Relevant and even prescient commentary on news, politics and the economy.

Social Security Defender Archive: Including Northwest Plan Docs/Spreadsheets

I have been working off and on, well mostly off because of ‘life’ and ‘laziness’, since 2010 on a project I modestly called the Social Security Defender. It is all built around a Google account and so has a Google+ page, a blog, an e-mail address and a Google Drive.

Today I am going live with a Public Folder in its Google Drive called the Social Security Defender Archive. In this folder are a series of other folders including ones devoted to The Northwest Plan for a Real Social Security Fix and to Social Security Reports and to CBO & OMB Documents and Reports. Plus others. In all cases the documents should be viewable, linkable, and downloadable even as there is no ‘write’ capacity.

So this is an open invitation to try out the Archive, to see what works, what doesn’t, what is useless and could be deleted and what is missing that should be added. I expect to be actively curating the Archive over the next week or so, in particular adding in a lot of material relating to the 2015 Social Security Report, including broken out Figures and Tables, as well as updated versions of the Northwest Plan with 2015 Report data included.

The e-mail address for this account, which is also my e-mail for Angry Bear related matters is:
socsec dot defender at gmail.com. Comments there or left her are more than welcome. Thanx.

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Dean Baker on the 2015 SocSec Report and Real Wage

CEPR’s Dean Baker: Wage Growth Continues to be the Key to Social Security Solvency

Dean Baker and colleague Mark Weisbrot have been making a steady case since their publication of the aptly named Social Security: the Phony Crisis back in 1999. In short Social Security does not face a structural demographic problem, instead it has encountered a contingent economic one, marked mostly by a failure of wages to grow with productivity in the ways it did in past decades. The ‘Phony Crisis’ link goes to the Introduction to the book, if you haven’t read it you should. And equally worth reading is the Press Release linked above published last Wednesday. I just want to isolate and emphasize two paragraphs from the Press Release.

Wage growth is the key to the program’s solvency for two reasons. The first is that the upward redistribution of wage income over the last three decades has played a large role in the projected shortfall. As income has been transferred from ordinary workers to those at the top of the wage distribution, a larger share of wage income has escaped taxation. When the Greenspan Commission set the cap for taxable wages in 1983, it covered 90 percent of wage income. Currently the cap only covers around 82 percent of wage income. If the cap had continued to cover 90 percent of wage income, the projected shortfall would be roughly 40 percent less than it is now.

“The other reason why broadly based wage growth is key to the program’s continuing solvency is that the burden of possible future tax increases would be much less consequential if most workers will share in the gains of economic growth. The Social Security trustees project that real wages will rise by more than 34 percent over the next two decades. (They are projected to rise by another 30 percent over the following two decades.) Even if the payroll tax is increased by three percentage points, it would take back less than one-tenth of the projected rise in before-tax wages if wage growth is evenly shared. On the other hand, if most of the gains from growth continue to go to those at the top end of the distribution, any tax increase will be a major burden.

On my reading Dean is calling for a dual approach: one that emphasizes wage growth in increasing revenue to Social Security but which also envisions accompanying tax increases. Whose affordability is that much more eased by the wage boosts. It doesn’t have to be either or, it can be MJ.ABW and NW.

More Jobs. At Better Wages. plus the Northwest Plan.

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Table IV.B5: Social Security OAS and DI Actuarial Balances by 25 Year Subperiod

Table IV.B5.—Components of Summarized Income Rates and Cost Rates,
Calendar Years 2015-89
[As a percentage of taxable payroll]

2915 Table IVB5
Lots of numbers here but the only ones want to focus on are those in the last column, those which show actuarial balances for each of the OAS and DI Trust Funds for for the next 25, 50 and 75 years for each of the Low, Intermediate and High Cost Alternatives.

The first thing I want to note is how front loaded the crisis is for DI. Under current projections its Trust Fund will go dry in the 4th quarter of 2016. On the other hand the total fix for the period 2015-2040 is only 0.30% of payroll. Which is almost identical to the cost of the fix for the whole 75 year window or 2015-2090. Meaning this isn’t a case of a patch that needs to be revisited a couple decades out. We could if we wished fix DI for 2016 and 2040 and 2090 right now for a very modest cost. Moreover such a standalone fix would meet the requirement the Congress stuck into the budget rule, that any fix for DI would have to positively effect the overall prospect for combined OASDI. While this requirement was inserted in hopes of Obama and the Dems being forced to open up the entire program for discussion and ‘reform’ there is actually no reason NOT to piece-meal it. Fix Social Security DI by a one time increase in FICA of 0.31% of payroll and we have bought more than a decade of space to address OAS.

Another way to look at this is as a down-payment on the Northwest Plan. Once people see how cheap and easy a DI fix was making them understand that a series of increases even smaller than that starting 3 or 5 years down the road might be the optimal choice. Or at least as the opening point for negotiations on the right mix of revenue enhancements.

In the meantime: DI Fixed. Done. For as Far As the Eye Can See. Let’s get started?

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2015 Social Security Report: Infinite Future Fun

2015 VI.F2
Hmmm. I think I’ll just let people have fun figuring out what this all means. Hover over the image or double click and you should get legible version.
Hint the meanings of ‘past’ ‘current’ and so ‘future participants’ might not mean exactly what they seem at first encounter. You can scroll to the text from this attached link to the Figure.
Table VI.F2.—Present Values of OASDI Cost Less Non-interest Income
and Unfunded Obligations for Program Participants,
Based on Intermediate Assumptions

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2015 Social Security Report Release Day (w/updates)

At 1:30 EDT the Trustees of Social Security will hold a media availability at which they will release the 2015 Social Security and Medicare Reports. If past practice holds the Reports will be released on line at or before that time in both a web (HTML) format and in PDF. Assuming past file name conventions hold the two URLs will be:
http://www.ssa.gov/oact/tr/2015/index.html and
http://www.ssa.gov/oact/tr/2015/tr2015.pdf

Once the Report is released this post will be updated with key numbers, dates and talking points. I will also be working with the text of the Report to transform it into more readily accessible form as an Excel Workbook with associated .jpgs and .pngs of the more important Tables and Figures. More on that as we go along.

Note the above links will be dead until Report release. The actual launch page for current and past Reports is here:
http://www.ssa.gov/oact/tr/index.html
Right now that current Report shows as the 2014. This should update to 2015 immediately on release and so this is probably the best link to be clicking on in the meantime. At least it will get you somewhere other than dreaded Room 404.

Back with more when there is more.

Update 1 Report not out online but Treasury Press release has Trust Fund Depletion in 2034 and 75 year actuarial gap at 2.68 or down from 2.88. Reasonably good news but the devil is in the details which are still forthcoming.

Update 2 HTML version online under first URL cited above.

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Why Progressives Should Reject Social Security Cap Increases

The basic reason is simple: it undercuts the broader progressive agenda. Also it buys into a particular Right economic meme. Both are huge mistakes.

To understand this we need to step back and examine overall tax policy and tax progressivity. What should progressives want? Well I suggest that as a first step we restore top marginal income rates back to Reagan levels (50%) and extend them to all income including realized capital gains. And then as some potential second stop restore those top rates to Kennedy levels (70%). At this point the Federal government would have the funds to start addressing all parts of the progressive agenda from childhood education and health to retirement security in a direct way, that is we could once again engage in the New Deal and the Fair Deal in a quest to achieve the Great Society. Or in more restrained rhetoric start working on social democratic solutions to broad societal problems.

But if progressives and Social Democrats agree on this then proposals to lift current Social Security wage caps and/or extend FICA to all income starts crowding out any possibility to tax THAT SAME INCOME via changes in marginal rates. Moreover it floods cash into and through a Trust Fund system that doesn’t allow expenditures on anything other than the specific programs involved. With the result that the rest of the progressive agenda remains stymied by the crowding out effect even as the Right can ‘explain’ that ‘you can’t have nice things’ because all the money is going to Social Security. Thus proving that the whole program was ‘unsustainable’ to start with and that any extensions of it, say in the direction of Single Payer Health Insurance, is just foolish and ignorant.

The truth is that the actual cash flow issues facing Social Security are minor and manageable within its current structures. Indeed almost all that needs to be done for Social Security going forward can be addressed by policies focused on increasing real wage and labor share via minimum wage and wage theft/suppression enforcement and by embarking on a much needed direct expenditure on public infrastructure. After all 12.4% of every wage dollar funded directly by a bridge replacement projects and 12.4% of every wage dollar produced by the multiplier effects of those wage workers spending their remaining wages flows directly into Social Security anyway. Meaning that jobs projects ARE Social Security ‘reform’.

George Laffer wasn’t entirely crazy. There is a maximum rate of tax extraction that corresponds with the greatest growth of the economy. It would just seem that depending on how you structure the incidence of that tax between wage income and capital income the empirical data shows that rate to be closer to Johnson and Kennedy’s 70% than Reagan’s 50% then 35% or Clinton’s 40%. So lets get cracking on raising marginal tax rates. But that effort is only impeded by progressives explicitly endorsing ‘Social Security Crisis’ and sending any and all increased tax revenue through the Trust Funds.

This isn’t to say to neglect Social Security entirely. The DI Trust Fund needs an immediate boost in revenues and the OAS Trust Fund would well be served by a gradual increase in FICA rates (hi Coberly!). But that doesn’t require extending FICA to all income, that is simple overkill and overreaction to what Dean Baker and Mark Weisbrot appropriately named the Phony Crisis in their book back in 1999.

To me the broader progressive economic agenda is simple: Restore top marginal income tax rates to 50%, or better 65%. Pursue policies explicitly focused on increasing employment, real wage and so labor share. And then—. Well there doesn’t really need to be much more “And then”. Certainly not in regards to major adjustments in the structure of Social Security finance, that just will work itself out with the combination of higher employment at higher wages and maybe some tinkering with FICA rates under the current cap formula.

Progressive Taxation and MJ.ABW (More Jobs. At Better Wages). And oh yeah – leave Social Security alone (at least mostly). Cap Increases are just a diversion from the real progressive solutions to the total progressive agenda.

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Rick Perry Says Social Security and Medicare Were Given to Us by God. Seriously. [Addendum added.]

The things we have in this country were given to us by God, not by government.

Perry: Government isn’t your savior, Nick Gass, Politico, today

Social Security and Medicare were given to us by God?  Who knew?

The highway system, sewer and water systems, airports and air traffic control, operation of shipping ports, public school systems, and (going back a way) electrification of the Tennessee Valley?

The research that resulted in the polio vaccine?

Guess I’ve been under a misapprehension about their provenance.

ADDENDUM:  It just occurred to me that, presumably then, the things Canadians, Danes, Swedes, Norwegians, and Germans have in their countries were given to them by God, not by government.  And the French, too—especially their healthcare system, widely regarded as one of the best in the world and available free of charge to everyone.

Which makes me wonder why God favors Canadians, Danes, Swedes, Norwegians, Germans and the French over Americans.

That said, I do understand why God favors the residents of blue states here in this country over red states.  Just in the last year alone, God has saved many, many more lives and lessened pain and physical suffering for far more people in blue states than in red states simply by deciding to significantly expand Medicaid availability under Obamacare.  Why did He decide to be a savior for so many more people in California than in Texas and Kansas?  He’s obviously a Democrat.  But he’s supposed to be nonpolitical.

This is testing my faith.

Added 6/5 at 2:58 p.m.

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Social Security Works…A friendly review from a different perspective

by Dale Coberly

Social Security Works  by Nancy Altman and Eric Kingson

A friendly review from a different perspective.

I have great respect for Altman and Kingson for the work they they have done writing this book.  I disagree with their ultimate “fix” for Social Security (it ain’t broke), but I want you to read the book.  I want everyone to read it.

This book does a  comprehensive job  explaining Social Security and the lies of those who are trying to destroy it.  I do have a different point of view and reach a different conclusion,  but you should read their book so you can understand the problem.  It would be far better for you to disagree with me and agree with Altman/Kingson than to leave yourself at the mercy of the Big Lie being told by the haters of Social Security and the politicians and press who have been bought or fooled by them.

The book demonstrates conclusively that Social Security is not going broke. And so far from being a “burden on the young,” it is perhaps the only thing standing between today’s young and terrible poverty in their own old age.  They describe the situation in America today in which all forms of reasonably secure retirement savings are under attack or already destroyed. The attack is orchestrated by a few very rich people who are either true believers in “free enterprise’ (as opposed to what they call “socialism”) or they are simply looking at the huge profits they can make by forcing everyone into “the market” and collecting fees while the workers take all the risks.

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Northwest Plan for Social Security: Conservative “Workers – Take Your Medicine”-ism (and why this Social Democrat likes it)

Long time readers of Angry Bear will be familiar with the Northwest Plan for a Real Social Security Fix. It has been pushed here in a series of posts and in innumerable comments (mostly by Dale Coberly) since 2009 including this core post: NW Plan for a Real Social Security Fix Ver 2.0: 2009 Trigger. Those who have questions about its details can ask them in Comments. But lets have the short version.

The Northwest Plan is inherently conservative in the old-fashioned sense of the word. It accepts that status quo that has resulted from the Social Security Act of 1935 and the important Amendments of 1939, 1950 and 1956 and for the sake of argument accepts the tests and Reporting imposed on Social Security by current law and the practice of the Social Security Trustees and the projections of the Social Security Office of the Chief Actuary. Having accepted that status quo in all its respects it then proceeds to ask a simple question: “What would it take to guarantee full Scheduled Benefits going forward under the constraints of current law and under the projections of the (standard) Intermediate Cost projection?” Or in other words “What would it take to Fix Social Security without Reforming it?” Where ‘Reform’ would include proposals from both the Right (which mostly take the form of benefit reductions) or from the Left (which generally take the form of modifying or eliminating the income cap formula). Or in still other words “What if we just made workers take their medicine and take the entire burden on themselves?”

In answering this question the authors of the Northwest Plan, primarily Dale Coberly with assists from Bruce Webb and Arne Larson, suggest starting from the arithmetic. Which in this case takes the form of “actuarial gap”. Now actuarial gap can be measured and presented in various ways over various time periods but is by the Trustees typically presented in the following form: “What is the gap between current rates of FICA and the rate currently needed to fully fund Scheduled Benefits over the 75 year Long Range Actuarial Window without changing either the Benefit formula or the Cap formula?” Now granted that there are a lot of barely buried assumptions in this formulation what would happen if we just ran with it? And answers to that under the fold.

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