of the Overview
The 2016 Trustees Report didn’t have much new to say, so the usual commentators were free to say what they have always said, which is mostly wrong.
A careful reading of just the Overview (p 2 to 25 of the Report) will help us correct the dangerous misunderstandings that have been created by commenters who either don’t understand it themselves or just hope that you won’t understand what the Report actually says.
Let us begin with the Trustees own conclusion (p 25):
“With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”
“Can continue… to protect… future generations.” But there has been no informed discussion. no creative thinking, and no timely legislation. Instead, the politicians and the press keep repeating hysterical distortions to lead people to believe that Social Security faces a huge debt, a “looming crisis,” that, so far from “protecting future generations” will impose “crushing burdens on the young.”
The Trustees indeed report [page 5] an “actuarial deficit” of 11 trillion dollars, a number the “non partisan experts” use to scare people who aren’t used to thinking with numbers. Thinking with numbers leads easily to an approximation: Eleven trillion dollars divided by 100 million workers is about 110 thousand dollars per worker. Dividing that by 75 years yields about 1500 dollars per year per worker. And to put that into terms workers are familiar with, that would be about twenty-eight dollars per week for an average worker (who is making about a thousand dollars per week).
Is this a huge burden? The $ 28 does not go into a government black hole: it comes back to the worker when he will need it most, with enough effective interest (automatically created by pay as you go financing in a growing economy) to provide for his basic needs when he is too old to work. This is a reasonable cost for the benefit.
The Trustees don’t leave the reader having to trust my approximation. They state quite clearly [page 5] that the $ 11 Trillion Dollar actuarial deficit would require an “immediate and permanent” tax increase of 2.66 per cent. That 2.66% would be 27 dollars per week for a worker making one thousand dollars per week.
By law the Annual Social Security Report is due by April 1. But as in every year for the last decade this deadline was missed and of course without explanation or excuse, leaving Social Security hobbyists like me whimpering. Luckily there are not a lot of SocSec fanboys and fangirls. It might be a club of half a dozen. Anyway—–.
So while I wait for my annual fix of Tables and Figures I want to return again to the very odd and counterintuitive relations between Social Security and Public Debt. Because it turns out that little is what it seems to be, at least if you use ordinary language. For example what does it mean to say that Social Security is ‘solvent’? Well one definition would be ‘healthy and able to pay out all scheduled benefits for the conceivable future’ and that is true enough. But what does that look like in relation to the rest of Federal finance and debt?
‘Solvency’ in Social Security terms has a number of metrics: ‘sustainable solvency’, ‘short term actuarial balance’, ‘long term actuarial balance’, ‘actuarial balance over the infinite future horizon’ but all draw on the same basic concept. Social Security is ‘solvent’ in any given year if it has cash convertible assets in its Trust Fund equal to one year of projected next year cost. This is called the Trust Fund Ratio and is expressed simply enough as 100% = TF Ratio of 100. If the TF Ratio dips below 100 Social Security can be called ‘insolvent’ and indeed according the the various metrics referenced above if it is projected to go below 100 in any year of a set of future years it could also be deemed ‘insolvent’. And this true even if the reserve was such that full benefits could be paid out for years after that point of ‘insolvency’. Which explains why Social Security can have $2.8 trillion in the ‘bank’ and be projected to be able to pay full benefits until 2034 and still be considered a ‘crisis’ that needs immediate attention. But putting that last aside for now lets get back to the nuts, bolts and accounting. Under the fold.
The argument behind MJ.ABW in relation to Social Security (More Jobs. At Better Wages) by real economist and mentor Dean Baker of CEPR. Also an implicit underpinning of the Northwest Plan for a Real Social Security Fix. The whole thing is short if you want to read through: An Aging Society Is No Problem When Wages Rise
The past increases in the Social Security tax have generally not imposed a large burden on workers because real wages rose. The Social Security trustees project average wages to rise by more than 50 percent over the next three decades. If most workers share in this wage growth, then the two or three percentage point tax increase that might be needed to keep the program fully funded would be a small fraction of the wage growth workers see over this period. Of course, if income gains continue to be redistributed upward, then any increase in the Social Security tax will be a large burden.
The Social Security Policy Options, 2015 was not the only report released by CBO yesterday. You have this one filling out the details in the Long-Term Budget Outlook
Haven’t read this one either. So you all get first shot at framing the debate! Go get ’em Tigers!
Life expectancy in the United States has stalled for three straight years, the government announced Wednesday.
A child born last year can expect to make it to 78 years and 9 1/2 months — the same prediction made for the previous two years.
In most of the years since World War II, life expectancy in the U.S. has inched up —- thanks largely to medical advances, public health campaigns and better nutrition and education. The last time it was stuck for three years was in the mid-1980s.
What does this mean for the future solvency of Social Security? Beats the crap out of me. But it sure casts doubt on all those who preach “demography is destiny” and “we are all living longer so work until you are 70”.
On a more mathy note small changes in input into Social Security models can have amazing effects on output, particularly over 75 year actuarial projections. Tweak some mortality and immigration assumptions and results change dramatically. We don’t even have to go the MJ.ABW. Though More Jobs. At Better Wages would itself have some outsized effects.
Instead of nominating Marco Rubio, the Republicans should just cut out the pretense and nominate his doppelgänger: Charlie McCarthy
Bill Clinton had a line during his 1992 campaign that he said, mantra-like, so often in fact that eventually it lost its meaning and was just a cringe-inducing song-like chorus. The line, the slogan, was, “People who work hard and play by the rules.” It was—until he repeated it to a point well beyond when people actually would think of its meaning when they heard it, rather than just cringe or role their eyes—a very effective campaign mantra and also one that said something meaningful. And it’s a line that I’ve thought of repeatedly since Thursday night’s debate.
Marco Rubio neither works hard nor plays by the rules. Except, of course, the rules that politicians these days play by, although Rubio has throughout his political career—which is to say, virtually throughout his adult life once he graduated from law school—been jaw-droppingly adept at it, finding two billionaires to sponsor his political career and shore up his personal finances. One of them is human, the other is a corporate person.
The corporate person is GEO Group, the second-largest private, for-profit prison company in the United States—is there another country that has a private-prisons industry? I have no idea—and whose company’s only client is government entities. Including the State of Florida, thanks to Rubio during his tenure as Speaker of the Florida House of Representatives (of billionaires, human and corporate). The other is Miami billionaire Norman Braman.
A common refrain about Rubio is that he’s a man in a hurry. A refrain that I trust is about to become common is that he also is a man on the take. Which he is. Pure and simple. This spade needs to be called a spade, and will be, whether it’s Donald Trump, Hillary Clinton or Bernie Sanders—or a massive swell from the news media of the sort that, finally, is occurring in the wake of Wednesday’s debate calling all but one member of the entire cast (Kasich was the exception) grifters, scam artists, fraudsters, liars on a truly grand scale—that begins it loudly enough to be heard.
Regarding GEO-Group-as-Rubio-family-financier, the first article about it (to my knowledge) in a major national publication was by Staten Island-based freelance writer Michael Cohen published in the Washington Post on April 28 of this year. Its title is “How for-profit prisons have become the biggest lobby no one is talking about.” Its subtitle is “Sen. Marco Rubio is one of the biggest beneficiaries.” Among its paragraphs about Rubio is this one:
Marco Rubio is one of the best examples of the private prison industry’s growing political influence, a connection that deserves far more attention now that he’s officially launched a presidential bid. The U.S. senator has a history of close ties to the nation’s second-largest for-profit prison company, GEO Group, stretching back to his days as speaker of the Florida House of Representatives. While Rubio was leading the House, GEO was awarded a state government contract for a $110 million prison soon after Rubio hired an economic consultant who had been a trustee for a GEO real estate trust. Over his career, Rubio has received nearly $40,000 in campaign donations from GEO, making him the Senate’s top career recipient of contributions from the company. (Rubio’s office did not respond to requests for comment.)
The statute of limitations has run on potential public corruption charges under the federal criminal code. But many public officials have been charged and convicted for conduct that bears, let’s just say, a resemblance to Rubio’s. Former Virginia governor Bob McDonnell would dispute that his was one such case, since McDonnell contends that when he pushed that vitamin supplement in exchange for $165,000 (or whatever the amount was) in gifts and sweetheart loans, he did so not in his official capacity but as a private individual.
Then there is the curious case of Norman Braman, Florida tax policy when Rubio was speaker of the Florida House, and Rubio’s job teaching Political Science at a Florida public university courtesy of a newly created and paid for in full by Braman after Rubio left the Florida House in order to run full-time for the U.S. Senate. (Full time except for that adjunct teaching position, of course.) In an article published Monday on Alternet, Lou Dubose of the Washington Spectator summarized the details as revealed earlier by The New York Times:
In an interview with The New York Times, the senator described Norman Braman, a Miami billionaire who once owned the Philadelphia Eagles and now sells BMWs, Rolls-Royces, Cadillacs, Audis and Bugatis, as “a father figure who had given him advice on everything, from what books to read to how to manage a staff.”
Braman, the Times reported, gave Rubio more than advice.
He contributed $255,000 to an advocacy group Rubio formed to lobby for one of his signature-mark initiatives while he was speaker of the Florida House of Representatives: a dramatic reduction of property taxes and increase in the state sales tax.
When Rubio left state government, he got a job teaching at Florida International University, committing to raise his salary from private donors. Braman contributed $100,000 to the university, earmarked for Rubio’s salary.
Braman donated to Rubio’s U.S. Senate campaign, and hired Rubio as a lawyer for seven months while he campaigned. He hired Rubio’s wife, and her company, to work for his charitable foundation. And he is reported to have committed $10 million to Rubio’s presidential campaign.
The New York Times reporters suggested that Rubio’s involvement with Braman will lead to a more thorough examination of the Florida Senator’s personal finances as the presidential campaign continues.
Dubose’s article is titled “Marco Rubio’s Financial Messes” and subtitled “Fishy financials don’t make for a great campaign.” And, really, they don’t.
Rubio’s debate riposte—not about any of this, which he wasn’t asked about, but to a question about problems with his and his wife’s handling of their family’s cash flow—was that, well, he unlike Bush and Trump comes from a family of very modest means, and as an adult he received no financial assistance from his parents. This presumably will do double duty as a response to questions about what the conduct that many people, I suspect, will view as amounting to public corruption. But it’s a line that will continue to work only until someone other than me—to reiterate, e.g., Trump, Sanders, Clinton, or journalists—points out that many, many people who come from families of very modest means actually do work hard and do play by the rules.
Many of them, like Rubio’s mother, whom he mentioned during the debate in reference to Medicare and Social Security—he said she relies on them—are weak as people. So, too, is he, by his own admission, for allowing his mother to rely on those federal programs rather than supporting her, including paying her healthcare costs. Like people did in the old days. I was unaware of this admission by him, and in fact was unaware that he thinks Medicare and Social Security weaken us as people, until I read Steve Benen’s post yesterday on Rachel Maddow’s MSNBC blog (h/t Paul Waldman):
Later, the far-right Floridian referenced entitlements – Rubio is on record condemning Medicare and Social Security for “weakening us as a people” – and said to laughter, “Nothing has to change for current beneficiaries. My mother is on Medicare and Social Security. I’m against anything that’s bad for my mother.”
That same record (video, actually) includes, specifically, Rubio’s statement that Medicare and Social Security have made us as a people lazy.
It will be a relief to many that as long as Mrs. Rubio is alive, Medicare and Social Security will be safe under a Rubio presidency. Enabling the lazy Rubio to avoid having to support her.
The Democrats can only hope that Marco Rubio will be the Republican nominee for president. Our current campaign finance system reduces most American politicians to ventriloquists’ puppets, but Rubio is unmistakably Charlie McCarthy reincarnate. To the point of comedy. Like the original Charlie McCarthy. Next time you hear or see him speak, just think of how comfortably he would fit on Edgar Bergen’s lap.*
A week or two ago I read—I don’t remember where—that there is a Super PAC tied to Rubio that has a huge amount of funding but only one donor, whose identity is anonymous. Rubio indeed would fit perfectly on Edgar Bergen’s lap, but here’s betting that that donor isn’t Edgar Bergen.
*Link to Paul Krugman’s blog post from this morning titled “Policy and Character” added. 10/30 at 11:01 p.m.
Way to rally the base Turtle Neck!
WASHINGTON — The 60 million people on Social Security will not receive any cost-of-living increase in their benefits in 2016, the government said Thursday, but because of a quirk in federal law, nearly one-third of Medicare beneficiaries could have record increases in their premiums unless Congress intervenes.
McConnell is seeking a reduction in cost-of-living adjustments to Social Security recipients and new restrictions on Medicare, including limiting benefits to the rich and raising the eligibility age, several sources said.
Now it is true that Social Security policy geeks like me and maybe some other readers/contributors to Angry Bear can have an informed discussion on the pro’s and con’s of CPI-U vs CPI-W vs CPI-E vs Chained CPI-W and their respective effects on Social Security “actuarial imbalance” and “unfunded liability over the infinite future horizon”. God knows I am up for that discussion any time and feel free to weigh in on the comment thread.
But you have to be pretty politically brain dead to propose holding the Debt Limit hostage to demands for COLA reductions in the same damn week that SSA announced that COLA would be zero for 2016. Boy that should rally seniors to the polls to vote Republican next year.