Editore"s Note
Tilting at Windmills

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October 29, 2007
By: Kevin Drum

SOCIAL SECURITY FOR DUMMIES....Robert Ball, the grand old man of Social Security, explains patiently to the Washington Post editorial board yet again that Social Security is (a) a rather modest program, (b) more necessary than ever in an era of shrinking private pensions, (c) shouldn't be cut, (d) has only minor long-term financial problems, and (e) can be fixed with a small number of fairly trivial revenue changes a decade or two down the road.

I know, I know, it's a boring subject. But the number of people who either don't understand (or pretend not to understand) just how insignificant Social Security's problems are and how easily they can be repaired is really staggering. A decade ago I used to be one of them, but all it took was a very modest amount of reading on the subject to convince me that I was off base. Considering how simple the math is, I really don't understand why so many otherwise bright people continue to be fooled by all this.

Kevin Drum 1:00 PM Permalink | Trackbacks | Comments (80)

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I really don't understand why so many otherwise bright people continue to be fooled by all this.

Hmm, maybe because it suits their rhetorical positions (and the financial positions of their backers) to continue to be fooled by it (or at least to pretend they are)?

Posted by: bleh on October 29, 2007 at 1:04 PM | PERMALINK

Gotta hand it to the Repukes -- they gloss over the trillions in new debt BushCo has created, and focus on getting more money for WallStreet. Man, can they set the debate!

Posted by: Gore/Edwards 08 on October 29, 2007 at 1:08 PM | PERMALINK

Hmmmm...my faith in social security is inversly related to Republican control of Government.

Their plan for Social Security seems to be to mine it for funds to pay for tax cuts for the wealthy, then abandon ship on it. After all, it was Bush who said that the promisary notes were just "IOU"s.

My point: The full faith and credit of the government of the United States of America ain't worth much with those guys in charge.

Posted by: Fides on October 29, 2007 at 1:13 PM | PERMALINK

If poverty-stricken old people are allowed to live with a shred of dignity, the terrorists have won.

Posted by: Anon on October 29, 2007 at 1:17 PM | PERMALINK

Bob Somerby, today: "In chapter 12 of Naomi Klein’s new book, The Shock Doctrine, she describes the process, observed all over the world, by which plutocrat entities create phony fiscal crises as ways of achieving regressive “reforms.” She focuses on a phony mid-90s crisis in Canada, and another fake crisis in Trinidad and Tobago—but in this country, plutocrats have followed this strategy for decades with regard to Social Security."

Posted by: penalcolony on October 29, 2007 at 1:18 PM | PERMALINK

Considering how simple the math is, I really don't understand why so many otherwise bright people continue to be fooled by all this.

It's a reflex.

Posted by: Horatio Parker on October 29, 2007 at 1:18 PM | PERMALINK

Just a large, rhetorical hammer used by both sides to beat the other. Works well against both the 'entitlements' and 'taxes' crowds.

Posted by: wishIwuz2 on October 29, 2007 at 1:23 PM | PERMALINK

It doesn't make any difference right now whether we have a big increase in FICA taxes or if we invest 100% in the stock market and everyone gets rich from their retirement accounts.

The problem is that when we have fewer people working and more people retired that the working people will have to support the retired people.

I don't care how much we all save or how much we pay in taxes now.

When we are all retired we will depend on our children in the workforce to provide goods and services.

Think about it.

If you are retired then you are not producing as many goods and services as you consume, period.

If your child is working then he will have to provide enough goods and services for the children who are not yet working and for the the retired people who are no longer working, period.

An individual can save for retirement.

A society can NOT save for retirement.

This is a natural law and can not be changed, period.

Posted by: neil wilson on October 29, 2007 at 1:30 PM | PERMALINK

At 41, I already count on about 70% of what is promised being there when I draw at age 67, big deal. Not a crisis to me, nor should it be to anyone paying attention.

Posted by: RollaMO on October 29, 2007 at 1:31 PM | PERMALINK

Maybe Dana Milbank could read this, as he's lately been on the Social-Security-Broken bandwagon.

Are the pundits at WashPo required to read AT LEAST the op-ed pages daily?

Posted by: Cal Gal on October 29, 2007 at 1:35 PM | PERMALINK

I agree Kevin. It is a fundamentally sound program fiscally. Also, Socail Security truly represents a "social compact", in that the employer kicks in half and the employee kicks in half to a government-run fund, with the implicit understanding that that employee's old age is going to be taken care of, in the event the employee doesn't save enough or isn't lucky enough with his or her investments or health to be completely self-sufficient.

Those conservative losers who grouse about the government using "the force of law" to require employers to pay into the SS fund, never make the same complaint about taxpayers being forced to pay for an out-of-control war machine or to pay mercenaries like Blackwater, which I fund appalling!!!

Posted by: The Conservative Deflator on October 29, 2007 at 1:39 PM | PERMALINK

Well his solution is to (1) raise the income cap for social security taxes, (2) divert the death tax to pay for social security, and (3) invest 1/5 of social security funds in the market.

The first solution punishes not the super-rich but rather those making around 100,000. Considering folks here were discussing how families making $80,000 needed SCHIP aid to pay for health care, I'm not sure hiking taxes on these folks is the right solution.

The second solution must be viewed with the same alarm that liberals have viewed proposals to eliminate the death tax. Because diverting the death tax to pay into social security means we are depriving the government from using these funds for other purposes.

And the third solution must be viewed with the same horror that liberals viewed proposals to allow individuals to invest their social security funds in the market. Same "risky scheme" different investor.

While I think we will ultimately see some raising of the income cap for FICA taxes, I think we also need to seriously look at raising the retirement age at which one gets social security. And we need to more realistically index benefits to inflation. The social security problem is fixable but it is a bit more complicated that what the writer proposed. Of course I would prefer the option of investing my own money but that seems unlikely to happen.

Posted by: Hacksaw on October 29, 2007 at 1:50 PM | PERMALINK

I have been overpaying social security taxes since 1983(?) in order to avoid financial problems with the program. Those excess funds were to be applied to the retirement of us baby boomers. If the funds have been used for other purposes (and they have), then obviously the needed social security expenses must be taken from the general fund.

It was always known that the next generation could not pay for the boomers and the fix for that was applied long ago. If the intervening administrations stole the money, the coming ones must be prepared to repay it.

Posted by: Mudge on October 29, 2007 at 1:59 PM | PERMALINK

Anybody who uses the term "death tax" is to be taken as seriously as somebody who once said:

"I lived in New York during the 1980s and I regularly shot my way out of restaurants and buildings and had to wear body armour and carry a first aid kit everywhere I went."

Posted by: Matt on October 29, 2007 at 2:00 PM | PERMALINK

Democratic candidates need a pithy, one-sentence explanation of this, and a website they can direct voters to for a short and sweet primer.

Posted by: marv on October 29, 2007 at 2:00 PM | PERMALINK

"I lived in New York during the 1980s and I regularly shot my way out of restaurants and buildings and had to wear body armour and carry a first aid kit everywhere I went."

Heh. Makes me giggle every time I think of it.

Posted by: shortstop on October 29, 2007 at 2:02 PM | PERMALINK

*

Posted by: mhr on October 29, 2007 at 2:04 PM | PERMALINK

Kebvi,But the number of people who either don't understand (or pretend not to understand) just how insignificant Social Security's problems are and how easily they can be repaired is really staggering.

Do you mean people like Obama?

Posted by: TJM on October 29, 2007 at 2:04 PM | PERMALINK

Most people aren't fooled. They think Social Security is just plain WRONG.

Posted by: jim on October 29, 2007 at 2:11 PM | PERMALINK

For conservatives, the reality of Social Security is irrelevant. They oppose it on ideological grounds, beinging it to be a step on the way to a Stalinist America. Their goal is to do away with it entirely. The problem is most Americans think Social Security is just great, so to try to win people over, they create a lot hysteria that SS is in terrible shape, and then propose solutions that they hope would destroy it.

Posted by: bobo the chimp on October 29, 2007 at 2:11 PM | PERMALINK

The primary imbalance in Social Security's future is that there will be fewer working people paying into the system relative to the number of retirees drawing benefits.

Throughout the history of Social Security, there has always been at least 3 workers per retiree, but that will change very soon with the baby boomer retirement. By 2020, the ratio is expected to drop to 2.6 workers per retiree. By 2050, it drops to 2.0 and in 2070 it drops to 1.9 (see http://www.ssa.gov/OACT/TR/TR07/IV_LRest.html#wp295447)

To improve the situation, it is a simple matter of raising the retirement age, or better yet, peg the retirement age to some demographic formula. It's simply not tenable over the long term to have such a large percentage of the population drawing benefits.

Posted by: JoeBob on October 29, 2007 at 2:13 PM | PERMALINK

The primary imbalance in Social Security's future is that there will be fewer working people paying into the system relative to the number of retirees drawing benefits.

Er, no. This demographic imbalance was always known and was always built into the system.

Posted by: Stefan on October 29, 2007 at 2:17 PM | PERMALINK

mhr you're back! how did the treatments go?

Posted by: mudwall jackson on October 29, 2007 at 2:23 PM | PERMALINK

The point regarding the number of workers per retiree now as compared then is a non-issue. Workers today are much more productive and have much higher earnings today than40/50/60 years ago and are able to support more retirees. It is a situation analogous to agriculture production: the number of ag workers per capita today is dramatically lower than in the past, but we are not discussing a lack of food. That is because ag workers today are more productive than ag workers from decades ago.

Posted by: Dan on October 29, 2007 at 2:23 PM | PERMALINK

But even Robert Ball does not address the fact that, so far, the "middle" actuarial formula has been more conservative than it needs to be. Of course, the Greenspan Commission (who weren't stupid enough to need Tim Russert's chalkboard analysis) was being duly conservative, and we should be glad they were. But based on expeience for quite a few years now, it means the "Baby Boom Trust Fund" has been getting bigger faster than they expected in 1983 (and later). In other words, the date we have to start dipping into the excess is now much later than originally projected -- still 10 years away, and 10 years after the Baby Boomers have started to retire. That's just the start date, which ought to be the easier to predict. It's like your 18-year-old kid decided on junior college and working for 10 years, so you don't even have to start dipping into it until then.

The supposed date when the Baby Boomer excess in the Trust Fund will be used up has been pushed out even more than the start date has over the last 15 years or so: now 34 years from NOW, whereas in the early to mid-90s they were projecting exhaustion of the fund in 28 years from THEN. The current projected exhaustion date -- which merely means not that Social Security becomes "broke" or "tapped out," but that we would have to go back to funding out of current withholding revenues (which is what's being projected to be about 75% of benefits under the assumptions we use now) -- is about 10 years after the retirment rate of Baby Boomers will have started to moderate.

We really have no idea yet whether trying to bring Social Security into "actuarial balance" under the middle projection is necessary or not. It is also premature at this point to place much faith in the expected revenues versus benefits over 30 years from now. It seems to me it would be irresponsible to try that when the jury is still out on whether it is the appropriate formula for its purpose or not. We may not have enough information yet to junk the algorithm and re-do it, and we certainly ought to keep watching (which is what the Social Security Administration does, so the politicians can butt out for now), but it would be unfair to employees and companies to increase withholding when there is substantial indication under information available today that it will never be necessary.

In order to default on these special Treasury Bonds ("IOUs") backed by the Full Faith and Credit of the United States Government, it would, besides causing a huge international financial crisis for the U.S. to be unable to meet its obligations, require a change in law that no politician would ever pass. There will be fiscal pain in redeeming these out of the general revenue budget, and the government may well -- probably will -- have to borrow again to pay them, but the U.S. Government can continue to do that, especially if some current huge drains are ended, and the alternative is unthinkable. Yes, if there is still a U.S. government, my teenager and yours will get their Social Security. It will "be there" for them, and those who throw out scare tactics to the contrary are being terribly irresponsible.

Posted by: urbanlegend on October 29, 2007 at 2:39 PM | PERMALINK

Memo to Obama -- let's not hear any GOP talking points from you on this subject!

Posted by: Joe on October 29, 2007 at 2:39 PM | PERMALINK

Under "People Who Need To Be Educated", Tim Russert would be a high priority.

Posted by: RonK, Seattle on October 29, 2007 at 2:43 PM | PERMALINK

Thanks, Dan and urbanlegend. I would particularly emphasize urbanlegend's point that "it would be unfair to employees and companies to increase withholding when there is substantial indication under information available today that it will never be necessary." I believe the worst predictions for SS are based on a prediction of 1.6% growth, and those predictions aren't that bad. But so far, we're doing much better than 1.6%, and, as urban legend points out, the date at which the trust fund will allegedly be exhausted keeps moving farther out.

Posted by: David in NY on October 29, 2007 at 2:46 PM | PERMALINK

You can tell that the scare tactics of the Republicans have worked because 75% of eligible people are collecting early Social Security at age 62, according to Jonathan Pond, the guy who gives the “preparing for retirement” talks on PBS during pledge week.

He says that unless you are ill and not expected to live long, or need the money to pay bills, you should wait until full retirement to start collecting. Otherwise, you start out with an income reduced by 25%.

I am eligible for full retirement in two months, but I plan to wait as long as I can before I start collecting Social Security, because, according to Pond, I can increase my base by 7.5% a year, up until age 70. I expect this to make a huge difference, if I live another 10 or 20 years.

Posted by: emmarose on October 29, 2007 at 3:13 PM | PERMALINK

I read his article, and he has no background in the retirement bond industry (probably why the socialists let him sit in the commission), I can tell that straight away because he makes no attempt to match demographics to payin and payout.

Ask him, why is there such a sharp break at 65? His answer? Probably because we are care about old people using young people's money.

But it is in fact absolutely opposite. Under any reasonable matching of demographics to retirement, the mathematically correct payout, and there is one, would actually have the very old getting much more, and the very young paying much more.

The demographically correct payout and pay in would start with higher payins, and have that gradually drop until you reach the demographic middle, then the payout starts rising, reaching a peak for the oldest SOB who would make bookoo bucks (a technical term).

Do the math, smooth the SS yield curve and you find, just the opposite of what the progressive democratic jackasses tell you. Dems actually rip off the very old, the very people who need social security, they are ripped off.

Further, what this idiot did by keeping that sharp break at 65 is to cause about another 3% more volatility in the economy than we have to have. This is easy to figure out.

It is not socialists, it is socialist idiots who purposely run bad programs because they think they are supposed to be bad socialists. No one told them that being socialist does not imply that you have to be an idiot.

Posted by: Matt on October 29, 2007 at 3:16 PM | PERMALINK

"Workers today are much more productive and have much higher earnings today than40/50/60 years ago and are able to support more retirees."

Fundamentally wrong, and well respected economists make this same mistake.

Being more productive simply makes it more expensive to take you off the job market, and you are not likely to want to completely retire because your productivity lasts longer.

The size of the retirement industry is tied to the amount of investment we need, and that is tied to the demographics because we want the interest rate curve to be independent of age. So we have a retirement industry that forward compensates old people for industrial improvements we pay for now that they will not see due to death. Young people pay more because they will see more of the benefits than old people.

It is a built in equilibrium. If the progressives continue to price fix and use monopoly powers to try and defeat this equilibrium, then they just cause volatility. Investment and demographics are tied together. All that we can do in a socialist system is to make sure we run the SS system as close to the investment needs as we can and be as demographically exact as we can.

Social security should be updated yearly.

Posted by: Matt on October 29, 2007 at 3:37 PM | PERMALINK

That was incomprehensible, Matt. But I'm glad to hear that you think you know more than "well respected economists." Self-esteem is really important, even if it's not justified by the facts.

Posted by: David in NY on October 29, 2007 at 3:55 PM | PERMALINK

The cranks who carefully explain to us that things are wrong stub their toes against the fact that things are fine as far as the eye can see with Social Security. Until the first Boomers are 100 and the last Boomers are 85. That's if the MOR projections are met. Since they've always been exceeded, the cranks and nay sayers have to yell "Boo!" about it.

And it takes a lot of damn gall to complain about Social Security when friggin' Bush passed a Medicare benefit without a corresponding revenue stream. IOKIYAR.

Posted by: Jeffrey Davis on October 29, 2007 at 3:58 PM | PERMALINK

The SS problem for republicans is debt that has been run up to the system by republican administrations since 1985 (yes thank the maestro for this and Clinton did try to reverse things). To repay those amounts, which will be needed to fund boomer retirements starting in 2020 or so, federal income taxes will have to rise. There goes the no new tax pledge. Great country we have, middle class workers paid extra ss all these years, that excess was used to help fund tax cuts for the weathly, now for the middle class to receive their ss benefits in full, their taxes will have to up again. Alternative, cut the benefits they have been overpaying for all these years.

Posted by: steve on October 29, 2007 at 4:03 PM | PERMALINK

"Well his solution is to (1) raise the income cap for social security taxes, (2) divert the death tax to pay for social security, and (3) invest 1/5 of social security funds in the market."
____________________

Well, set aside for the moment if these solutions are wise. If all three were implemented in 2009, just how far past 2017 would we go before Social Security outlays begin to exceed its own revenue stream and starts dipping into the general revenue?

Posted by: Trashhauler on October 29, 2007 at 4:22 PM | PERMALINK


The Congress is more likely to declare itself officially atheist, or make its sessions clothing-optional, than to intentionally mess up Social Security. There's a reason why future generations will gladly pay to keep SS going, just as past generations did: paying taxes is much less onerous than the life-style-cramping alternative of taking the old folks in to live with you.

Neil Wilson at 1:30 makes the important point that wingnuts keep ignoring: the food we consume, the electricity we use, the medical care we receive in the year 2057 will have to be produced in the year 2057, by that year's workforce. You can't save up stuff like that. Regardless how you finance retirement, the deal in any future year is that all of us (workers plus retirees) only get to consume as much as some of us (the workers alone) produce. Whether we allocate GDP to retirees by market mechanisms (e.g. stocks and bonds), by government action (e.g. Social Security), or by family loyalty (e.g. taking our parents in to live with us), the underlying realities of production and consumption don't change.

-- TP

Posted by: Tony P. on October 29, 2007 at 4:45 PM | PERMALINK

Trash, his solution to raise the cap means to have the existing FICA tax rate (unchanged) apply to more of the country's total payroll such that the amount of FICA collected equals 90% of total payroll instead of the 83% currently. (2007 Trustees Report)
That would make the 7.65% equal about 8% on employees with the employer match totaling 16% instead of 14.3% currently. (Assuming around $800 billion of SS tax receipts)

Posted by: TJM on October 29, 2007 at 4:54 PM | PERMALINK

The demographic argument shows the superficility and ignorance of its proponents. As numerous commenters have pointed out, the Greenspan commission increased FICA tax rates to pre-pay the boomers' future retirement needs. ]Of course, the Republicans have borrowed the trust fund surplus to lower taxes on the wealthy right now; will taxes be increased on the wealthy in the future in order to re-fund the surplus ?] Also, if the number of workers in the future reduces then (1) their wages will go up; (2) employers will have to treat their employees better; and (3) higher wages & better working conditions will induce "retirees" to rejoin the work force, thereby reducing the benefits payments and even increasing FICA receipts.

mhr is being silly --- in this context, "full faith and credit" is a financial policy, not a legal requirement. It's strange how words can have multiple meanings !

Posted by: H-Bob on October 29, 2007 at 5:43 PM | PERMALINK

The first solution punishes not the super-rich but rather those making around 100,000.

How is that a "punishment"? It merely puts those making above $97K (who pay SS taxes on less than 100% of their salary) at parity with those below (who pay SS taxes on 100% of their salary). If anyone's being punished, it's those making less than $97K who suffer the full tax bite.

Posted by: Stefan on October 29, 2007 at 5:54 PM | PERMALINK

"If all three were implemented in 2009, just how far past 2017 would we go before Social Security outlays begin to exceed its own revenue stream and starts dipping into the general revenue?"

That's an irrelevant question. The money was borrowed for the general revenue fund; it will have to be paid back from the general revenue fund. That has nothing to do with the long-term funding for Social Security. The proposals on the table are for the time when Social Security (potentially) can no longer meet all of its obligations, in another forty years or so.

Posted by: PaulB on October 29, 2007 at 5:54 PM | PERMALINK

"That was incomprehensible, Matt."

It was pretty hilarious, wasn't it? I'm pretty sure that Matt has been here before, although with a slightly different handle. He was always good for a laugh, though.

Posted by: PaulB on October 29, 2007 at 5:59 PM | PERMALINK

Is past knowledge also part of the problem? I remember hearing that about ten years ago, the challenges surrounding the program seemed a lot worse than they do today. If those passing on information in the press feel that nothing has changed since they originally researched the issue, then perhaps that explains what we are getting now.

Posted by: Brian on October 29, 2007 at 6:03 PM | PERMALINK

The first solution punishes not the super-rich but rather those making around 100,000.

Here's another solution: keep the current cap but then have a jump from $97K to, say, $300K with no upward cap. This would protect those income earners in between from having to pay extra, while still causing the wealthy to pay their fair share.

Posted by: Stefan on October 29, 2007 at 6:04 PM | PERMALINK

Republicans want to kill Social Security and they're outsourcing jobs and destroying the mortgage market. Clearly they are a bigger problem than any accounting triviality.

Posted by: MarkH on October 29, 2007 at 6:09 PM | PERMALINK

Anyone who says fixing SS is simple doesn't understand the problem. Here are a couple of major bloomers in Ball's column:

1. It's out of the question for the US government to make major purchases of stocks. They would have to pick winners and losers. They'd have an enormous impact on the stock market. It would mean substantial government ownership of private companies. The opportunites for corruption would be immense. Also, if there's any extra cash, Congress is going to spend it. That's what they do today with the SS surplus.

2. SS cannot be fixed in a vacuum. Extra dollars of tax will be needed for SS. More extra dollars would be needed under Ball's proposed expansion of benefits. At the same time extra tax would be needed for Medicare. Extra tax would be needed for the budget deficit. Extra tax would be needed for Hillarycare or other governmental health care program. Extra tax would be needed for whatever other new programs or giveaways Congress enacts.

What will the sum of all these extra taxes do to the economy? I don't know, nor does any panelist here know, nor does George Ball know. But, if taxes get too high, our economy will start to look like Europe's, with high unemployment as businesses move out.

Posted by: ex-liberal on October 29, 2007 at 6:16 PM | PERMALINK

"The problem is that when we have fewer people working and more people retired that the working people will have to support the retired people."

While it's true that there are likely to be fewer workers per retiree, that's not necessarily a problem. If I recall correctly, when Social Security was first founded, we had something like 16 workers per retiree. The number has been steadily dropping, for a variety of reasons, all without major problems. The baby boomer retirement has been prepaid, as a result of bipartisan legislation passed during the Reagan years.

"I don't care how much we all save or how much we pay in taxes now.

Then you are showing that you aren't bothering to understand the real issues involved.

"When we are all retired we will depend on our children in the workforce to provide goods and services."

How is that different than any other time in history? And what does this have to do with Social Security?

"Think about it."

I did, but clearly you have not.

"If you are retired then you are not producing as many goods and services as you consume, period."

And your point is, what, exactly?

"If your child is working then he will have to provide enough goods and services for the children who are not yet working and for the the retired people who are no longer working, period."

Again, how is this different than any other time, any other society?

"An individual can save for retirement."

True.

"A society can NOT save for retirement."

Not only is this essentially a meaningless statement, it's demonstrably false in the context of Social Security.

"This is a natural law and can not be changed, period."

I don't think you have the foggiest idea what a "natural law" is.

Posted by: PaulB on October 29, 2007 at 6:20 PM | PERMALINK

The proposals on the table are for the time when Social Security (potentially) can no longer meet all of its obligations, in another forty years or so.Posted by: PaulB

In 40 years, the pig will be through the python. In other words, in 40 years most boomers will be dead. After that, SS enters a period where there are more people paying into the system than receiving benefits.

Posted by: JeffII on October 29, 2007 at 6:21 PM | PERMALINK

Mmm.. I find his suggestions kind of disappointing.

Why this magical 90%? Why does that top 10% of income need to be exempted? Sounds like a closet case of 'trickle down' economics is under there somewhere.

Then we have the federal government invest $500B (now)-1T(at projected maximum 'trust fund' size) in the stock market so we get to experience the insurance cycle in social security from now on, and to watch the president bushes of the future stack the governing body with cronies to direct a few percent of most paychecks in the country toward other cronies.

Finally as a bass-ackward way of NOT undoing the remaining regressivity after implementing the first suggestion we 'dedicate' the inheritance tax to social security, which is a meaningless accounting change. If the tax system remains unchanged and in fact the inheritance exemption continues to increase just how has the progressivity of anything improved? It has not.

Posted by: jefff on October 29, 2007 at 6:28 PM | PERMALINK

"Why this magical 90%?"

He explains that, sort of -- it's a "traditional goal."

"Then we have the federal government invest $500B (now)-1T(at projected maximum 'trust fund' size) in the stock market"

No. He calls for "investing some of its assets -- up to 20 percent, say," not the whole thing.

Posted by: PaulB on October 29, 2007 at 6:49 PM | PERMALINK

"In 40 years, the pig will be through the python. In other words, in 40 years most boomers will be dead. After that, SS enters a period where there are more people paying into the system than receiving benefits."

Of course, but the SSA middle estimate still shows trouble meetings its goals in that timeframe. The fact that the middle estimate is likely too conservative has already been noted above.

As I read it, he isn't saying that we should necessarily adopt any of those suggestions; he's simply pointing out that the Post's recent editorial on this was completely bogus, which it was.

Posted by: PaulB on October 29, 2007 at 6:51 PM | PERMALINK

"Anyone who says fixing SS is simple doesn't understand the problem."

ROFL.... Anyone who claims that fixing Social Security isn't simple is usually lying.

"1. It's out of the question for the US government to make major purchases of stocks."

Well, no, actually, it isn't, since large funds, including state pension funds, do this all the time. Moreover, he isn't calling for the entire sum to be invested, nor is he insisting that we do this -- it's just an idea to indicate that there is more than one way to solve any potential problem.

In any case, for Republicans to decry this is simply laughable, since privatization would end up with the government doing exactly that.

"2. SS cannot be fixed in a vacuum."

Considering the relatively minor size of the issue, it's actually quite clear that it can be, and almost certainly will be, "fixed in a vacuum."

"Extra dollars of tax will be needed for SS."

Not necessarily. The best case to date is that we will need little, if any, additional tax dollars, and all of those can be obtained by tweaking the existing funding mechanisms.

"At the same time extra tax would be needed for Medicare."

None of those other putative taxes have a damn thing to do with Social Security, since Social Security has its own independing funding source. It is dishonest to pretend that they are in any way related.

"What will the sum of all these extra taxes do to the economy?"

Irrelevant, with respect to Social Security, which is all that is under discussion here.

Posted by: PaulB on October 29, 2007 at 7:01 PM | PERMALINK

"No. He calls for "investing some of its assets -- up to 20 percent, say," not the whole thing."

Yea, $500B is around 20% of the current 'trust fund' and $1T is around 20% of the projected maximum... well closer to 25% so nudge down some.

Posted by: jefff on October 29, 2007 at 7:02 PM | PERMALINK

Oops... my apologies, Jeff. I hadn't looked at the numbers.

Posted by: PaulB on October 29, 2007 at 7:12 PM | PERMALINK

This whole social security scare is put forth by wealthy people because of their profound fear that someone will figure out that Social Security and Medicare, and Medicare for everybody could well be financed by a tax on the wealthiest 1%. Professor Jacobus ten Broek and Richard B. Wilson wrote an article about this way back in 1954 in 1 UCLA Law Rev. It has always been crazy to finance SS with a regressive flat tax on wages. Roosevelt accepted this in 1935 only because it was the best he could do at that time. Doug Page, Tucson, AZ

Posted by: Doug Page on October 29, 2007 at 7:23 PM | PERMALINK

Of course, but the SSA middle estimate still shows trouble meetings its goals in that timeframe. The fact that the middle estimate is likely too conservative has already been noted above. Posted by: PaulB

Then there is the other depressing but very real prospect - the U.S. will have declined so dramatically that supporting SS will be the least of our concerns. In 40 years, if any of us are still around, we won't be driving cars powered by petroleum, and we may have no plastics of any kind. Goodbye "modern world" as we currently know it.

Posted by: JeffII on October 29, 2007 at 7:46 PM | PERMALINK

George Bush alive men do tell tales.Cut Social Security so I can spend it on my war and put the rest in my pocket, fvcking republicans never sease to amaze me with their lies and corruption to the highest level of the government.

Posted by: Al on October 29, 2007 at 7:54 PM | PERMALINK

"Why this magical 90%?"

He's quite clear about it. The number is the %age of total payroll in the economy subject to FICA. It has nothing to do, per se, with anyone's salary. According to the 2007 report, that # has dropped to around 83% or so for the last 5 years.

That same report shows why Medicare is the program that needs to be discussed. Under the middle case, 2% of GDP (around 12% of government revenue today, 10% historically) is needed to fund the SS gap. Medicare climbs within the next 40 years to 18% of GDP or essentially all government revenue.

Extra taxes? You're going to need a bigger boat.

Posted by: TJM on October 29, 2007 at 7:56 PM | PERMALINK

"That same report shows why Medicare is the program that needs to be discussed"

Yup, which is why alarm bells should always go off when someone dishonestly talks about a "Medicare and Social Security crisis" or when they try to bring Medicare into a discussion of Social Security, as our dear friend faux-liberal does above.

Posted by: PaulB on October 29, 2007 at 8:05 PM | PERMALINK

[Quoting me] "If all three were implemented in 2009, just how far past 2017 would we go before Social Security outlays begin to exceed its own revenue stream and starts dipping into the general revenue?"

"That's an irrelevant question. The money was borrowed for the general revenue fund; it will have to be paid back from the general revenue fund. That has nothing to do with the long-term funding for Social Securitity."
__________________________

I don't see how that is an irrelevant question, Paul. As you say, the money will have to come from the general revenue fund. That puts Congress in a box: fulfill the SS promises, cut spending elsewhere, or raise more revenue. TANSTAAFL.

At that point, Social Security becomes part of a unitary budgetary problem, not something that stands on its own. Worrisome.

Posted by: trashhauler on October 29, 2007 at 9:41 PM | PERMALINK

What trashcan is ignoring is that it isn't a Unified Budget problem, it isn't a Social Security problem, it is purely a General Fund problem. And it is only a General Fund problem because a class of morons has insisted on borrowing the money to pay for lower taxes on the wealthy.

Posted by: heavy on October 29, 2007 at 9:51 PM | PERMALINK

trashhauler:As you say, the money will have to come from the general revenue fund. That puts Congress in a box: fulfill the SS promises, cut spending elsewhere, or raise more revenue. TANSTAAFL.

Would that the administration had learned the lessons LBJ taught. Where exactly do you think the money is coming from to finance GwB? You want to base an argument against Social Security? Then use something other than Congress is in a box. The Congress, run by the same party from 1994 to 2006 didn't seem to have any qualms about tax cuts (thank you very much) and an utterly stupid war.

The Social Security system, through the FICA tax is much more likely to be self-funded than Iraq was dreamt to be. You do realize, don't you, that one argument was the war will pay for itself from oil revenues. Yet here we are at $94/bbl oil and the Iraqcle debacle is costing billions per week.

Shame on you, sir, shame on you. Not that that will have any effect.

Posted by: TJM on October 29, 2007 at 10:10 PM | PERMALINK

There is something more than a little unseemly about those whiners who complain that - Social Security will someday stop being a slush fund for tax cuts and that those who have long reaped the rewards of that low interest loan will have to start paying it back.

By 2017 the Trust Fund will have been in surplus for more than 30 years. There is no reason why it shouldn't be allowed to spend 30 years after exhaustion borrowing from the General Fund. Fair is fair.

Posted by: heavy on October 29, 2007 at 10:23 PM | PERMALINK

"You want to base an argument against Social Security? Then use something other than Congress is in a box."
________________________

No, I don't want to make an argument against Social Security. I want to receive it in a few years. That still doesn't take Congress out of that box they've been building for decades.

Posted by: trashhauler on October 29, 2007 at 10:48 PM | PERMALINK

trashcan, do you really not understand that Social Security isn't a problem? Do you really think that raising taxes on those who have spent three decades sucking at the government teat at the expense of the working class is a problem?

There is no Social Security problem. There is only a problem that people like you want to let the rich be deadbeats.

Posted by: heavy on October 29, 2007 at 11:13 PM | PERMALINK

By the way, trashcan, given your apparent inability to understand debt, can I borrow about $10,000 from you? I'm sure you will understand why it's your problem if I choose to spend the money on things I want and simply ignore your desire to get any of it back.

Posted by: heavy on October 29, 2007 at 11:34 PM | PERMALINK

"He's quite clear about it. The number is the %age of total payroll in the economy subject to FICA. "

Obviously. The payroll that isn't subject to FICA is basically the payroll over 90-whatever thousand dollars a year. So he wants to up it to, I suppose, $125k or whatever it takes to get another 7% of total income. Why not make it 100% and lower the rate if that is too much money? It is completely arbitrary. This guy claims to be looking for some more money, and to be worried about regressivity but for some reason he wants to stop the fica taxes so the top 10% of income isn't taxed, but then he has this boneheaded idea to dedicate the estate tax to social security under the misguided idea that it matters at all which particular taxes go to which particular spending. It's a meaningless distinction. That estate tax money isn't sitting around now, it's being spent. An accounting gimmick like claiming it goes to some particular program doesn't generate any new revenue. Hey, I have a better idea, lets use the payroll taxes from the bottom half of earners for general revenue, then use however much of the income tax from the top earners we need to fund social security so we can claim social security taxes are massively progressive! We can just ignore the fact that we didn't actually change the tax system at all, and everyone is paying just what they were before, and social security still works exactly the same. Even better lets write the law so that whenever a person it talking about any particular program or group of programs the source of funding for that program in the context of any such conversation is structured as I described above. That way all programs can be, in a stupid technical sense, claimed to be funded very progressively.

This 90% limit is arbitrary (though better than what we have today), the stock market idea is unwise, and the estate tax idea is meaningless wordplay.

These three items are his best idea for fixing social security? AND he thinks they are "desirable in any case"? 20% of SS should go into the stock market even if we didn't need a bit of extra revenue for it? The estate tax should be dedicated to SS even if we didn't need more money? 90% of income should go to it whether we need 90%, more, or less? Really?

Posted by: jefff on October 30, 2007 at 3:03 AM | PERMALINK

The positions on this are confusing because they're not really rational, they're political - and in the case of the real partisans (on the right, of course), clearly irrational.

Posted by: jerry on October 30, 2007 at 7:28 AM | PERMALINK

The majority of those who believe the propaganda against SS are not very bright.

Posted by: Defender on October 30, 2007 at 8:48 AM | PERMALINK

Well Jerry if those supposed conservatives were rational they'd be progressives.

The amount of unadulterated bull shit being spread here by some people is amazing.Perhaps a short history lesson would be helpfull for those that don't understand why we have social security.

Posted by: Gandalf on October 30, 2007 at 8:55 AM | PERMALINK

The majority of those who believe the propaganda against SS are not very bright.

Or not very honest, or both. I'd say the same for anyone who uses the phrase "death tax" as if they were making some kind of point. A franker admission that the GOP can't sell its policy honestly rarely comes along.

Posted by: Gregory on October 30, 2007 at 9:12 AM | PERMALINK
In 40 years, the pig will be through the python. In other words, in 40 years most boomers will be dead. After that, SS enters a period where there are more people paying into the system than receiving benefits.

That's simply not true. Yes, most of the boomers will be dead in 40 years, but life expectancy will continue to rise and the fertility rate will continue to be low. The problem of not having enough workers to cover the benefits paid out will continue forever until we raise the retirement age. The system goes out of whack by about 2030, when there are only 2.2 contributing workers per beneficiary. Then it stays out of whack beyond the end of the projection, ending with only 1.9 workers per beneficiary in 2085.

To put it back in balance, the retirement age HAS to go up. Don't forget that we also have to deal with (more pressing) financial problems in Medicare and health care in general at the same time as Social Security, so raising taxes to cover SS needs will be difficult. Plus, we have to pay interest on Bush's war debts.

Posted by: JoeBob on October 30, 2007 at 9:27 AM | PERMALINK

heavy wrote:

"trashcan, do you really not understand that Social Security isn't a problem? Do you really think that raising taxes on those who have spent three decades sucking at the government teat at the expense of the working class is a problem?"
_______________________

Ah, I begin to see. Social Security is "not a problem" because we can always raise taxes on the rich, however they might be defined. All well and good, I suppose, but don't you have a slight targeting problem? The people for whom taxes will be raised aren't going to be those "who have spent three decades sucking at the government teat." (And, barring those who have lived in some parallel universe in which they received nothing from the government, we've all sucked at those teats together.) Instead, it's going to be our children and grandchildren who will pay the freight.

They might differ with you on whether that will be a problem or not.

Posted by: trashhauler on October 30, 2007 at 1:37 PM | PERMALINK

"Social Security is 'not a problem' because we can always raise taxes on the rich, however they might be defined."

No, idiot. Social is "not a problem" because a) the odds are quite good that we have no shortfall at all and don't need to do a damn thing, and b) if we do need to act, we have decades to do so and can easily fix any shortfall by a simple tweak of the system. By any meaningful definition of those words, that is, in fact, "not a problem."

Posted by: PaulB on October 30, 2007 at 4:36 PM | PERMALINK

"I don't see how that is an irrelevant question, Paul."

LOL... Of course you don't. Or, rather, you know precisely why I said what I did, but you want to play silly games rather than debate this seriously.

"As you say, the money will have to come from the general revenue fund."

No shit, Sherlock. The money was borrowed for the fund; it will have to be paid back from the fund. This is true regardless of where that money came from.

"That puts Congress in a box: fulfill the SS promises, cut spending elsewhere, or raise more revenue. TANSTAAFL."

Sorry, but you're comparing apples to oranges, as you well know, which means that you're simply being dishonest. The problem with the general fund has not one damn thing to do with Social Security. The money was borrowed; it will have to be paid back. How Congress chooses to do this also has not one damn thing to do with Social Security. You are trying to pretend that a general fund budget issue is really a Social Security "problem." It isn't, and no amount of handwaving can make it so.

"At that point, Social Security becomes part of a unitary budgetary problem."

Complete bullshit. We will have a budget problem; that budget problem has not one damn thing to do with Social Security.

"not something that stands on its own. Worrisome."

Only if you're dishonest, or an idiot. Take your pick.

Posted by: PaulB on October 30, 2007 at 4:47 PM | PERMALINK

"Sorry, but you're comparing apples to oranges, as you well know, which means that you're simply being dishonest. The problem with the general fund has not one damn thing to do with Social Security. The money was borrowed; it will have to be paid back. How Congress chooses to do this also has not one damn thing to do with Social Security."
______________________

Yes, Paul, your favorite tactic: Accuse the questioner of dishonesty, firmly placing yourself by comparison on the side of the angels. Then claim that what the questioner sees as a problem to be no problem at all. Mix in unnecessary hostility and insults throughout. Sweet.

How Congress decides to raise the money is exactly what's problematical. Unless, of course, you imagine the money is going to come from pixie dust, it will either on top of, or at the expense of, other priorities. Only someone who has no idea of how government programs are funded would say that's not a problem.

Posted by: Trashhauler on October 30, 2007 at 5:38 PM | PERMALINK

"Yes, Paul, your favorite tactic: Accuse the questioner of dishonesty"

LOL.... No, dear, it isn't; my favorite tactic is to point out that the poster is a moron. I'm doing you the favor of assuming that you're reasonably intelligent. Of course, if you want to argue this point, by all means, be my guest.

"Then claim that what the questioner sees as a problem to be no problem at all."

ROFL.... You do have trouble reading, don't you, dear? I said that we don't have a Social Security problem; I didn't say that we don't have a problem. In fact, I quite plainly said that we did have a problem -- a general budget problem.

"Mix in unnecessary hostility and insults throughout. Sweet."

Dear heart, I use language appropriate to the argument and the arguer. Someone who makes such a patently dishonest and idiotic argument doesn't warrant polite treatment.

"How Congress decides to raise the money is exactly what's problematical."

Of course, but that has nothing to do with Social Security.

"Unless, of course, you imagine the money is going to come from pixie dust, it will either on top of, or at the expense of, other priorities."

Which has nothing to do with Social Security, which is funded with its own revenue stream.

"Only someone who has no idea of how government programs are funded would say that's not a problem."

Only someone who is an idiot or a liar would say that is a Social Security problem. As I said, take your pick.

Posted by: PaulB on October 30, 2007 at 6:16 PM | PERMALINK

Where did my last comment go? I was in the middle of it and it vanished! Whatever.
My point is that "fixes" to the SS system generally only add debt, as any increase in the surplus to the SS Trust Fund is simply spent by Congress and replaced by IOUs in the Trust Fund. Hillary has been right so far in telling us that the long-term solution to the SS system is increased fiscal responsibility and performance by the federal government. Don't be tricked by a promise of easy solutions. The System is not broken, it's just that the bank account that is supposed to hold the reserve funds has been looted by our federal government. That needs to get fixed!

Posted by: George Fulmore on October 30, 2007 at 6:19 PM | PERMALINK

"LOL.... No, dear, it isn't; my favorite tactic is to point out that the poster is a moron."
________________-

Double sweet! Now we come to Paul's other trick, which is to use inappropriate expessions of endearments in an effort to sound cleverly lighthearted and, oh, so controlled. In this way, he covers the fact that he's still frothing at the mouth with anger. Or perhaps we should consider...bipolar?

_______________________

"I said that we don't have a Social Security problem; I didn't say that we don't have a problem. In fact, I quite plainly said that we did have a problem -- a general budget problem."
_______________________

Neat. Ignoring for the moment that we've said essentially the same thing and you're doing this just to get your daily adrenalin rush, let's see if I've got you right. Social Security doesn't have a problem, even though it will soon have to rely on the general revenue fund at least partially. But that's not a Social Security problem, it's a budget problem. Geez, sorry, I must have confused Social Security with some other program that will still need to acquire revenue and dispense it.

Most program managers consider their revenue streams to be an essential part of the program, Paul. And any potential hindrance to that revenue stream is a problem. But not you, because - all together now - "Social Security does not have a problem. It can't because, well, because it's Social Security!"

Can you say, tautology, Paul? Print it on a yellow stickee and slap it up there where you keep the hundreds of other important things you try to remember each day. Like the one that reminds you to take your meds.


Posted by: trashhauler on October 30, 2007 at 8:05 PM | PERMALINK

"Double sweet! Now we come to Paul's other trick, which is to use inappropriate expessions of endearments in an effort to sound cleverly lighthearted and, oh, so controlled.."

No, dear, it's called mockery and trolling. I do this when I'm engaging someone who is unable to make a valid argument, or who fails to employ logic, reason, or any real data to support their assertions. Both of these apply in your case, of course.

"In this way, he covers the fact that he's still frothing at the mouth with anger."

ROFLMAO.... Dear heart, for me to be angry with what an anonymous blog poster writes, I'd first have to care. Alas, I don't, which is why I can have a great deal of fun instead.

"Social Security doesn't have a problem"

Correct. Nor have you provided even one iota of evidence that it does.

"even though it will soon have to rely on the general revenue fund at least partially."

No, dear, it will not be "rely[ing] on the general fund." The general fund has been borrowing money that will need to be paid back. We borrowed money from Chinese banks. Do we have a "Chinese banks problem?" We borrowed money from wealthy U.S. investors. Do we have a "wealthy U.S. investors problem?" Of course not. We have a general revenue shortfall, a budget deficit. That will have to be paid back through the usual means -- cutting spending or raising taxes. None of this has a damn thing to do with Social Security, as you well know.

"Geez, sorry, I must have confused Social Security with some other program that will still need to acquire revenue and dispense it."

ROFL.... Yes, dear, you did. Social Security has its own revenue stream, a revenue stream that is adequate for its needs for at least the next 30-40 years, depending on whose estimates you believe. And, using the estimate that has historically been more accurate, it is funded into perpetuity without any trouble at all.

"And any potential hindrance to that revenue stream is a problem."

Since you have yet to identify a problem with the Social Security revenue stream, forgive me if I ignore this as the bullshit that it is.

The rest of your little diatribe was hilarious, but hardly worth the trouble to respond to. Do try to do better, won't you, dear?

Posted by: PaulB on October 31, 2007 at 11:40 AM | PERMALINK

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