Bacon's Rebellion

Democracy Thrives in Sunlight

Happy Birthday, Social Security!

—

by

James A. Bacon
in


B

aconauts and Boomergeddons are something of a cult. They have their own leader, their own religion, their own pecking order and at times, their own Kool-Aid. Since it is a somnambulent August Monday morning, here are a few things to wake you up.

Happy Birthday, Social Security!
That’s right! The federal program that has proven funding and comfort for millions of Americans in their old age is 75 today. Conservatives of all stripes HATE SS because it shows that the government can do some good. And plenty have fought Social Security through the decades, including my late grandfather, who was a minor Republican official and absolutely despised FDR. The program is so electrified with conflict that it has been called a “third rail”
in politics.
Now comes Paul Krugman, one of my favorite economist-columnists and I am sure, one of yours, too, with his assessment about the lies being spread about Social Security. I am trotting out the Nobel Prize winner because he raises points that, if true, kinda turn the “Boomergeddon” thesis upside down. His points:
  • Costs of Social Security are not unsupportable by the federal budget. SS has its own budget.
  • “The program won’t have to turn to Congress for help or cut benefits, which the program’s actuaries don’t expect to happen under 2037 — and there’s a significant chance, according to their estimates, that that day will never come,” write Krugman.
  • While it is true that a lot of Boomers will be applying for SS in the near future, “Boomergeddon” might be slight exaggeration. Krugman says they will increase payouts from 4.8 percent of GDP to 6 percent of GDP. How much is that, in plain terms? Krugman says it is significantly LESS than the rise in post 9/11 defense spending which was considered such a non-crisis financially that Bush was able to go ahead with his tax cuts for the rich.

If I were Jim Bacon, I might be calling my publisher right now.

Of, any by the way, on another federal spending riff, check out Page A6 of the Wall Street Journal. There’s a page-long graphic showing just how little of Obama’s stimulus has actually been spent. Let’s see, only 15 percent of energy funds have been spent, only 23 percent of health and human service funds are gone, and only 35 percent of transportation infrastructure funds have been spent. The largest category is justice with half funds gone.
And we’re facing a budgetary crisis of Biblical proportions?
Maybe we should hit the “reset” Buttons. To Baconauts, I say, “Harroog, Harauga!” To EMR, I say, “Listen to this! (chuck, thud, chuck, thud).”
Peter Galuszka

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25 responses to “Happy Birthday, Social Security!”

  1. Groveton Avatar
    Groveton

    So, the gang who declared this "Recovery Summer" just a few months ago now want us to believe their crystal ball out to 2037?

    Someone will have to help me understand the Social Security Trust Fund.

    I have a trust fund established for my children's education. The money has been separated from my other accounts and placed into an account of its own. It is invested in generally safe, short term investments. It can only be spent on the direct, educational costs of my children. Every month I get a statement for the account which I use to re-calculate the adequacy of the funds.

    If all of my children simultaneously declared they would not be seeking higher education, I could liquidate the educational trust, pay taxes on the investment profits and spend the money to buy a boat or something.

    Is that how the Social Security Trust Fund works?

  2. Larry G Avatar
    Larry G

    re: "the gang" ?

    WTF

    we're talking about 75 years verses the last 18 months of this administration.

    So, no matter what the subject or the length of time a program has been in effect – it's this 18 month administration that has screwed it up?

    Pray tell, tell me what exactly this particular administration has done – different from prior administrations with regard to Social Security?

    Have they changed it?

    Have they done anything different with regard to the trust fund in prior administrations.

    The trust fund – by the way IS separate …….

    otherwise why would this report exist:

    " Status of the Social Security and Medicare Programs"

    " Each year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs. This message summarizes our 2010 Annual Reports."

    http://www.ssa.gov/OACT/TRSUM/index.html

    " On August 5, the Social Security Board of Trustees issued the 70th annual report on the program’s financial and actuarial status. [1] The trustees’ report shows some mild deterioration in the program’s short-term outlook — a finding that was widely expected — and a mild improvement in its long-run finances, thanks largely to the recent enactment of health reform.
    Several key points emerge from the new report:
    The trustees continue to estimate that the trust funds will be exhausted in 2037— the same date that they forecast in last year’s report.
    Even after 2037, Social Security could pay more than three-fourths of scheduled benefits using its annual tax income. Those who fear that Social Security won’t be around when today’s young workers retire misunderstand the trustees’ projections.
    The program’s shortfall is relatively modest, amounting to 0.7 percent of Gross Domestic Product (GDP) over the next 75 years (and 1.4 percent of GDP in 2084). A mix of tax increases and benefit modifications — carefully crafted to shield recipients of limited means, potentially make benefits more adequate for the neediest beneficiaries, and give ample notice to all participants — could put the program on a sound footing indefinitely.
    The 75-year Social Security shortfall is about the same size as the cost, over that period, of extending the 2001 and 2003 tax cuts for the richest 2 percent of Americans (those with incomes above $250,000 a year). Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat.
    Preserving and building upon the cost-control measures enacted in the health reform law will be important not only to Medicare, but — to a lesser degree — to Social Security as well."

    http://www.cbpp.org/cms/index.cfm?fa=view&id=3262&emailView=1

    so my question is this:

    Is there really no fund and these guys are issuing false reports ..and lying?

    Provide some proof that they are lying if you think so.

    Bonus Question: If you think these guys are lying.. did they just start doing it in the last 18 months?

  3. James A. Bacon Avatar
    James A. Bacon

    Let's take Peter's substantive points one by one:

    Costs of Social Security are not unsupportable by the federal budget. SS has its own budget.

    Yes, Social Security has its own budget and its own income stream. But the Social Security trustees report that the income stream will pay for scheduled benefits only through 2037, at which point the Social Security trust fund runs out. Then, lacking legislative action, payroll taxes will suffice to cover only 75% of scheduled benefits.

    "The program won't have to turn to Congress for help or cut benefits, which the program's actuaries don't expect to happen under 2037 — and there's a significant chance, according to their estimates, that that day will never come," writes Krugman.

    I'm not sure which planet Krugman is living on. The Social Security trustees, whose ranks are dominated by Obama administration cabinet members, say that under the most likely scenario, the trust fund WILL run out. Prolonged unemployment may hasten that date by lessening the revenues generated by payroll taxes. Clearly, the program needs a legislative fix.

    Krugman says [Social Security payouts] will increase payouts from 4.8 percent of GDP to 6 percent of GDP. How much is that, in plain terms? Krugman says it is significantly LESS than the rise in post 9/11 defense spending which was considered such a non-crisis financially that Bush was able to go ahead with his tax cuts for the rich.

    This is true as far as it goes, but it doesn't go very far. As I explain in "Boomergeddon," it will be fairly easy to put Social Security on an actuarially sound basis. Small increases to payroll taxes. Increase the retirement age a little. Tweak the formulas for increasing Social Security payouts over the years. Spread the pain so thin that no one really feels it. That much can be done (if partisan politics don't get in the way).

    But that's not the problem. Groveton identified the real problem. Social Security has built up a "trust fund" of $2.5 trillion, which is expected to reach $4.3 trillion at its peak. But what are the assets in the trust fund? Stocks? Corporate bonds? Real estate? The kinds of assets that pension funds have?

    No, the assets consist of U.S. Treasury Department IOUs. When Social Security begins drawing down that trust fund around 2025, the Treasury Department will have to start forking over hundreds of billions of dollars a year. But Treasury has no assets of its own. It will have to enter the marketplace to borrow the money, which in turn it will turn over to Social Security.

    Therefore, scheduled Social Security payments will be paid only as long as the Treasury Department is good for the money. As I argue in Boomergeddon, the feds will go into default on its debt between 2025 and 2030. When that happens, good luck collecting your full Social Security check.

  4. James A. Bacon Avatar
    James A. Bacon

    Let's take Peter's substantive points one by one:

    Costs of Social Security are not unsupportable by the federal budget. SS has its own budget.

    Yes, Social Security has its own budget and its own income stream. But the Social Security trustees report that the income stream will pay for scheduled benefits only through 2037, at which point the Social Security trust fund runs out. Then, lacking legislative action, payroll taxes will suffice to cover only 75% of scheduled benefits.

    "The program won't have to turn to Congress for help or cut benefits, which the program's actuaries don't expect to happen under 2037 — and there's a significant chance, according to their estimates, that that day will never come," writes Krugman.

    I'm not sure which planet Krugman is living on. The Social Security trustees, whose ranks are dominated by Obama administration cabinet members, say that under the most likely scenario, the trust fund WILL run out. Prolonged unemployment may hasten that date by lessening the revenues generated by payroll taxes. Clearly, the program needs a legislative fix.

    Krugman says [Social Security payouts] will increase payouts from 4.8 percent of GDP to 6 percent of GDP. How much is that, in plain terms? Krugman says it is significantly LESS than the rise in post 9/11 defense spending which was considered such a non-crisis financially that Bush was able to go ahead with his tax cuts for the rich.

    This is true as far as it goes, but it doesn't go very far. As I explain in "Boomergeddon," it will be fairly easy to put Social Security on an actuarially sound basis. Small increases to payroll taxes. Increase the retirement age a little. Tweak the formulas for increasing Social Security payouts over the years. Spread the pain so thin that no one really feels it. That much can be done (if partisan politics don't get in the way).

    But that's not the problem. Groveton identified the real problem. Social Security has built up a "trust fund" of $2.5 trillion, which is expected to reach $4.3 trillion at its peak. But what are the assets in the trust fund? Stocks? Corporate bonds? Real estate? The kinds of assets that pension funds have?

    No, the assets consist of U.S. Treasury Department IOUs. When Social Security begins drawing down that trust fund around 2025, the Treasury Department will have to start forking over hundreds of billions of dollars a year. But Treasury has no assets of its own. It will have to enter the marketplace to borrow the money, which in turn it will turn over to Social Security.

    Therefore, scheduled Social Security payments will be paid only as long as the Treasury Department is good for the money. As I argue in Boomergeddon, the feds will go into default on its debt between 2025 and 2030. When that happens, good luck collecting your full Social Security check.

  5. Groveton Avatar
    Groveton

    LarryG – Please read what I write before you assualt the keyboard.

    The question is whether the trust fund is viable or not. Krugman thinks it's just fine. Krugman is one of "the gang". He and the rest if "the gang" see no reason to change social security because they think everything is "hunky – dorey".

    This is the same gang who proclaimed this summer to be "recovery summer" back in the spring. This has been a long way from "recovery summer" as it turns out. Maybe "the dog days of double dip" would have been a better term.

    The same prognosticators who gave us "recovery summer" are now giving us "trust the trust fund".

    This has no more to do with Obama screwing up Social Security than a stcok analyst who says, "sell XYZ". It is a forecast of the future. Krugman's forcast is rosy, mine less so. Only Krugman, et al have recently cast doubt on their ability to predict things with "recovery summer".

    Most Republicans and some Democrats want to limit the future payouts of Social Security because they doubt the financial quality of the so-called trust fund. I think they are right and would guess that Jim Bacon will agree when I read his book this weekend.

  6. Hydra Avatar
    Hydra

    I think we can agree that in the long run the trust fund is not viable. however, as Larry pointed out, the long run started a while ago so there is planty of room to spread the blame for our currently projected problems.

    Just because the system is not viable now does not mean that the idea isn't a good one. The facts on the ground today are a lot different than when the system was started, and the sytem has not yet adapted to the new environment.

    Like any oter creature it will adapt or perish, so the questionis whether we will allow a funddamentally sound idea to expire.

    If we can agree it is fundamentally sound. some will argue that anyone can do better investing on their own than investing in the SS system. There are two problems with that argument. Any individual COULD do better, but the issue is whether many, many individuals WILL do better, and we know that the unfortunate answer to that is, no they won't.

    Even for those to do manage to save and outperform SS, they are able to do so because the SS safeety net allows them to take more risk than otherwise. Without SS much more investment would be in more conservative holdings and it would be harder to outperform SS.

    We may need luck in collecting our full promised SS check, but we will need a lot mroe collective luch in the market.

  7. Larry G Avatar
    Larry G

    who are the social security trustees and how or why are they different than prior administration appointees?

    re: is social security "viable"

    take ANY pension plan .. or ANY many medical insurance plan and project it ahead to 2037 and judge it the same way that ya'll judge SS.

    won't you find that virtually any kind of actuarial analysis that goes out to 2037 might conclude that without some kind of changes, it may not be viable?

    but more than this – saying that SS will be "broke" and unable to pay benefits in the future – is what?

    the actuarials say they will pay 78%.

    that's not "no benefits".

    do we know that because of boomer demographics that how we do SS will have to change if we want to not let benefits drop to 78%?

    What I am pointing out here is that we have a number of years to make corrections if we so decide to do it

    and promoting it as SS going bust because it is not sustainable is no more correct than saying that Anthem will go broke in 2037 if they continue on the track they are on now.

    And finally, none of this has anything at all to do with various commentators including Krugman who admittedly has his own spin on it that is opposite from the gloom & doom spinmeisters.

    implying that the SS trustees are lying Democratic partisans … for the last 18 months I presume while ignoring all the other trustees for the 70+ years is what kind of an honest depiction of the facts?

    NOT!

    Are SS trustees suddenly liars because they were appointed by Obama?

    They do an annual report you know… 70 years worth – long before Obama was born.

    Were they liars before Obama?

  8. Larry G Avatar
    Larry G

    re: " Most Republicans and some Democrats want to limit the future payouts of Social Security because they doubt the financial quality of the so-called trust fund."

    why would they "doubt" any more or any less this fund than any other fund?

    75 years is a long time for any fund to perform pretty much like it was expected to and is projected to go another 25 years – and even without adjustments projected to pay out 78%.

    Why would anyone expect any fund to go for 25 years without midstream adjustments anyhow?

    All you need to do to preserve SS is to index the retirement age to average life expectancy.

    We made the same mistake with SS that we did with the gas tax an that was we assumed static demographics and inflation.

    If we start right now and index SS in stages … increase the retirement age by one year – every five years until 25 years from now – it is 70 – what happens?

    Why would anyone advocate getting rid of SS BEFORE you at least do the analyses to determine what might be done to have it not get to 78% payout in 25 years?

    Why abandon it without at least looking into what might be done?

    Two words – Partisan Politics

    that are driven by those who are fundamentally opposed to the CONCEPT of SS – from the get go – as a govt retirement insurance plan – on of the most successful in world to provide a safety net to seniors.

    SS is a forced savings plan folks..

    and we have it because the folks who would not save for their retirement would come back to us when they are old and broke and beg for help from the govt – and we'd give it to them – like we do right now with Medicare and EMTALA.

    All SS is – is a plan to tell people that they WILL put aside SOMETHING for their retirement because we know if we don't force them to – they won't.

    Go back and see why SS was "invented" to start with.

    Do you REALLY want people in their 70's living on park benches and dying on the steps of ERs?

    Because in the end – that's what you're saying if you don't think the govt should be doing SS and Medicare.

    that's the basic truth.

    how do you want to handle people who won't prepare for their future and then when they are old and broke expect you to take care of them?

    what is your plan for this that does not involve the govt?

  9. Larry G Avatar
    Larry G

    the SS "revenue stream" and the SS fund "going broke"

    let's cut to the chase.

    SS is not some giant fixed fund that we take money out of to pay the recipients – and every day there is less and less money in it because no new money is coming in – and soon there will be none.

    Nothing could be further from the truth – that's why is often implied.

    And it is a total fiction, yet this is how the issue is usually framed by those who are opposed to SS in concept.

    The truth is this:

    Every day – across the county, part of a persons pay is sent to an corporate account called FICA.

    Once a quarter (usually), the business has to write a check in that amount and send it to SS.

    and every day – actual real money is moved from corporate FICA accounts to the Social Security administration who actually banks the money and writes checks against it that they send out to people who will actually cash those checks – and they do not "bounce" when they do.

    SS is not currently "broke" (it actually has a surplus) and it won't be broke 10, 20, 30 , 40 years from now.

    What will happen in 25 years if we DO NOTHING – is the amount of money the checks are written for will have to be reduced to 78% of what they were scheduled to pay so that the total amount of checks written do not exceed the total amount of FICA payments that fund the checks.

    Why is it important to cite the specifics?

    Well because we have no shortage of sound-bite believing yahoos "out there" that when you tell them SS is "broke", that they'll swallow it hook, line and sinker without once sitting down for a minute and going through how SS and FICA actually do work.

    So when the folks who are fundamentally opposed to the CONCEPT of SS to start with – claim that today's young people won't get SS because it will be broke –

    not only do these young folks believe it but so do their dads who are probably receiving SS or will shortly.

    We can never get to the point of discussing what might be done to prevent SS from degrading over the next 25 years to a 78% payout because we already assume SS is dead an we might as well abandon it.

    this is what passes for "thinking" now days.. and what passes for 'commentary' by some who lean or lurch to the right.

    We don't have informed substantiative conversations about issues like this any more.

    we have sound-bite food fights egged on by so-called "commentators" who "spin" what amount to – clever lies that have little to know with the actual realities.

    and yet, it works.

    half the population or more does not understand the simple idea that FICA is money going into the system – every day an that the SSA folks write legal and valid checks against that money and that they are no more "broke" than the man in the moon and that the money is NOT being "diverted".

    The only semblance of "truth" in any of this is the fact that Congress (long before Obama showed up) has traditionally counted the SS trust fund as a govt asset to be use to make the deficit sound less than it actually is.

    Even Clinton did this.

    If we had disallowed the counting of SS as a general fund asset would the Clinton "surplus" still had registered as a "surplus"?

  10. Hydra Avatar
    Hydra

    "We made the same mistake with SS that we did with the gas tax an that was we assumed static demographics and inflation."

    =================================

    AHA, you finally admit the problem withthe gas tax: it ahasn't been raised sufficiently.

  11. Larry G Avatar
    Larry G

    " AHA, you finally admit the problem withthe gas tax: it ahasn't been raised sufficiently."

    some states have indexed their gas taxes. Even those states still have funding issues because at the core of it issue – the gas tax worked best when gasoline was cheap an cars got crappy mileage..

    Indexing would have helped but not been sufficient to deal with the other part – the "demographics".

    SS to it's credit has dealt successfully with inflation but insufficiently with the demographics.

    75 years ago.. the life expectancy was likely 5 years less than now but even more important was the number of people paying into SS verses the numbers receiving benefits.

    Ironically – the auto companies in the US ran into the same problem – when their retirees started living longer and there became more retirees than active workers paying into the pension/medical plans.

  12. Larry G Avatar
    Larry G

    " AHA, you finally admit the problem withthe gas tax: it ahasn't been raised sufficiently."

    some states have indexed their gas taxes. Even those states still have funding issues because at the core of it issue – the gas tax worked best when gasoline was cheap an cars got crappy mileage..

    Indexing would have helped but not been sufficient to deal with the other part – the "demographics".

    SS to it's credit has dealt successfully with inflation but insufficiently with the demographics.

    75 years ago.. the life expectancy was likely 5 years less than now but even more important was the number of people paying into SS verses the numbers receiving benefits.

    Ironically – the auto companies in the US ran into the same problem – when their retirees started living longer and there became more retirees than active workers paying into the pension/medical plans.

  13. James V Avatar
    James V

    Sorry to hear that Peter Galuszka relies heavily on what Paul Krugman writes. Notwithstanding his Nobel Prize, in the last few years Dr. Krugman has been caught in numerous misstatements, distortions and outright falsehoods. Several years ago, Dr. Krugman apparently decided that being a hardcore political partisan was a better role than to be an economist who is persuaded both by evidence and theory. Alas, today one really has to check up on what he writes these days because he no longer is a reliable source. I suspect that his social security ramblings fall into the category of "not really true, but I wish it were true."

    James V. Koch

  14. Larry G Avatar
    Larry G

    I would agree – that Krugman has become partisan – without question. one more casualty in the partisan firestorm that is consuming the country.

    I admit that not even I read his words without some suspicion.

    But at the same time – we also have no shortage of people who have no problem portraying SS as "broke" no matter the truth.

    Oh.. and the "truth" another untidy concept these days…

    The SS trustees deliver a report each year – for the last 70 years but NOW – THIS YEAR – something that has never happened in the prior 70 years – THEY LIE!

    That's right.

    No trustees had previously been accused the trustees of lying in prior administrations because they were Bush or Clinton appointees or Bush I or Carter or Reagan appointees – nope.

    But now – after 70 years of issuing reports through both Republican and Democratic Administrations – they NOW lie because of this particular President.

    so, no – we can no longer trust the annual reports ….. that say

    that the SS fund is NOT BROKE

    and will never be broke but instead will have to cut benefits to match it's revenues, to 78% of what is currently scheduled in 2037.

    Nope.

    this is a lie.

    we know this because conservative commentators like Hannity and Limbaugh have told us the "real" truth.

    and they have also told us that any appointee of Obama is a lying sack of donkey-dung.

    so the whole SS thing is yet another massive conspiracy to make us believe that it's not actually going broke like the conservatives say it is….

    if you think this is a tad bit nutty… whacky…. wow… you really think so?

    sorry I got a bit wound up today…

    and sorry if I insulted anyone including Jim B.

  15. James A. Bacon Avatar
    James A. Bacon

    Larry, You didn't insult me. I never said the Obama administration lied. I think the Obamanauts have injected some wishful thinking into their long-term forecasts for Social Security — Social Security's own actuary disowns key statements made by the trustees — but *every* administration engages in wishful thinking. (George W. Bush's certainly did.) That doesn't mean they are deliberately lying.

  16. Gooze Views Avatar
    Gooze Views

    Dr. Koch,
    So what is Paul Krugman has a point of view? Are you saying that all of the economists who write tomes for the Amerian Enteprise or Cato Institutes do not have a point of view?
    Or take yourself. As former president of ODU, you wrote a paper that offshore oil drilling would be just great for Virginia. When Robert McDonnell picked it up and touted it, you quickly backed away from it.
    Now tell me, with Deepwater Horizon in mind, would offshore oil be great for Virginia?
    Or are you an economist who doesn't have a point of view?

    Peter Galuszka

  17. Larry G Avatar
    Larry G

    If they engaged in wishful thinking though – one would think that the reports would vary from year to year in dramatic ways and as far as I know – they do not.

    The general projections about what happens to SS in the future have been consistent.

    What has varied is the length of time ….for instance 2037 verses other time frames – and what the percentage of payout would be if no action is taken – 78% in this report.

    This is more about the inherent variances in actuarials than wishful thinking in my view.

    but the "you LIE" idea is front and center these days. No public or private institution is immune from being accused of cooking the data anymore.

    The net result of this is that more and more people simply don't believe what they disagree with – no matter who is saying it – no matter their credentials – and, in fact, will adopt the narratives they like even if those narratives are sources from college-drop-out entertainer/journalists/bloggers.

    The narrative that SS is doomed to fail is particularly pernicious and corrosive because it starts off assuming that SS will fail – no matter what we do – that's the basic concept is so flawed that it is unsustainable – and that is simply not the truth.

    ANY actuarial fund will vary significantly over decades and will require adjustments to maintain the intended goal.

    That is not a failure and not an indication that something is not sustainable.

    We could have an honest debate about the concept of SS but the folks opposed to SS don't want that debate – they, instead, are committed to a narrative that is intended to destroy trust in it and to get folks to voluntarily walk away from it – on false pretenses.

    that's the issue I have with the dialog – if ANYONE is LYING… it's those who say that SS cannot work as a concept…

    it does work and it works quite well as long as we continue the commitment to keep it actuarially healthy.

  18. Anonymous Avatar
    Anonymous

    Larry, I don't know many people who are opposed to the idea of Social Security per se. Pay something while you are working and get something when you retire, plus benefits to underage children if the working parent dies.

    FDR is to be commended for the program. But we don't have enough workers per retiree to sustain the existing system long term. Right? We can ignore the problem. We could raise taxes and cut benefits. But at what point do higher taxes become a barrier to jobs creation? At what point does Social Security become a welfare program that those on the mid-to-higher end of the income ladder stop supporting it? Or we can have some type of savings accounts for younger workers with perhaps some public, shared component for the lowest income workers.

    Every administration paints overly rosy forecasts. No one believes them any more.

    TMT

  19. Larry G Avatar
    Larry G

    TMT – SS was designed to fit the times.

    The times have changed.

    What makes the initial version of SS the only legitimate version of it?

    All plans have to adapt to the times as change occurs.

    Any financial plan that is tied to demographics – will be affect by the changing demographics… right?

    I'm not sure where the line is that says social security is not welfare and social security is welfare.

    I know that of all the industrialized countries, we appear to have the LITE version of "social" security.

    But even those countries are subjected to the same changing demographics that we are.

    The Demographics won't destroy Social Security – but they will change it – perhaps dramatically but because we decide it no longer works at all and should be abandoned, should we take a look at potential changes – like pushing the retirement age ?

    Not only for Social Security – but how about for pensions?

    In 1930, life expectancy was about 60. Now it is about 78.

    Should young people expect to work 18 more years before they retire?

    if we phased in increasing retirement age – what would it do to the 2037, 78% pay out?

    I don't see a problem with the concept of SS but I do buy the annual reports that basically have said for the last 20 years that we need to address the life expectancy issue if we are to keep SS – at 100% of scheduled pay out.

    I do not believe that SS is bankrupt or broke or no longer will provide ANY benefits at retirement – but rather …without changes.. about 3/4 benefits.

    That's a far sight from broke – and "no" benefits.

    It's not Social Security that is going to get killed by Demographics – it's health care.

    The same Demographics that affect Social Security when create a larger and larger pool of Medicare recipients and fewer and fewer people paying into Medicare.

    That's what was driving HC reform.

    As ugly and imperfect as Obama's plan turned out – it has been the ONLY true attempt to actually recognize the danger an try to do something to deal with that clear threat.

    In general… the narrative that Conservatives are pushing right not is that SS and Medicare are unsustainable and the ONLY OPTION that we really have – is to walk away from them.

    there is a wide range in between the two extremes.

  20. Anonymous Avatar
    Anonymous

    Larry says: "SS was designed to fit the times. The times have changed."

    Agreed. The program was designed for a different set of circumstances — shorter life spans & more workers per retiree. The program need not be scrapped.

    Politically, I would imagine that benefits could be capped for the very highest income people without endangering overall political support. But where do you draw the lines? Do some people pay, but receive nothing? Are they limited to the amounts paid in, plus a return for the use of their money?

    Big income redistribution plans are generally not accepted in the United States.

    TMT

  21. Larry G Avatar
    Larry G

    I think HOW they reconfigure SS is a legitimate subject of debate – as opposing to condemning it and declaring it salvageable.

    I'm not in favor of wealth transfer as the "easy" solution.

    It's a bad strategy in my view because it's politically a loser.

    And just from a personal responsibility point of view – we never want a country or any entitlement programs that encourage people to seek the entitlements rather than their own personal efforts towards more self-sufficiency.

    SS is called "insurance" and that's the way we should think of it.

    You pay into the plan with idea that it will help cover your needs in between your retirement and your death – if you find yourself on hard times and run out of resources.

    I don't think Obama's perceived vision for entitlements including SS is going to be embraced by a majority of people but I also hope that a majority of people will not buy into the hard right idea of doing away with SS and Medicare either.

    somewhere in the middle – is a range of acceptable approaches that need to be reached by consensus of a majority of folks in the middle.

    I'm not sure what that guy or gal looks like but it won't be any right side Ronald Reagan wannabies and it won't be those who seem to lean the way Obama leans.

    SS will end up the way that many current employees end up with less pay than before and they'll have to front more money for their pensions – and all of them including public sector plans should be defined contribution.

  22. Hydra Avatar
    Hydra

    "…all of them including public sector plans should be defined contribution."

    ===============================
    OK, but where do you put the contributions?

    Stock Market
    Bonds
    Money Market
    Bank
    Mattress
    Property

    If you believe the critcs of SS it has all been spent and is no in the form of government debt – government bonds if you will.

    Compared to everything else on the list, why is that such a bad place?

  23. Larry G Avatar
    Larry G

    " If you believe the critcs of SS it has all been spent and is no in the form of government debt – government bonds if you will."

    and it's a lie.

    Anyone who works – gets a pay stub and on that pay stub is a box that says FICA.

    Your employer sends REAL MONEY to the SSA folks who, as far as I know… keep it to pay bills and benefits with.

    What the FEds do is they COUNT the SSA money that remains unspent as an asset to balance their books on, i.e. make the deficit look smaller than it really is.

    …. accounting tricks….

    but the folks who say SS is "broke" are not in receipt of the facts and I strongly suspect consider that aspect merely a "nit", a mere "detail" to their bigger ideological agenda to promote the idea that govt-sponsored SS is a failure and proof that we should not be depending on SS to start with.

    it's nasty welfare, don't you know?

  24. Larry G Avatar
    Larry G

    re: " OK, but where do you put the contributions?"

    YOU… is the key word…

    IN the Fed Govt thrift plan – you can choose from about 10 different funds that ranges from Govt securities to Domestic and International Stock Market funds.

  25. Hydra Avatar
    Hydra

    Look, I'm not denying the deleterious effect of taxes on business growth, or that the effects are different short term and long. I'm not arguing against the idea that when taxes get high enough people will haveless incentive to earn.

    I'm just looking for a realistic, how-does-it work-in-the-real-world, best estimate of what teh Laffer curve might look like.

    How high do your taxes ahve to get before you say, "Screw it, this isn't worth doing, let government go earn their own money."

    I don't think that is going to happen in a business that still allows you to multiply your wealth 30x in ten years.

    I'm not fighting your answer, just trying to find one that doesn't set off the alarms.

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