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Tilting at Windmills

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February 8, 2006
By: Kevin Drum

JUST WHEN YOU THOUGHT IT WAS SAFE....Like the creature that won't die no matter how many bullets you put through its heart, Social Security privatization is back for an encore in President Bush's 2007 budget proposal. Allan Sloan has the dirt. The proposal itself, such as it is, is on p. 286 here, and the cost estimate is on p. 321 here. As usual, details are magnificently nonexistent.

My guess is that this is a nothingburger, just a way for Bush to demonstrate that he's not backing down on anything no how, no way. Still, you have to love the chip-on-a-shoulder rhetoric:

By adopting progressive indexing and allowing young workers to create voluntary personal retirement accounts within the Social Security system, the Presidents recommendations would provide future seniors with real money instead of the current systems empty promises.

That's our boy. The full faith and credit of the United States government is just an "empty promise." It's sort of like listening to an angry five-year-old, isn't it?

My prediction: this proposal won't even die a sad death. It will just be ignored.

Kevin Drum 2:16 PM Permalink | Trackbacks | Comments (149)

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Comments

Hey! What happened to the commission??

yeah right.

Posted by: Tony on February 8, 2006 at 2:19 PM | PERMALINK

hey, are we still going to mars ?

Posted by: ed_finnerty on February 8, 2006 at 2:20 PM | PERMALINK

Hopefully this sneaks away as quickly as George Deutsch!

Posted by: bryrock on February 8, 2006 at 2:21 PM | PERMALINK

Did this get inserted into the budget after the Democrats applauded Bush's defeat during the State of the Union Address?

Posted by: Ron Byers on February 8, 2006 at 2:21 PM | PERMALINK

hey, are we still going to mars ?
Posted by: ed_finnerty

Yes, stupid. But we have to kick our oil addiction first.

Posted by: Jeff II on February 8, 2006 at 2:22 PM | PERMALINK

The full faith and credit of the United States government is just an "empty promise."

I thought, under current law, Social Security automatically reduced by 27% (to start) once the "Trust Fund" ran out of cash.

So what is Kevin saying?

Posted by: Al on February 8, 2006 at 2:26 PM | PERMALINK

allowing young workers to create voluntary personal retirement accounts

Yes, it's too bad workers are barred from creating personal retirement accounts now.

(I know it says "within the social security system," but why do we allegedly need that?)

Posted by: Alek Hidell on February 8, 2006 at 2:26 PM | PERMALINK

Didja notice they're calling it "Social Security modernization" now? They're not privatizing, they're modernizing, by golly! Anyway, the budget request is pointless since Congress didn't pass any changes to the statutes. This is completely meaningless.

Posted by: Pocket Rocket on February 8, 2006 at 2:27 PM | PERMALINK

Kevin might not say it, but I will: Al, you are nothing if not stubborn. Post latest GOP lies, be refuted, come back for more (after Mommy gives you your latest batch of Cheetos).

Posted by: Gore/Obama '08 on February 8, 2006 at 2:33 PM | PERMALINK

They should call it the Terrorist Abatement through Retirement Enititlement (TARE) program. Everyone will buy it then. Who wants to be a traitor?

Posted by: lib on February 8, 2006 at 2:34 PM | PERMALINK

Every single Dem candidate, EVERY SINGLE ONE, should be repeating:

1) If you elect a Republican, they will take that as ENDORSING their plan to destroy Social Security.

2) Did you like what they did to wreck Medicare-D? What they plan for Social Security is MUCH, MUCH worse, and will be even more confusing.

3) They plan on cutting Social Security so that they can give HUGE TAX CUTS to Paris Hilton and her millionaire buddies.

Posted by: POed Liberal on February 8, 2006 at 2:37 PM | PERMALINK

Al, please. there are two issues.

the first issue is when do we have to start paying back the trust fund for the money we borrowed to enable bush's tax cuts. bush's attitude is never, because he doesn't believe the IOUs have any meaning.

that's what Kevin is referring to.

the second issue is what happens if, at some point down the road, outgo for social security exceeds inflow from taxes (and the repayment of the debt to the trust fund). the answer then is, benefits are automatically cut to match available funds.

this is why the shallow little man in the oval office is just plain lying every time he talks about the system going "bankrupt." it's an impossibility.

but i posted not to visit with Al but rather to note that it shouldn't be ignored: the democratic party should pound on this. every day. "he just can't let go: he wants to destroy social security, and so does his party."

Posted by: howard on February 8, 2006 at 2:39 PM | PERMALINK

I wouldn't be so cavalier about this. It is possible this could get signed into law with nobody noticing.

Posted by: alan on February 8, 2006 at 2:41 PM | PERMALINK

The Dems should have a daily press conference: "The Destruction of Social Security: Day xxyy" in which they discuss, daily, Bush's plans and how the Repukes are doing in their plans to destroy Social Security.

Posted by: POed Liberal on February 8, 2006 at 2:41 PM | PERMALINK

I thought Leiberman was going to do a national barn-storming tour and then camp outside Obama's doorstep until he agrees to stop being shrill and co-chair a commission.

Posted by: asdf on February 8, 2006 at 2:44 PM | PERMALINK

I wouldn't be so cavalier about this. It is possible this could get signed into law with nobody noticing.

You are correct. Dems will surely object, moderate Repubs will come over to their side, and the offending language will be stripped out of the final budget. Then it will be reinserted in conference and passed into law without anyone noticing.

Posted by: Beale on February 8, 2006 at 2:51 PM | PERMALINK

My prediction: this proposal won't even die a sad death. It will just be ignored

That's probably true and I suspect that's what they hope will happen. Then, six months from now and regardless of the facts, the noise machine will start broadcasting the new conventional wisdom that they (the GOP) offered up an explicit, workable plan to fix SS. The dems, however, didn't have a plan, wouldn't even try to negotiate, and simply killed the GOP plan for partisan political reasons.

I sure hope this doesn't just get ignored. Members of Congress need to be forced to commit one way or another on this plan - and why.


Posted by: pvjeff on February 8, 2006 at 2:51 PM | PERMALINK

My prediction: it'll end up in the budget, and anyone voting against the budget as a whole will be accused of being an obstructionist.

Posted by: cleek on February 8, 2006 at 2:54 PM | PERMALINK

This is like the "balanced budget" Regan proposed just before he left office. No basis in reality and no one willing to put up with the nonsense.

Posted by: tomeck on February 8, 2006 at 2:56 PM | PERMALINK

It will be ignored. It is only there to show that Bush won't "back down".

However, it amusing that many of you continue to put your heads in the sand and claim that Social Security is just fine. Seniors today have trouble making ends meet with their benefits. This situation will only get worse as the baby boomers retire. The benefits are tied to an inflation calculation that significantly understates price inflation. There will be massive political pressure to raise benefit levels in about 10-15 years (I would estimate about 33-50%). In other words, the shortfall between benefits and the present payroll tax will be much, much greater, as a practical matter, than is calculated- and we will have to deal with the problem much earlier than the depletion date of the so-called trust fund. Taking into account Medicare, which is likely an even bigger problem, there will have to be significant means testing of both programs.

Posted by: Yancey Ward on February 8, 2006 at 3:15 PM | PERMALINK

There's something deeply pathological about this inability to face the reality that they lost on this. It's like some idiot kid that can bear to be one-upped, and keeps coming back with meaningless verbal comebacks. "You lost!" "Did not!" "Did too." "DID NOT!" "Did too" "DID NOT INFINITY! SO THERE! NYA NYA!"

Agree that Dems should make this a centerpiece of the argument that the R's aren't fit to be trusted with power. Because they aren't.

Posted by: jimBOB on February 8, 2006 at 3:15 PM | PERMALINK

I had occasion to call Social Security this week. They still have the scary messages about the dire need for change playing in a loop while you're on hold.

Posted by: Quaker in a Basement on February 8, 2006 at 3:24 PM | PERMALINK

POed Liberal: "The Dems should have a daily press conference: "The Destruction of Social Security: Day xxyy""

OT, but have you noticed this week how Olbermann has added "the nth day since 'Mission Accomplished' was declared" (I paraphrase) to his sign-off this week?

Posted by: farmgirl on February 8, 2006 at 3:26 PM | PERMALINK

HAHAHAHAHA Strap on your crash helmet. Heeeeeere it comes.

Posted by: Lurker42 on February 8, 2006 at 3:27 PM | PERMALINK

However, it amusing that many of you continue to put your heads in the sand and claim that Social Security is just fine.

As they say on the internets: cite, please.

No, social security is not quite "just fine"; it is, however, in less dire shape than Bush and his apologists would have us believe. Kevin (among many others) pointed this out quite clearly last year when Bush was on his U.S. Tour about it.

At any rate, it's Bush's proposed "solution," nebulous as it is, to which we object. It's no solution at all, unless you're a right-wing ideologue who hates the so-called "welfare state" even in its most benign and useful forms.

Posted by: Alek Hidell on February 8, 2006 at 3:29 PM | PERMALINK

I thought Leiberman was going to do a national barn-storming tour and then camp outside Obama's doorstep until he agrees to stop being shrill and co-chair a commission.

I think that Lieberman and Bob Woodward should get together and do a pro-Iraq-war barn-storming tour of America. Can you imagine the raw energy--the excitement--that would create?

Posted by: Baldrick on February 8, 2006 at 3:41 PM | PERMALINK

Alek Hidell,

No, please point me to anyone here, today, who has made a proposal to fix the problems. Almost no one really paints a dire problem in either party (And please note that I most emphatically don't support Bush's proposal, such as it is). Kevin is even on record that we don't have to do anything until the trust fund runs out. That is the predominant view expressed on this blog in multiple blog postings. It is a delusion- the demographics are undeniable. Now the world won't end in the future if we do nothing now, but economics will force a reckoning, one way or the other. Trying to have such a large fraction of the population (retirees and other unemployed people) trying to live off of the production of the actual employed is going to be increasingly impossible. The employed will simply not tolerate the taxes required, or they will get more for their product. Either way, more of the "retired" will be forced to make other provision rather than depending on government transfer payments. This isn't a financing problem (what many here clearly think, and what part of Bush's proposal stupidly tries redo)- it is a demographic problem.

Posted by: Yancey Ward on February 8, 2006 at 3:49 PM | PERMALINK

Kevin is even on record that we don't have to do anything until the trust fund runs out.

cite?

This isn't a financing problem - it is a demographic problem.

nope. the demographics make the financing more difficult than it was before, but it's still a financing problem.

daring people here to come up with a "solution" is silly, since the only "solution" that's going to be in play until Bush leaves office or the Dems take one of the three branches is Bush's. that's the only one up for offer, and it needs beating down.

Posted by: cleek on February 8, 2006 at 3:55 PM | PERMALINK
I thought, under current law, Social Security automatically reduced by 27% (to start) once the "Trust Fund" ran out of cash.

No, under current law, if (as the projections that have been most accurate in the past currently show it never will) the Trust Fund runs out of cash, benefits are reduced to match current income. The 27% is the amount of reduction from currently authorized benefits projected if the (historically, extremely pessimistic) "middle" projection by the Trustees (as of, IIRC, 2001 or 2002) was accurate out through, as I recall, 2030-something, to make post-fund exhaustion benefits match receipts.

The "high" projection, which historically has been the best match for reality, shows the Fund never running out of money as far as it projects (and, in fact, gaining money, not losing it.)

Posted by: cmdicely on February 8, 2006 at 4:10 PM | PERMALINK

Why are the American people too stupid to handle their own retirement finances after the Federal Department of education was established almost forty years ago?
If your against privatization, shouldn't you be for the abolishment of the Department of Education?
YES.
So when are the Democrats going to advocate the abolishment of the Dept. of Education?

Posted by: Terry on February 8, 2006 at 4:11 PM | PERMALINK

No, please point me to anyone here, today, who has made a proposal to fix the problems.

Since the most reliable information available suggests that there is, in fact, no problem to fix, I don't see the burning need to make a proposal to fix it. Social security is not as efficient or as effective as it could be, to be sure, but the entire idea of a crisis is a result of taking a projection which has been historically extremely pessimistic and treating it as if it were gospel, when the projection which has been historically most accurate shows no crisis at all.

Posted by: cmdicely on February 8, 2006 at 4:12 PM | PERMALINK

There will be massive political pressure to raise benefit levels in about 10-15 years (I would estimate about 33-50%). In other words, the shortfall between benefits and the present payroll tax will be much, much greater, as a practical matter, than is calculated- and we will have to deal with the problem much earlier than the depletion date of the so-called trust fund.

Your in other words is inaccurate. The absence of available funds will militate against raising benefits whether or not there is demand for it; if that demand is crystallized into policy, that policy will also no doubt identify where the additional money will come from. There is no crisis now, and if the political demands for benefits change, there is no reason to expect their will be a crisis then.

Medicare is a problem, but nothing that well-designed universal healthcare won't solve. And there ain't no other solution to that problem.

Posted by: cmdicely on February 8, 2006 at 4:16 PM | PERMALINK

Social Security is running a surplus, and any shortfall it might have is very far away and may not even be real. Note that the date it will "run out of money" has been moving more than a year into the future every year. More to the point, of course, since we have borrowed from SS funds (tax cuts for the rich!) for many years, we could always choose to fund SS in any case and raise the money through (gasp) tax increases.

Medicare and Medicaid face the same cost escalation issues as US health care in general, and we will have to confront this much sooner than any Social Security "problem". This was repeatedly discussed during the first go-around. If you weren't listening then Yancy, what would be the odds that you'll listen now?

Posted by: Marc on February 8, 2006 at 4:16 PM | PERMALINK

Why are the American people too stupid to handle their own retirement finances after the Federal Department of education was established almost forty years ago?

Um, Terry, we did that awhile ago. We called it Social Security. We like it.

Posted by: Tripp on February 8, 2006 at 4:18 PM | PERMALINK
Why are the American people too stupid to handle their own retirement finances after the Federal Department of education was established almost forty years ago?

They aren't. Social security isn't designed as a primary retirement system, but a "pension of last resort" safety net. The American people are smart enough to know that you don't want the last resort safety net exposed to risk and invested in the same way and the same types of vehicles as primary retirement (IRA, 401k, etc.) accounts, because then chances are if your primary retirement gets wiped out by an unexpected event, its more likely that your safety net goes with it.


If your against privatization, shouldn't you be for the abolishment of the Department of Education?

No, you shouldn't.

Not if you understand the function of Social Security, at least.

Posted by: cmdicely on February 8, 2006 at 4:19 PM | PERMALINK

For any of our questioners who are actually interested in some numbers, see

http://www.cepr.net/Bytes/social_security_2004.htm

Bottom line: fully funded to 2053 assuming nothing more than slower than average economic growth (1.9 percent per year, as opposed to the 2.5 percent per year average for the last 50 years).

Posted by: Marc on February 8, 2006 at 4:21 PM | PERMALINK

cleek,

There is no way to finance, today, the future benefits. Only taxes levied in the future can pay the benefits in the future. That trust fund really does not exist- it will pay none of the future benefits. Bush's plan is largely irrelevant because it attempts to create financing solutions through private accounts, but, again, future consumption can only be made out of future production, and Bush's plan does absolutely nothing to provide the ongoing capital investment that is required to provide this future consumption/production (Bush's plan does nothing to increase real savings- he wasn't proposing cutting government's present consumption). As the fraction of the idle increases with respect to the fraction of the employed, the real value of the products will increase. The tax increases of the future are self-defeating since you can only tax the productive, and by doing so you make their product even more dear. In other words, it is not how much money you save today, it is how much more you save than everyone else that matters.

Now ongoing investment in capital will make the future workers more productive, and better able to supply the present level benefits to the retirees, but the retirees will not accept a static level when everyone else is getting a wealthier life. The proof of this can be found in studying how the worker/beneficiary ratio has dropped in step with the increase in the level of the payroll tax, despite the fact that workers today are far more productive than they were in 1950. More of the retirees will be forced to work longer than they do today to enjoy the lifestyle they will expect in the future; and those that have the personal means will not get the benefits of today.

Posted by: Yancey Ward on February 8, 2006 at 4:29 PM | PERMALINK

who is going to manage social security for bush when he makes it a privately operated government organization, ENRON ?

Posted by: TREBEL WINGNUT on February 8, 2006 at 4:37 PM | PERMALINK

Paul Krugman wrote an analysis of the President's "private accounts" proposal. It's behind the firewall so I can't re-read it to refresh my memory. My recollection is that he charged that Bush wants the numbers to work both ways for him. Bush uses the trustees' conservative projection of GNP growth of 1.8% to predict bankruptcy in whatever near future corresponds. But Bush says that private accounts will allow people to grow their accounts at 6.5 - 7% by investing in stocks. Krugman says that for stocks to grow at that rate, a GNP growth of more than 3.5% is necessary. Then he (Krugman) concludes that (i'm paraphrasing) with a GNP growth of 3.5%, the trust fund never goes bankrupt. My read on this is that whatever crisis the SSA is facing, Bush's private accts are not the solution.

Posted by: pete21 on February 8, 2006 at 4:43 PM | PERMALINK

cmdicely,

You, of all people, should be aware that government can increase benefits without clearly identifying where to get the money. However, I did not mean to imply that benefits would be raised, only that the retirees will need more money, and long before the "depletion date". The will turn to the government initially, and though I doubt that taxes can actually be increased to supply real buying power. In other words, many of the retirees will have to actually work, and that others will have their benefits actually cut. However, you are right that if tax rates can actually be raised to fix these problems, then, by default, there is no problem.

Posted by: Yancey Ward on February 8, 2006 at 4:43 PM | PERMALINK

Gore was right in 2000. It's time to stop mixing Social Security money with general funds, and anymore talking about a "unified" budget. It's time to put Social Security in a lockbox, and to talk about this.

Too many people are concerned that Social Security is some big threat, or so much more a % of the budget, when, in reality, the military portion of the "actual" budget is the biggest, and Social Security is a separate budget that at the moment is paid in full.

Quite simply, we need to stop the theft and plunder of Social Security, and stop mixing it with the real budget. I'm sick of having conversations with conservatives and libertarians where they constantly claim that Social Security/Medicare (as if the same) are the biggest pieces of the budget, instead of military spending.

The Biggest Accounting Fraud: Social Security

Social Security Administration on "Unified Budget"

Myths and Misinformation about Social Security (source: SSA)

Posted by: Jimm on February 8, 2006 at 4:44 PM | PERMALINK
As the fraction of the idle increases with respect to the fraction of the employed, the real value of the products will increase.

Which really isn't a problem, at all, if increases in per-worker-hour productivity offset the increases in working-hour:idle-hour ratio.

Now, of course, it means that in order to work, the ratio with which the benefits of additional productivity are split between "proits to capitalists" and "the rest of society" will have to shift, but that's not a particularly bad thing.

Posted by: cmdicely on February 8, 2006 at 4:49 PM | PERMALINK

There is a problem today, cmdicely, in that people largely expect to be able to live off of their benefits in the future, and increasingly make no other provisions for their futures. We could make things easier for our children if we took action now to increase the retirement age a bit more, or faster, or started means testing benefits more than we do through the tax code. Doing nothing now only makes the solutions more dramatic in the future.

However, human nature is to do nothing until the crisis actually arrives. I don't expect anything to be done, just pointing out that we could do something if we wished. Bush's proposal was nothing.

Posted by: Yancey Ward on February 8, 2006 at 4:50 PM | PERMALINK
I doubt that taxes can actually be increased to supply real buying power.

That's got to be one of the stupidest things I've ever heard. It only makes any sense if you both ignore distributional effects and only pay attention to the signs, but not the magnitudes, of shifts.

If taxing one person to give money to another couldn't supply real buying power, the buying power of any government worker would, necessarily, be exactly the same as an unemployed person receiving no public benefits. That clearly is not the case.

Posted by: cmdicely on February 8, 2006 at 4:54 PM | PERMALINK

Kevin,
You're not suggesting the Democrats should ignore this, are you? The truth is that defeating this proposal may more difficult than last year---at any rate, Bush will not be a pushover.

First thing you have to understand is language control: This is a completely new program, since it has a different name. It will take weeks of bitter struggle to get this one point clear in the press, and that is only the beginning.

Very tough fight ahead.

Posted by: marky on February 8, 2006 at 4:57 PM | PERMALINK
There is a problem today, cmdicely, in that people largely expect to be able to live off of their benefits in the future, and increasingly make no other provisions for their futures.

I think you are inventing problems now. Where is the evidence that people are increasingly expecting to be able to live off Social Security benefits alone in retirement?

(Yes, increasingly people may be forced to by pension collapses, etc., but that's not a problem with Social Security, but with pension regulation.)

We could make things easier for our children if we took action now to increase the retirement age a bit more, or faster, or started means testing benefits more than we do through the tax code.

All of those would, indisputably, have exactly the same bad effects as you dubiously claim come from maintaining the status quo -- more retirees (or would-be retirees) forced to work, or having their benefits cut. I fail to see how doing exactly what you claim you want to avoid helps the problem.

However, human nature is to do nothing until the crisis actually arrives.

Since you have provided no reason to believe their is an actual crisis, or that it will arrive when you say it will, and proposed "solutions" that involve creating the exact same problems as you claim characterize the crisis, I have no idea why you think any person would take you in the least bit seriously on this issue.

Posted by: cmdicely on February 8, 2006 at 4:58 PM | PERMALINK

the current systems empty promises.

The promises are only empty promises because of the person sitting in the white house.

Posted by: patrick on February 8, 2006 at 4:59 PM | PERMALINK

Ha, sloppy writing. The point to make clear is that the program is the same, of course.

Posted by: marky on February 8, 2006 at 4:59 PM | PERMALINK

cmdicely,

As you take a larger and larger share of my income as a worker to give to retirees, I will produce less and demand more for the product I do produce. In other words, taxing to supply ever greater nominal benefits is a losing game since the now increased benefits have even less product to buy.

Posted by: Yancey Ward on February 8, 2006 at 5:02 PM | PERMALINK

Yancy

It's not that I say Soc Sec is fine and dandy, just that there are better solutions than Bush's privatization. Means testing, applying the soc sec tax to all income, gradually raising the retirement age. Also we could start going after companies that dump their pension plans onto the government. There's lots of things we can do.

Posted by: tomeck on February 8, 2006 at 5:02 PM | PERMALINK

The only thing the Dems applauded for in the SOTU was their victory in denying my children the right to save more of their own money for retirement. Brilliant. Whose retirement are they looking out for?

Posted by: Jay on February 8, 2006 at 5:07 PM | PERMALINK

However, human nature is to do nothing until the crisis actually arrives.

No, human nature seems to be robbing Peter to pay Paul, with the robbers taking a cut.

The reason why Robin Hood was popular because he took from the rich and gave to the poor - i.e. he took from the wanton and gave to the needy.

With this in mind, there is room for improvement from both major political groups as far as policies to rob Peter and pay Paul. The most criticism, however, goes to the Right, for robbing Peter to pay Paul Big Corporation.

Posted by: Jimm on February 8, 2006 at 5:09 PM | PERMALINK
As you take a larger and larger share of my income as a worker to give to retirees, I will produce less and demand more for the product I do produce.

Yes, see, that's exactly what I said about ignoring distributional effects and paying attention only to the signs, not the magnitudes, of shifts.

Yes, if you increase taxes for a redistributional purpose, then, on average, you expect the marginal utility of each unit of the taxed activity to decrease, and to get less overall of the taxed activity.

But that's just a matter of the directions of shifts; to support your argument you need evidence of the magnitude, and I think its pretty clear that, even before getting into detailed distributional logic, its quite possible to tax one group to provide a benefit to another group and increase the actual buying power of the group recieving the benefit. Your argument is based on ignoring reality, and suggesting that because two effects have opposing directions of influence, one most completely cancel out the other, without any evidence of magnitude to suppor that claim. Its an empty-headed argument.

Posted by: cmdicely on February 8, 2006 at 5:09 PM | PERMALINK
The only thing the Dems applauded for in the SOTU was their victory in denying my children the right to save more of their own money for retirement.

Your children are free to save all of their own money for retirement.

Posted by: cmdicely on February 8, 2006 at 5:10 PM | PERMALINK

The last Social Security checks will go out sometime just after President Jeb Bush has repealed the Bill of Rights and permanent martial law has been declared in the U.S. The country will be pockmarked with several large nuclear blast craters that used to be cities, after al-Qaeda sets off several suitcase nukes. The American economy will have collapsed, due to overspending on the military and the ensuing chaos from having a half dozen key cities vaporized, including New York. People will be eating tree bark and anything that is reasonably edible and living hand-to-mouth.

Welcome to the neocon's dystopic world!

Posted by: Stephen Kriz on February 8, 2006 at 5:11 PM | PERMALINK

Did this get inserted into the budget after the Democrats applauded Bush's defeat during the State of the Union Address? Posted by: Ron Byers on February 8, 2006 at 2:21 PM

No doubt it was. He's petty enough to do it.

Posted by: Dr. Morpheus on February 8, 2006 at 5:12 PM | PERMALINK

tomeck,

I would do away with the payroll tax altogether and raise income taxes by equal percentages across all brackets. This would make the tax completely progressive.

However, companies cannot dump their pension plans onto the government without being bankrupt. I suppose the goverment could put itself in line ahead of other creditors at that point, but that is likely only going to make bankruptcies more likely, which increases the problem you are trying to solve. Realistically, the best you could do is raise the premium on present going concerns to better fund the guarantee, and have these premiums based on a more realistic evaluation of the liabilities and the assets of each plan.

Posted by: Yancey Ward on February 8, 2006 at 5:12 PM | PERMALINK

The Dems should have a daily press conference: "The Destruction of Social Security: Day xxyy" in which they discuss, daily, Bush's plans and how the Repukes are doing in their plans to destroy Social Security. Posted by: POed Liberal on February 8, 2006 at 2:41 PM

Something along the lines of, "America's Future Held Hostage: Day xxx"?

Me likey.

Posted by: Dr. Morpheus on February 8, 2006 at 5:14 PM | PERMALINK

Terry's comment, though stupid, was actually fairly amusing and witty. He deserves credit for that. Like many witty yet ignorant people, I'm sure he'd make a decent columnist at townhall.com.

Yancey, at the end of the day, the country is perfectly happy to make tradeoffs regarding its desire to pay its obligations. There's no reason to assume that the country is unwilling to accept higher debts, higher taxes, or cuts in other programs in order to support social security-- similarly, the country is apparently willing, at the moment, to endure certain financial stresses in order to pay for the war in Iraq. The country will deal similarly when paying social security obligations becomes an issue.

Posted by: Constantine on February 8, 2006 at 5:15 PM | PERMALINK

We can't change it piece meal. Everything is going to change--including Social Security--and it isn't going to be privatized, either.

Economic justice, equal opportunity, working to build the common good helps everybody without exception.

Duh.

Posted by: liberal elite on February 8, 2006 at 5:20 PM | PERMALINK

The only thing the Dems applauded for in the SOTU was their victory in denying my children the right to save more of their own money for retirement.

Ah, Jay, your head continues to thicken. Or are you simply being disingenuous, another beloved wingnut trait?

Please explain to me how Democrats "denied" your children the right to save their own money for their retirement. I wasn't aware they eliminated savings accounts, money market accounts, mutual funds, Traditional and Roth IRAs, and so on. They managed to sneak that under the MSM radar, huh? Those devious bastards!

Posted by: Alek Hidell on February 8, 2006 at 5:20 PM | PERMALINK

Like the creature that won't die no matter how many bullets you put through its heart,

What's Cheney have to do with this?

Posted by: ckelly on February 8, 2006 at 5:21 PM | PERMALINK

It seems to me that there is a lot of potential to ridicule Bush for attempting by stealth what he couldn't achieve by a 3 month tour.

Posted by: marky on February 8, 2006 at 5:22 PM | PERMALINK

There are a lot of thigs we can do:Yes like have the gov. give rebate checks for the extra money not being paid out to retiree's instead of putting into the genral fund.

Posted by: rico swava' on February 8, 2006 at 5:23 PM | PERMALINK

cmdicely,

Ok, I misunderstood your point, and wrote my initial comment sloppily. However, what I was getting at is that there is a limit to how high the taxes can be raised to support the ever dropping worker/beneficiary ratio. At some point well before a 100% payroll tax (or any other tax for that matter), the buying power of a nominal benefit will max out and decline with further increases in the rate.

Posted by: Yancey Ward on February 8, 2006 at 5:23 PM | PERMALINK

denying my children the right to save more of their own money for retirement.

Yes, the Democratic Savings Police will be there at the bank not allowing anyone to put deposits into their savings accounts. Right.

Jesus, we have to go destroy all these same brain-dead arguments again? Sheesh.

Very tough fight ahead.

I say, bring it on. We already know how to defeat the proposal, and every time they bring it up Bush's poll numbers go down even further. In fact, I'd love for this to be topic A for the rest of the runup to the 2006 elections. We'd take both House and Senate.

Realistically, everybody including the R's knows that this budget is DOA. Smarter GOP operatives will pretend this Social Security privatization stuff never happened.

Posted by: jimBOB on February 8, 2006 at 5:25 PM | PERMALINK

If the feds had not stole the SS fund it would be somwhere in trillion dollars in the black.Just so the rich don't have to pay there share in taxes.

Posted by: rico swava' on February 8, 2006 at 5:25 PM | PERMALINK

Kevin, folks: Don't be so dismissive. There are powerful folks out there who want to wreck Social Security, and they will push this plan or something like it. We have to fight them, not ignore them.

PS: The full faith and credit of a current Republican-run government *is* just an empty promise! We have to ensure not only that privatization fails, but that payment promises from Social Security are honored. Go back and read from previous discussions here about that, about the Admins' dismissive attitude towards honoring the Bonds, etc. I note also that many letter-writers to Newsweek used points we developed here: somehow it got around. Keep fighting and spreading talking points without complacency.

Posted by: Neil' on February 8, 2006 at 5:27 PM | PERMALINK

JimBOB,
Yes, we will win the fight, but we have to bring equal mobilization as last year.. if not more.

Posted by: marky on February 8, 2006 at 5:29 PM | PERMALINK

Constatine,

I hope you are correct. However, there is the chance that a significant fraction of the population of the future will find that their benefits disappeared when the workers refused to pay them. I see nothing wrong with leveling with the workers of today (tomorrow's retirees) that they should plan to retire later, or that they should plan further ahead than they do. We have made very large promises to ourselves that we expect others to honor. Social Security and Medicare remind me to a large extent of the pension situation.

Posted by: Yancey Ward on February 8, 2006 at 5:31 PM | PERMALINK
However, what I was getting at is that there is a limit to how high the taxes can be raised to support the ever dropping worker/beneficiary ratio. At some point well before a 100% payroll tax (or any other tax for that matter), the buying power of a nominal benefit will max out and decline with further increases in the rate.

Yes, so what? Until you provide some reason to believe that we are likely to reach that "some point" sometime in the foreseeable future, who cares? Yes, somewhere there is a limit on the ability to increase taxes redistributionally and not be self-destructive. Somewhere. Is there any indication that it is at some point we will reach any time in next 50, 100, or even 250 years? Not that I can see. The theoreitcal existence of such a limit at an unknown point is the whole basis of your argument of an imminent crisis that will reach a head in the next 10-15 years. That is, in a word, insane.

Posted by: cmdicely on February 8, 2006 at 5:33 PM | PERMALINK

Despite we are tough on terrorist rhetoric, the GOP is out to fuck the middle and lower wages earns at every turn. Fuck Bush.

Can I get in trouble for saying that? Probably in trouble just for thinking it.

I guess the last three years will be about taking over a women's womb, fucking the middle class, and record corporate profits.

Posted by: the fake Fake Al on February 8, 2006 at 5:34 PM | PERMALINK

Yancey Ward/et al: Your charge against pro-SS factions is wrong. Proposals have been made by proponents of keeping SS, such as (of course) raising/eliminating the income cap, means-testing benefits, investing the money (but pooled, not individually.) The question should be, not framed from the clich lie that Democrats have no solutions, but to challenge the Republicans etc. to deal with those kinds of fixes instead of ditching the system and replacing it with individual retirement savings. After all, the whole point of Social Security is to pool the risk to be a counterpoint to ordinary individual savings - "insurance" indeed.

Posted by: Neil' on February 8, 2006 at 5:35 PM | PERMALINK

alek, private accounts allow people the option to retain as much as 3% of their SS contribution to the gov't to be set aside in a transferable blue chip fund. Effectively earning more annual interest than SS could ever hope to pay. The dems decided that they could spend my children's money more effectively themselves. What don't you understand about that?

Jimm, entitlement spending under Bush totals a little more than $360 Billion. The highest amount ever spent in one fiscal year on entitlements under Clinton; $180 Billion. Sucks when the facts don't support hyperbole.

Posted by: Jay on February 8, 2006 at 5:35 PM | PERMALINK

Yancey:In theory, I agree with you. That is, of course after ensuring that we reformat the economy to aim for full employment to create a competitive labor market and make sure that people actually have money to save.

Posted by: Karmakin on February 8, 2006 at 5:36 PM | PERMALINK

However, companies cannot dump their pension plans onto the government without being bankrupt. I suppose the goverment could put itself in line ahead of other creditors at that point, but that is likely only going to make bankruptcies more likely, which increases the problem you are trying to solve.

Actually, I would think it would make them less likely (and of smaller magnitude), as private creditors would be less likely to make loans to companies that would be likely to be at risk of being forced into bankruptcy, since they would be at more risk of not getting anything out of them.

Admittedly, this would make credit tighter in general for businesses, but I don't see that it would make bankruptcies more common, and it certainly would seem to make it more likely that the bankruptcies that did occur would be of smaller magnitude.

Posted by: cmdicely on February 8, 2006 at 5:36 PM | PERMALINK
However, there is the chance that a significant fraction of the population of the future will find that their benefits disappeared when the workers refused to pay them.

There is also a chance that all of humanity will be wiped out by a large meteor. "There is a chance" isn't an argument for the existence of an imminent crisis requiring immediate drastic action. You need to make a case for the magnitude, likelihood, and probable timeframe of the threat, for starters.

Posted by: cmdicely on February 8, 2006 at 5:39 PM | PERMALINK

rivate accounts allow people the option to retain as much as 3% of their SS contribution to the gov't to be set aside in a transferable blue chip fund.

3% of your social security contribution is 3% of 6.2%, or ~0.186%. Even if you make the maximum, 90,000/yr, that amounts to $167/yr. With a $45,000/yr income, it's half that. I fail to see how this would be helpful to anyone.

If only there were some kind of tax-deductible account to which one could contribute money to in order to help safe for retirement. Some kind of individual retirement account...

Posted by: Constantine on February 8, 2006 at 5:42 PM | PERMALINK

A reminder to anyone thinking about affordability of retirement plans in light of the shrinking worker/retiree ratio: Money is just an exchange medium. In light of real economy production/consumption issues, a certain number of work-hours must support a certain number of consumption hours, period. No manipulation of "finance" and monetary accounts can prevent workers from having to work about 2X more to support non-working status being as long as working status, etc. Just think of what is used versus who can produce it; true physical economy (to include of course how long things last, advancements, services, shrinking land per person, side-effects of development, ecology and climate changes, other issues like wars, terrorism, etc.) Nothing can really change that..

Posted by: Neil' on February 8, 2006 at 5:44 PM | PERMALINK

constantine, hang with me here, TRANSFERABLE. I can pass my account on down, as will my children be able to. Imagine what that could do for our great grandchildren.

Posted by: Jay on February 8, 2006 at 5:44 PM | PERMALINK

constantine, hang with me here, TRANSFERABLE. I can pass my account on down, as will my children be able to

Um, parents already receive a substantial tax credit for each dependent child. Why not simply put that tax credit in an interest-bearing account which one can pass down to them?

Also, if you remember anything about the White House's proposal for SS privatization, money in that investment account (3% of 6.2%?) would be used to purchase an annuity which would make up the difference between promised benefits and benefits paid out of government SS taxes. The children, grandchildren, and great-grandchildren wouldn't see that account at all, since the annuity would expire after the death of the retiree.

Posted by: Constantine on February 8, 2006 at 5:49 PM | PERMALINK

constantine, jay isn't worth the breath. the fact is, there is no bush proposal on social security, so he's in no position to discuss what it would have meant.

there's all kinds of other things wrong with jay's perspective as well, but like i say, he's not worth the effort.

yancey, on the other hand, is a sensible feller who is a little offtrack on this. while there's no point in recapitulating the excellent points made by cmdicely, i think the main problem yancey has is that he's presuming a problem that doesn't - and may not - come into existence.

the core of his presumption is that the inflationary adjustment to social security won't actually keep up with inflation and retirees will be upset. maybe. but until there's some indication of it, solving that problem isn't worth our effort.

what's worth our effort now is solving the general fund crisis, followed by solving the medicare crisis.

Posted by: howard on February 8, 2006 at 5:50 PM | PERMALINK

Constantine:

1. The poster and like-parsing others who referred to "3% of your social security contribution" meant 3 percentage points worth out of the 6.2% current contribution - almost half. That is the unfortunate result of the prevaling sloppy way of talking about percentages and percentage points. I realize he didn't parse it correctly, but a bit of common sense would have indicated that wasn't a likely interpretation.

2. "If only there were some kind of tax-deductible account to which one could contribute money to in order to help safe ["save," but apt Freudian slip] for retirement. Some kind of individual retirement account..."
- good sarcastic dig at SS privatization schemes, whose proponents pretend that there aren't already tax-sheltered means of saving money on your own for retirement. We of course still need to keep the pooled back-up SS insurance to cover variable life-spans, etc!

Posted by: Neil' on February 8, 2006 at 5:51 PM | PERMALINK

If only there were some kind of tax-deductible account to which one could contribute money to in order to help safe for retirement. Some kind of individual retirement account...

These accounts should exist on top of Social Security.

The level of Social Security needs to at least account for the survival of folks who will, for whatever reason, not adequately save for their retirement, and, since this is the case, we as a civilized society do not want to die of deprivation. So Social Security should always be at a level to least survive.

Beyond that, if people want to save for retirement, above and beyond Social Security, then they should be able to do so tax-free. This should be demarcated in such a way that it can only be tapped in an emergency, and, depending on that emergency, may be taxed if utilized or transferred before retirement age. For instance, if it's a health emergency, no taxes should result from the early withdrawal of the funds. Also, there should be meaningful caps so that this tax-free shelter remains solely for retirement, and a modest (not luxurious) retirement either. This prevents the program from becoming a dump for rich folks to hide from taxation.

On the flip side, the health savings accounts are just dumb. Money spent on health care should just not be taxed...period. Allow people to write off all health expenditures from their taxes, and also to acquire no or very low interest loans for super-expensive health care backed by their future earnings and taxes or current assets.

Posted by: Jimm on February 8, 2006 at 5:52 PM | PERMALINK

All the wingnuts are forgetting that if they had put in their SS money in index funds as mandated by the new program, their accounts would have declined in value in real terms during the last five years of GWB presidency.

It's quite amusing that Bush has been so bad for the market as a whole yet he still insists that the rest of us will be better off investing in it.

Posted by: lib on February 8, 2006 at 5:52 PM | PERMALINK

Wrong. The money is redirected to managed blue chips funds which the contributor can begin to request scheduled draws at age 65, or later upon retirement. If the contributor passes before that time, the fund can be bequeathed to a spouse or direct descendants. Benefits are entirely different. Medicaid and Medicare will be stretched tremendously when the boomers start retiring.

Posted by: Jay on February 8, 2006 at 5:55 PM | PERMALINK

the core of his presumption is that the inflationary adjustment to social security won't actually keep up with inflation and retirees will be upset.

A couple things about Yancey's presumptions-- first, inflation as currently calculated is generally considered to overstate inflation, not understate it. Aren't SS COLA increases are tied to wage increases, not inflation? You're right though that Yancey's issues with SS are essentially practical concerns, while Jay's issues with SS are essentially faith-based in nature-- Jay has a religious attachment to privatization.

Posted by: Constantine on February 8, 2006 at 5:55 PM | PERMALINK

Jimm, entitlement spending under Bush totals a little more than $360 Billion. The highest amount ever spent in one fiscal year on entitlements under Clinton; $180 Billion. Sucks when the facts don't support hyperbole.

What?

I don't get how this related to me, or my posts, at all.

Posted by: Jimm on February 8, 2006 at 5:55 PM | PERMALINK

Jay -
You missed the key point - private SS accounts would hardly amount to anything. Sure, you could transfer it, but so what? It would be so paltry that even the tax benefits would be negligible.

Besides, there are plenty of tax avoidance transfer vehicles today.

Posted by: tinfoil on February 8, 2006 at 5:56 PM | PERMALINK

lib, where exactly is the dow these days and what happened today on the market? I'd say pretty good returns all the way around.

Posted by: Jay on February 8, 2006 at 5:58 PM | PERMALINK

Entitlement spending cannot be lumped together willy nilly, since Social Security is a separate program thas is paid for through its own mechanisms, and legally supposed to be separate from the rest of the budget.

Thus, if there is a problem with the sustainability of Social Security over the long-term, which there seems to be, then this is a problem within the Social Security program, and mechanisms, and should not be confused with the actual federal budget, or problem with lack of sustainability and deficits there.

If looking at the budget in this sense, in this legally required sense, you cannot include Social Security as a share of the federal budget, and then combine it with Medicare, and say the entitlement spending in the budget outpaces military spending.

Posted by: Jimm on February 8, 2006 at 6:01 PM | PERMALINK

jimm, "the most criticsm goes to the right for their rob Peter to pay Paul big corporation policy". Just thought I would point out something that may water that down some.

tinfoil, my point is that it is OUR money that we should be able to have more options with. I thought Democrats were pro-choice. It doesn't matter what it equates to, I can spend my money more effectively than the gov't can, and should be able to. BTW, private accounts would be OPTIONAL. Again, that pro-choice thing.

Posted by: Jay on February 8, 2006 at 6:04 PM | PERMALINK

Social Security and Medicare should be considered separate problems under separate budgets.

When the plunderers convince you otherwise, on this basic point, you already are at a disadvantage.

Solve one problem at a time, and don't conflate the two, or the budget and financial standing.

Posted by: Jimm on February 8, 2006 at 6:07 PM | PERMALINK

Jay (and most people in general!) the people as a whole cannot earn net money off of each other in the stock market or etc. any more than everyone playing cards together could end up with more on average. I know, the new generations, but just remember that when a stock is sold, someone else had to buy it at that price. The only reason "people keep making money in the stock market" is that it isn't totally saturated by everyone playing. If they do, either there has to be losers, or stagnation of the captial gains available on average.

And, dividends represent in effect what we could have spend less buying things, so that just cancels out in the net too.

Posted by: Neil' on February 8, 2006 at 6:07 PM | PERMALINK

Actually, I shouldn't even say "solve one problem at a time", but solve and consider them "individually".

Medicare is a much bigger problem right now, while Social Security, if we effectively return to honoring it legally as we should, can easily get by with some minor tweaks for another decade or two before we address it again, or, even better, give it some minor tweaks and readdress it in a few years after we've resolved the problems and deficits in the real budget.

Posted by: Jimm on February 8, 2006 at 6:09 PM | PERMALINK

Jay: the whole point of Social Security is to *pool* the monies to comp. for variable life-spans, the unexpected, etc. That trumps all other considerations. Well, do you really think you could and should just save on your own for auto accidents, etc?

Posted by: Neil' on February 8, 2006 at 6:09 PM | PERMALINK

For someone celebrating the Dow today:

Dow Jones closing Value

1/2/2001 10646

Today 10858

So in five years a wwhopping 2% Return.

If you count in inflation (at least 10% over these years), the real return is negative.

Posted by: lib on February 8, 2006 at 6:11 PM | PERMALINK

We've gone over this subject in excruciating detail in threads last year. Somebody is going to have to do something about entitlements, primarily Medicare, and I'm not seeing a lot of help from either side of the aisle.

I wish Bush had had the guts and conservative principles to say we can't afford a new long-term entitlement instead of pulling a half-assed "me too" to the Democrats. Signing the prescription drug coverage bill was like hauling an anvil into a sinking boat.

Posted by: tbrosz on February 8, 2006 at 6:20 PM | PERMALINK

jimm, "the most criticsm goes to the right for their rob Peter to pay Paul big corporation policy". Just thought I would point out something that may water that down some.

No, you are so wildly off the point it's comical.

My point is who redistribution goes to, not the level of redistribution. The level of redistribution is a separate issue, and I did come part of the way towards "means" testing and setting these levels at low to moderate thresholds (of survivability and liveability).

Back to the point you were trying to address, who redistribution goes to, you should not take from the rich/middle/poor to give to the rich under any circumstances, voodoo economics or no. If there is to be any taking from one and giving to another, it will only be accepted, popular, and moral in human society if this is engineered to give to those who are needy, and is held strictly to this standard.

Noone can argue that Medicare or Social Security primarily or even signifigantly benefits the rich (the anti-needy, who, if having their hands out, are "greedy"), whereas cutting taxes of the rich and steering big tax breaks and subsidies to the military-industrial complex and other Big corporations that "pay to play" is the essence of social evil, properly understood.

If these programs are escalating out of control, then we should consider them individually and on their own merits in order to craft solutions, beginning with the notion that the benefits and protections are always most important that go to the "needy", to those who cannot help themselves, and must be protected at all costs, while the first places to look to trim the system are those where benefits go to those who are not "needy". With Social Security, there are some obvious ways to do this, and with Medicare, less obvious. This is why I consider Medicare to be the primary issue that needs to be addressed at the moment, in terms of holding steady (in a decent range) its impact on the budget.

Posted by: Jimm on February 8, 2006 at 6:20 PM | PERMALINK

lib, that someone is jay, who quite honestly seems not to have a clue, although he is sure that there was an actual bush proposal that he can describe in detail. this will come as a big surprise to bush....

jimm, actually, i think a better way to talk about social security is that it is an annuity. there are two problems that all retirees face with respect to their savings: inflation eating away at the value and outliving their money.

that's why an inflation-linked annuity is such an important component of your overall retirement.

it is certainly true that some people won't save enough in the first place, but were that the only issue, we wouldn't need social security. instead, we have one risk-free, guaranteed component of your retirement and two other potential components: your savings and (should you be lucky enough) your pension.

anyone relying on social security alone is going to have a tough time of it when they are retired.

PS. and, of course, i'm oversimplifying: there's an insurance and death benefit aspect to social security as well.

Posted by: howard on February 8, 2006 at 6:20 PM | PERMALINK

lib: Also, note my point about stagnant net average earnings based on the stock market for the public as a whole.

Posted by: Neil' on February 8, 2006 at 6:21 PM | PERMALINK

just to say it, one of the very few things that tbrosz and i agree on is that the prescription drug benefit, on top of being poorly designed, was unaffordable in our current general fund situation and therefore exacerbated the rapidly growing and highly dangerous problems of medicare.

talking about social security before we solve the general fund and medicare problems is like worrying about the flat you get while your clutch fails and your engine blows.

i've been urging dems since the kerry campaign to call for a complete elimination of medicare d on grounds we can't afford it right now, with that as the carrot to reward fiscal discipline, should we manage to achieve it.

Posted by: howard on February 8, 2006 at 6:23 PM | PERMALINK

Bush's plan is largely irrelevant

ummm... actually, no. no it's not. it is, in fact, the only plan up for discussion by the very people who set the policies of the government - that gives it a relavancy that every plan that any two-bit pundit or work-shirking blogger has ever dreamed up can only dream of having.

the fact that it's irrelevant to doing what the country wants is a separate discussion, and one Bush wants to be left out of.

Posted by: cleek on February 8, 2006 at 6:25 PM | PERMALINK

Jay, maybe YOU can spend your money more effectively than the gov't can but the -0.5% savings rate shows that most Americans cannot manage their money effectively.

Posted by: cq on February 8, 2006 at 6:26 PM | PERMALINK

I say we first streamline NASA and DOD spending and then talk about streamlining the so called entitlements.

Posted by: lib on February 8, 2006 at 6:29 PM | PERMALINK
that's why an inflation-linked annuity is such an important component of your overall retirement.

it is certainly true that some people won't save enough in the first place, but were that the only issue, we wouldn't need social security. instead, we have one risk-free, guaranteed component of your retirement and two other potential components: your savings and (should you be lucky enough) your pension.

I do agree with this, and am just trying to argue in a "global" way with libertarian readers who hate the Social Security program in the first place. I'm always trying to communicate with the broadest possible potential audience, and on philosophical and policy levels simlutaneously.

We need the Social Security system, and it was and is a good idea. It should remain as "modest" as possible (and appropriate), however, in order for people to rationally decide not to depend on it, and to instead take active and voluntary measures to increase their retirement nestegg with their own income. This is where tax-free shelters for income to be diverted to retirement accounts would be effective, if these accounts themselves are vigilantly limited to "more modest" to "much more modest" and not turned into tax-evasion vehicles for the rich.

Posted by: Jimm on February 8, 2006 at 6:29 PM | PERMALINK

So tbrosz, did you read Fred Kaplan's dissection of the 580-billion-dollar-per-year defense budget in Slate this week?

I'll vote for anyone who vows to take a look at those line items. I mean, in terms of cost vs. actual protection to the country they do not even seem to be close calls. Perhaps you would like to defend them.

If you do, fine. If not, obviously the amount of pork in the defense budget will more that make up for whatever actuarial problems present in SS and Medicare.

Moreover, right now all this defense spending seems to be accomplishing is to piss off more people in the world, and to what end?

I thought Bush was the big isolationist, gee, that about face turned out well, didn't it? If we took all the money we are now spending to make life better for Iraqi's there would be no SS funding issue.

Posted by: hank on February 8, 2006 at 6:30 PM | PERMALINK
Jay (and most people in general!) the people as a whole cannot earn net money off of each other in the stock market or etc. any more than everyone playing cards together could end up with more on average.

The people of the Earth (at least, until we start trading with aliens) can't, but the people of the United States certainly can.

Because the people of the United States aren't the only people playing cards at the table.

Though its still not a good idea to replace social security with a private-accounts-in-the-stock-market-based scheme.

Posted by: cmdicely on February 8, 2006 at 6:35 PM | PERMALINK

cq, it's not a question for most americans of "managing" their money. Median household income is $43K and has falled, in real terms, for 5 years. on top of that, fewer people are covered by health care benefits at work (we're down to below 60%).

i mean, admittedly, i suppose it's always possible to eat rice and beans three times a day, dress your kids in rags and ratty shoes, and walk or bike ride everywhere, but in most cases, we have a negative savings rate because people aren't earning enough to afford life's necessities.

jimm, fair enough.

Posted by: howard on February 8, 2006 at 6:35 PM | PERMALINK

I think the Medicare prescription drug plan is part of a larger strategy concocted by drug and managed-insurance companies to move people away from actual health care and doctor visits and towards drug usage ("potions").

In my mind, it seems similar to banks pushing people to the ATMs and discouraging them from getting some people customer service at the branches (I remember when Bank of America actually started charging people to come to branches in 1999-2000), all in the pursuit of greater profits by reducing service ("efficiency").

Obviously, there's a few other elements of this Drug Plan "ruse", including how it will be funded and where it will be accounted for, but a large part of it is to increase profits to both managed-care and drug companies by encouraging greater "efficiency" in health care through drug usage, which, if a sound assumption, might not be so bad, but in the end this is not a sound assumption, and we need people to see their doctor's more, and to get more preventive care, in order to make more efficient our efforts at overall health of the communities.

Posted by: Jimm on February 8, 2006 at 6:36 PM | PERMALINK

While everyone here banters about the future social security crisis or lack thereof, the real budgetary elephant in the room is the growing percentage of the budget that is consumed by interest on our national debt. I say budgetary elephant because most of that debt was accrued under republican presidents. We're to the point where we're borrowing money just to keep the interest payments on our debt current and wind up paying interest on the interest. If not for the debt which was piled up to fund tax cuts there would be no future budgetary crises that could not be funded with projected income. In fact we could probably afford a tax cut that would benefit everyone not just the rich.

Posted by: sparky on February 8, 2006 at 6:39 PM | PERMALINK

I'm definitely learning from you howard (and a few others) in this thread, and really am just trying to compliment the discussion in my own way. I'm not nearly as up-to-date on the various policy arguments and minutiea, and always try to engage the libertarian-minded on deeper levels.

Posted by: Jimm on February 8, 2006 at 6:39 PM | PERMALINK

Howard, where I live a good amount of the negative savings rate is borrowing to buy boats, 4 wheelers and snowmobiles. Besides, why can't the poor save those big tax cuts they got from Bush?

Posted by: cq on February 8, 2006 at 6:45 PM | PERMALINK

Also, I only sound critical of Social Security promising too much because of our overall population trends, which will not sustain Social Security at the level we have it pegged now, and due to awareness of the political impact that will result from these future population demographics (lots more elderly voters will be a powerful force).

With this in mind, it would be nice to set in place some values, some sustainability, and some incentives to save for retirement on one's own while we still are decently well-balanced between generations in terms of political power. If we wait too long, and don't come up with something rock solid philosophically and pragmatically, then the chances of elderly voters in the future reducing their own benefits to save the budget is going to be much harder to do, and the negative impact of not doing so an existential threat to the nation.

Still, I'm much less concerned about Social Security than I am Medicare.

Posted by: Jimm on February 8, 2006 at 6:45 PM | PERMALINK

I do want to state that in no way do I support gutting Social Security, or replacing it with private accounts.

Instead, I'd like to trim Social Security around the edges, assuring it is targeted primarily so that no elderly in society go "needy", and are able to live "modestly" (low-end) in retirement if only having Social Security, and then allow for tax-free private accounts so that people can invest some of their income without penalty into retirement accounts that would allow for a "more modest" or "much more modest" retirement.

Basically, I think Social Security should remain largely as it is now, at least as long as most people live by paychecks, with minor tweaks and trimming, while simply giving people more options to save for retirement. Private accounts should be an enhancement, not a replacement, and should always be vigilantly controlled to remain tax-free only at "modest" levels.

Posted by: Jimm on February 8, 2006 at 6:52 PM | PERMALINK

Part of the solution to the Social Security crisis lies in making the Medicare more cumbersome and therefore less attractive. This will not only save money for the Medicare program itself but also lead to considerable reduction in the strain on Social Security, as, absent a good health care program to fall back on, the seniors will voluntarily postpone their retirement.

I think what is being called the Medicare mess is actually a part of clever plan by the Bush administration to save both Medicare and Social Security.

Posted by: tbrosz on February 8, 2006 at 6:56 PM | PERMALINK

cq: very droll.

jimm: nothing to apologize for. we can all learn from each other, and we each have our perspective to bear (except for the right-wing morons like jay of course).

fake tbrosz: very droll.

Posted by: howard on February 8, 2006 at 6:59 PM | PERMALINK

I wouldn't be so cavalier about this. It is possible this could get signed into law with nobody noticing.
Posted by: alan on February 8, 2006 at 2:41 PM | PERMALINK

Could?

WILL.

Count on it.

Thank the yellow-bellied Dems for making it happen.

Posted by: Osama_Been_Forgotten on February 8, 2006 at 7:01 PM | PERMALINK

Oh, and I don't feel like we should really do anything about Social Security aside from minor tweaks at the moment, and preferably after the 2006 elections to see where the country stands politically.

I would tackle Medicare first, and preferably that after 2006 as well, when hopefully there will be some more balance in Congress.

And, if I were Congress, I'd just start ignoring the president, since we've become far too dependent on the president to fix everything. Let Congress do the work, and the president can fund it.

Posted by: Jimm on February 8, 2006 at 7:04 PM | PERMALINK

Let Congress do the work, and the president can fund it.

Oops...I mean the president can take note of it and include it in his budget.

Posted by: Jimm on February 8, 2006 at 7:06 PM | PERMALINK

Here is a short overview of the Congressional budget process.

Posted by: Jimm on February 8, 2006 at 7:13 PM | PERMALINK

Am I the only one who finds this insulting. You can't put things in he budget that are contrary to current law.

Where is the law that allows this foolishness?

And Democrats should just pound Bush for scare tactics regarding these "empty promises". He is a joke and should be treated accordingly.

Posted by: little ole jim from red country on February 8, 2006 at 7:13 PM | PERMALINK

Honestly, I hope they DO kill Social Security. And ban abortion. The people in this country need to wake the fuck up and realize that the people in power who call themselves Republicans are predators, and are out to get them.

Until things get really bad, nothing's going to change.

Posted by: Osama_Been_Forgotten on February 8, 2006 at 7:20 PM | PERMALINK

Fake tbrosz misses something:

Part of the solution to the Social Security crisis lies in making the Medicare more cumbersome and therefore less attractive. This will not only save money for the Medicare program itself but also lead to considerable reduction in the strain on Social Security, as, absent a good health care program to fall back on, the seniors will voluntarily postpone their retirement.

...or, more frequently, involuntarily shorten it. Saving money either way.

Posted by: cmdicely on February 8, 2006 at 7:24 PM | PERMALINK

hank:

I'll vote for anyone who vows to take a look at those line items. I mean, in terms of cost vs. actual protection to the country they do not even seem to be close calls. Perhaps you would like to defend them.

If you do, fine. If not, obviously the amount of pork in the defense budget will more that make up for whatever actuarial problems present in SS and Medicare.

Unfortunately, Social Security, Medicare, and Medicaid added together exceed the entire discretionary budget. I agree that government programs are generally wasteful, and that defense is driven by a lot of things besides real defense needs. Good Lord, look at all the extraneous crap that got tacked on to our Homeland Security legislation. But something a lot more fundamental is going to need to be done to fix entitlements than shaving a few billion off of discretionary spending (not that this still wouldn't be a great idea.)

A first crack at it would be eliminating the cap on Social Security taxes. That, and moving towards real means-testing for both Social Security and Medicare (taxing benefits is basically means testing through the back door.)

As with ANY radical changes to entitlements, these things would need to be phased in over a number of years for younger and middle-aged citizens, and those on the system now, or close to it, should be assured of benefits that they were led to expect.

Posted by: tbrosz on February 8, 2006 at 7:27 PM | PERMALINK

Social Security has no demonstrable problem, and the problems with Medicaid and Medicare are just symptoms of the broader problems with the U.S.'s bloated, inefficient, ineffective, and unjust private/public hybrid frankenstein's monster of a healthcare system which doesn't serve anyone, except the rich and insurance companies well, and is vastly more expensive than systems that are far more effective in the rest of the developed world -- the solution is a universal healthcare system.

But, yeah, cuts in other areas of discretionary spending are largely orthogonal to the problem in healthcare entitlements, which is really just the problem in healthcare more broadly.

Posted by: cmdicely on February 8, 2006 at 7:36 PM | PERMALINK

Unfortunately, Social Security, Medicare, and Medicaid added together exceed the entire discretionary budget.

There's no justification in bundling these all together - Social Security funds itself. It should be considered separately.

Medicare and Medicaid are in the budget, and need to be addressed in their own right, not bundled with Social Security.

As for your recommendations, tbrosz, they sound like a good starting point for discussion, and the kind of "trimming" and "tweaking" we ought to be looking for in the short-term.

Posted by: Jimm on February 8, 2006 at 7:37 PM | PERMALINK

But, yeah, cuts in other areas of discretionary spending are largely orthogonal to the problem in healthcare entitlements, which is really just the problem in healthcare more broadly.

I definitely agree with this. We need wholesale reform of health coverage so that everyone is insured, one way or the other, at least for "essential" care, and we also should allow for 100% tax deduction of any and all spending by an individual for legitimate health purposes above and beyond the insured level.

Posted by: Jimm on February 8, 2006 at 7:41 PM | PERMALINK

If there were actual bets on this, mine would be a combination of (i) an increase in age eligibility from the current, sceduled 67 to say, 72 phased in in the next decade, (ii) an increase in the wage cap, not an elimination of it.

Anyone who has looked at the actual numbers knows that those two things will work.

As for the "crisis" which is slated to occur when the SS bonds will need to be redeemed, well, I guess we will then find out whether the last twenty years were the biggest insult to the collective intelligence of the American voters in history, won't we?

After all, if paying the bonds back, which obviously involves using general tax revenue to fund SS payments, is a crisis, the administration of that structure (Reagan) and the architects (which I believe included Greenspan) pretty much conned everyone, did they not?

Posted by: hank on February 8, 2006 at 7:46 PM | PERMALINK

. . . That, and moving towards real means-testing for both Social Security and Medicare . . .
Posted by: tbrosz on February 8, 2006 at 7:27 PM | PERMALINK

While we're at it, why not some means-testing for Corporate Welfare as well:

Companies (like Exxon) who don't need a tax break should not get one.

Companies (like GlaxoSmithKline) who don't need patent extensions to fund R&D (because they spend 5x the amount on marketing) should not get one.

Companies (like AT&T) who don't need to merge all the baby bells back together in order to gain a monopoly, should not be allowed to.

Companies (like UAL) who don't need bankruptcy protection and pension guarantee (because they already got their government handout after 9/11, which was caused when they negligently allowed armed muslim fanatics to board their planes) should receive neither.

I think that if we took an honest look at the Corporate Welfare System in the US, we'd start to realize that we're not a Free Market economy at all, not even close, and that the obscene degree to which we subsidize our corporations is really the major expense in our budget - and we would very likey not be having any of these discussions; wringing our hands over a few measely tens of millions of dollars from student loans and such, because Corporate America would be doing just fine (and in fact, probably be doing more to stay competitive) without these handouts.

Posted by: Osama_Been_Forgotten on February 8, 2006 at 7:49 PM | PERMALINK

A few points.

On SS indexing. While you are working, your contributions are wage indexed. After you retire, your benefits are inflation indexed. Which is to say when you retire, SS indexes your lifetime earnings in such a way that if you spent 20 years earniing an 80th percentile income and 20 years earning a 10th percentile income, it doesn't matter whether your high earning years were at the beginning of your career or the end. After you reitre your benefits are indexed to the CPI. How to best calculate the CPI is an exercise that we can leave for another day

This is probably a bit of a strawman to most here, but if the "full faith and credit" represented by trust fund was the solution was the answer, than the simple solution would be to raise the interest rate that the goverment pays on those "special, nonnegotiable" bonds. If the treasury was paying the trust fund 20% the trust fund would never run out of money. At the end of the day, contemporary workers are paying for contemporary retirees. We shouldn't complain because we're living longer. We do however have to figure out how to pay for it.

And of course personal/private/whatever they call them tomorrow accounts won't solve the problem, at best delay it. The main effect would be to bid up equity prices in the same way that housing prices have been bid up by easymoney mortgages. Just as your house hasn't doubled in square feet because it's worth more, throwing large amounts of money indiscrimantely at Wall Street is unlikely to productivity jump in such a way as to make it easier for fewer workers to support more retirees. There would probably be SOME effect, but mostly a second order one.

Posted by: Jim A. on February 8, 2006 at 7:49 PM | PERMALINK

Good points Hank and OBF.

Posted by: Jimm on February 8, 2006 at 7:51 PM | PERMALINK

I'm not sure I understand your proposal Jim A.

Posted by: Jimm on February 8, 2006 at 7:53 PM | PERMALINK
And of course personal/private/whatever they call them tomorrow accounts won't solve the problem, at best delay it.

I think you mispelled "accelerate".

Posted by: cmdicely on February 8, 2006 at 7:55 PM | PERMALINK
If there were actual bets on this, mine would be a combination of (i) an increase in age eligibility from the current, sceduled 67 to say, 72 phased in in the next decade, (ii) an increase in the wage cap, not an elimination of it.

Anyone who has looked at the actual numbers knows that those two things will work.

Since the numbers that have been most reliable show that neither of those (nor any other change) is necessary for Social Security to remain fully funded, I'm not sure what your point is.

Posted by: cmdicely on February 8, 2006 at 7:57 PM | PERMALINK

Actually, to solve this problem, we don't need to do anything.

Medicare-D will make it impossible for old people to get medical treatment. So they'll all die sooner. Thus breaking off the top half of the Social Security expense curve, and making more money available for baby boomers who retire at 65.

Hell, they could probably afford to drop it back down to 55, and since this will take millions of old people out of the workforce, the increase in productivity, combined with the increase in young people's income as demand for workers rises, will increase revenues.

Maybe this was Bush's crafty plan all along. That wily fox!

Posted by: Osama_Been_Forgotten on February 8, 2006 at 7:59 PM | PERMALINK

It's an election year. There isn't a chance in Hell that this will make it to the final budget, not even in a watered down form.

Posted by: Adam G on February 8, 2006 at 10:32 PM | PERMALINK

Jimm- I wasn't making a (serious) proposal. I was attempting to point out just how useless it is to worry about when the Social Security Trust Fund Will "run out" of money. Saying the magic words "full faith and credit" doesn't magicly the money to pay retirees after 2020 appear. The trust fund consists entirely of a safe full of special, nonnegotiable bonds in a save in West Virginia. It would be a trivial matter to raise the interest rate that the trust fund charges on those bonds to make sure that we ALWAYS had a pile of laserprinted sheets of paper with the magic words on them in said safe.

However in 2020 or 2040 the money for benefits must be either taxed or borrowed. The only difference is that the trust fund makes is that more of the money to pay those benefits will come from relatively progressive income taxes instead of regressive payroll taxes. The irresponsible thing is the huge unified budget deficts we are running now when we KNOW that in the future retiree benefits will be much more expensive. It's as if we're adding $100 to our credit card balance every month, but see we're having $30 put aside every month to pay for when grandma has to go into a home.

If we were running a budget surplus now, we could be paying DOWN the debt now and we would be, perhaps in better shape to borrow money when the baby boomers retire.

Posted by: Jim A. on February 8, 2006 at 11:36 PM | PERMALINK

But what do you mean we have to pay back the money we borrow? Says who? don't your Daddy's rich oil buddies cover all your debts?

Posted by: Chimpy McCokespoon on February 9, 2006 at 1:06 AM | PERMALINK

I'm surprised that everybody here seems to forget the figures in the Bush privatization plan, at least what was made available to evaluate. The 3% was NOT a percentage of current SS contributions, (currently 6.2% of income), but rather 3% of income. (almost half of the 6.2%). For example, if you made 50K, you would currently contribute $3,100 toward SS. Under the Bush plan, you could divert 3% (of 50K) to a "private account". This would be $1,500.

However, part of our current contribution goes to support current retirees - the rest goes into a trust fund. If a large percentage of current workers opted for this, who would pay for current retirees? Remember the term Transition Costs? This was estimated as anywhere from 12 to 15 TRILLION dollars, and nobody would say how we would finance it.

Another question, seldom asked, what would happen to the employer matching for this 3%? Would the employer still have to match it, or match your "private account" contribution? Or would they get to keep it. (Seems likely, considering the power of lobbying groups vs. workers.

This stuff was all covered by Kevin and most people here, but it's been, what, a year? Just trying to keep us sharp here.

Posted by: DK2 on February 9, 2006 at 2:20 AM | PERMALINK

I know it's late everywhere else, so I may be all alone here, but I'll add one other point. IF the proposal was in fact 3% of the 6.2% employee contribution, (Using my 50K example above), that would amount to only $93 a year, and if I was guaranteed that I could personally drown any further "privatization" scheme, well, I'd take that in a New York minuite.

Posted by: DK2 on February 9, 2006 at 2:33 AM | PERMALINK

It will just be ignored.

Kevin Drum 2:16 PM Permalink | TrackBack (0) | Comments (142)

No. He's got to keep making it to set Dems up for ads showing their State of the U applause!

Posted by: McA on February 9, 2006 at 2:50 AM | PERMALINK

I had a feeling Social Security "reform" might show up again after the in-your-face standing-o the dems threw at Bush during the SOTU. I'm sure he punched some low-level staffer the minute he got out of the hall.

The man just doesn't lose gracefully. I'm sure he thinks this trait is just persistence and competiveness rather than the underdeveloped sense of awareness more often demonstrated by children in the 4-5 year old range.

We used to call those kids "spoiled."

Posted by: DeanVernonWormer on February 9, 2006 at 11:17 AM | PERMALINK


jay from way up thread...The only thing the Dems applauded for in the SOTU was their victory in denying my children the right to save more of their own money for retirement.


lol

the victim card is always close by....huh jay?

Posted by: thisspaceavailable on February 9, 2006 at 12:59 PM | PERMALINK

Anyone who is against moving toward private accounts and slowing the growth of SS should be voted out of office. How the hell can people be against improving a plan just because the current one won't be a problem for 10 years?

Posted by: aaron on February 9, 2006 at 3:46 PM | PERMALINK

You aren't keeping up, are you Aaron.

There are many personal account options (401k, IRA, etc). However, they don't involve using the money set aside for social security to cover catastrophic loss - i.e. when your personal investment tanks (all enron shares) and you are left with nothing. Since the rest of us don't want you as a burden, we all make a small payment to put you on social security (not much), so you aren't begging for beer money outside my house.

Repeat after me, "YOU ARE NOT AN INVESTMENT GOD"! (My pardon if you own a hedge fund).

Posted by: royalblue_tom on February 9, 2006 at 4:59 PM | PERMALINK

The government is completely dependant on the American economy to provide social security and medicare. If your private account tanks, so will social security.

Private accounts allow more people to accumulate wealth and index SS to economic growth instead of arbitrarily demanding ever increasing payouts without having increased supply.

Posted by: aaron on February 9, 2006 at 7:23 PM | PERMALINK
The government is completely dependant on the American economy to provide social security and medicare. If your private account tanks, so will social security.

Um, wrong.

You are conflating the whole ("the American economy") with the part ("your private account") and suggesting that the latter tanking implies the former tanking. This is obviously not correct -- people make money in economic collapses in private investment portfolios (though only very few, and very lucky or clever ones), and even more people go broke with their private investments while the economy chugs along fine.

There are plenty of private investment vehicles, tax advantaged even, which allow people to save for their own retirement based on their own skill. Social security is the safety net of last resort, so it makes no sense to put it into the same kind of vehicles that those other retirement plans use, and open it up to the same kind of risky choices.

Posted by: cmdicely on February 9, 2006 at 7:29 PM | PERMALINK

You haven't heard of diversified funds? They've been around a long time. Private accounts are indexed and fixed income securities mutual funds. It's not day trading. Take a look at the TSPs. The fact that people have lost money trading trading is a strawman, those are not the vehicles being considered.

If you look at the investment market as a whole, I speculated that in the long run it distributes all of the GDP minus payroll to people who have invested. People who have disposable income can claim a share, but those of us who don't get left in the dust. Privatizing gives you particular size share of what is produced rather than giving you a certain amount whether there is enough to go around or not.

Posted by: aaron on February 10, 2006 at 8:32 AM | PERMALINK




 

 

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