if Obama’s guys have their way:
Can These Men Fix the Deficit?
Obama has appointed The National Commission on Fiscal Responsibility and Reform, a.k.a. The Social Security Commission, a.k.a. The Cat Food Commission, to solve the dire problem of Social Security going broke. Of course, the very premise of this game – that Social Security is going broke – is just crap made up by Republican lunatics. As Paul Krugman explains:
OK, the immediate problem is the statements of Alan Simpson, the commission’s co-chairman. And what got reporters’ attention was the combination of incredible insensitivity – the “lesser people”??? – and flat errors of fact.
But it’s actually much worse than that. On Social Security, Simpson is repeating a zombie lie – that is, one of those misstatements that keeps being debunked, but keeps coming back.
Specifically, Simpson has resurrected the old nonsense about how Social Security will be bankrupt as soon as payroll tax revenues fall short of benefit payments, never mind the quarter century of surpluses that came first.
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So what does it mean that the co-chair of the commission is resurrecting this zombie lie? It means that at even the most basic level of discussion, either (a) he isn’t willing to deal in good faith or (b) the zombies have eaten his brain. And in either case, there’s no point going on with this farce.
And when one starts with a (fraudulent) premise that “Social Security doesn’t have enough money”, the only way to go is to cut benefits. My favorite mealy-mouthed quote from Simpson on this:
We’re not going to cut Social Security-we’re going to stabilize it. None of the ideas that have been presented will affect anyone over age 58. But we’re going to make the system work. As it is, it can’t sustain itself.
So, if you’re 58 or under, you’re about to get screwed.
For a fun (albeit marginally-audible) video of Simpson prevaricating as fast as he can, check out:
Alan Simpson: Cutting Social Security Benefits to “Take Care of the Lesser People in Society”
In this economy, we should be expanding SS and Medicare. It would take a few million people out of the workforce permanently just a few years before they would have left anyway, and allow the rest to get jobs.
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p>The overall effect is not much different than expanding unemployment benefits for a few years, but it’s probably more politically palatable.
at least in the news and with the Tea Party crowd (which is pretty much the only crowd the news covers, sadly)… but I think you’re onto something here. That said, bear in mind it could be considered a permanent solution to a temporary problem. I’d settle for a bill that beefed up prosecution of age-based discrimination. True story: Google has 20,000 employees. Guess how many employees it has over the age of 40? If your guess is > 200, it’s wrong. No, that is not a typo.
in the sense that since folks are growing older and more importantly are staying healthy longer, raising the retirement age a smidge here and there seems reasonable to me.
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p>Thing is, it’s not about SSI being solvent. We’ve got the money — we just blow it on wars and on Bush’s tax cuts. Terminate those two things and we don’t even have a deficit.
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p>So, refine SSI to cut bennies on those under 58? Well, maybe under 50 would be a bit better. But don’t do it until you’ve done the other things to improve the solvency of our entire government, starting with the suckhole of money we call Iraq and Afghanistan, and then going ahead and letting the Bush tax cuts expire. Third? What the hell, let’s stop subsidizing the exploration, mining, drilling, and shipping of fossil fuels.
Or raising the retirement age, for that matter. But now is not the time. SS acts as a stimulus, so like any of this deficit hawk bs, it’s a bad idea right now.
How can future social security benefits “act like a stimulus”?
They’re only future benefits for young people. For someone who’s turning 67, they matter quite a bit now.
would it be okay to cut benefits in any economy? Do you really think Social Security is too generous? It does a damn good job of keeping our elderly out of poverty, but not much beyond that. Cutting Social Security benefits in any economy means more elderly living in poverty, one of two age groups in society which can least afford to live in poverty conditions, with little means of getting themselves out of it. There’s a reason why the nickname of this commission is the “cat food commission.”
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p>This is all ignoring the point that people have paid into Social Security all their working years. Suggesting it should be okay to cut their “benefits,” when they’ve paid into Social Security most of their lives, is just insulting. One could make an argument that they aren’t benefits at all… they were earned. This is why Social Security is an entitlement, those eligible for Social Security are entitled to them. It would be like calling my paycheck a “benefit.” It’s not, it’s my paycheck. I earned it. Well, so do seniors when they get Social Security after having paid into it their entire life.
… the ‘benefit’.
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p>What, beyond that, is it supposed to do? I’m certain that you and I would lock arms and fight valiantly, side by side, against any thing that threatens the central purpose of SSI. But that doesn’t mean we have to adopt a knee-jerk antagonism to ANY changes, does it?
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p>And that reason is…? From where I sit it’s equally likely that that sobriquet derives from an antagonism to a particular outcome or antagonism to any outcome whatsoever besides the status quo. I quite agree that the status should remain with the quo if there is no valid reason to change, And I quite agree that Simpsons reasons and reasonings are not valid. I don’t agree that because Simpson is spouting nonsense there is no reason not to make changes. I do rue the fact that Simpson is on the panel that will recommend changes…
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p>If you’re going to make appeals to fairness and rightness by talking about what’s earned and what’s ‘entitled’then you’ve picked a deeply unequal system to defend under those terms. I would venture to say that, during the entire history of the programs in question here, most payouts have been completely divorced from that which was payed in. I would, in no way, be surprised if you crunched all the numbers and told me that not a single participant ever reaped exactly what they have sowed. Some people have gotten less than they payed in, others have gotten more.
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p>I’ve paid into the system my entire working career and expect, at the end of my ‘official career’ (I’ll never ‘retire’… the very idea is anathema) a check. I’m not particular about the amounts. I’m not going to worry too much about not being paid the exact amount I was taxed no more than I’m going to send back every penny in benefits greater than what I paid in taxes. I plan on cashing the checks and spending the money. I might even have a cat at that time… so I may use some of the benefits to by cat food.
is idiotic. There’s a reason why the saying, “if it ain’t broke, don’t fix it,” is so prevelent.
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p>Knee-jerk? Hardly. 14 out of 18 people appointed to the cat-food commission were for cutting social security, many of whom support cutting it deeply. Cutting it is not likely to make it better, is it? It only serves to start the erosion. You can’t go into this process without a basic foundation of understanding surrounding this issue… this is about finally, after decades, destroying the last vestiges of the New Deal. This is about changing our country… for the worse. This is only step 1 and, once Nixon takes us to China, I mean Obama cuts Social Security, it will suddenly become okay and acceptable for Republicans to do it when they’re in office, and we won’t be able to build the same kind of unified opposition we did in the past, during the Bush era.
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p>If? But we know there’s no valid reason. That’s a verifiable fact. Social Security is simply not in danger of insolvency, not now and not even in the Republican-make-believe 2030s number. Your argument here is akin to the he-said-she-said styled arguments so prevalent in the MSM, in which the media reports what each side says, regardless of whether or not they’re true, usually without correcting any falsehoods. When the media does it, it’s bogus, and it’s just as bogus here, too.
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p>It’s called inflation, dude. Besides, it’s a straw man. Social Security was never intended to only pay out what you pay in, even regardless of inflation. It’s meant as a social net to protect the elderly, not as a retirement fund or investment. You’re just ensured of getting it so long as you pay into it.
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p>You’re rapidly swivelling into incoherence. Have you been drinking? Did you read what I wrote? My argument has no relation, whatsoever, to ‘he said/she said’. I should have thought you would consider me more supple of mind than that, having clashed heretofore… And, I thought, was sufficiently clear in my denunciations of Simpsons idiocies to forstall the notion that I’m weighing his side against your.
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p>I do not think that insolvency for SSI is a problem. Never have. I don’t agree with Simpson and I don’t wish to make any deleterious changes to the system. I do think, however, that some changes ought to be made. I’m all in favor of raising the retirement age, for example. Add, too, a voluntary component, say letting someone choose if they will retire at 65, 70 or 80… I think it’s a good idea that will make a good system even better.
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p>I am not in favor of a blind obeisance to some status quo simply because you lack the imagination to see beyond it.
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p>My. Point. Exactly. You, I am at pains to point out, are the one who first introduced the terms “earned” and “entitlement” and suggested that, in your words, they were not, in fact, “benefits” but wholly earned numerical entitlement and needing an equivalence between what was paid in versus what was paid out. Indeed, you cannot possibly call it a ‘benefits cut” without, wholly, subscribing to this view of equivalence. It’s at the heart of your argument. I reject your argument. A fifth grader could come up with a better one… perhaps you should go find a fifth grader and get a new argument.
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p>If you go back and, you know, actually read what I wrote, you’ll see what I’m saying.
If it’s not at risk of going insolvent, then there’s not a problem. I just find it intolerably cruel that we’d try to work people well into their senior years… just because. It would be one thing if social security were really at risk of becoming bankrupt, but it’s not. This is just an attempt to finally dismantle the New Deal.
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p>As important as Social Security is (it’s the reason why the age group least likely to live in poverty in this country is the elderly), this actually transcends social security and enters into the territory of what it means to be a democrat, our very ideals as a party and how we go about talking about them and expressing them. If we are the party that craps on social security, the damage it will do to us will be catastrophic long term. Karl Rove famously worried that single payer would doom the Republican Party — the Democrats taking a stick to Social Security, especially when it’s not necessary , is the inverse, and is no doubt wet-dream territory of fantasies for Karl Rove, one which will likely be made true by Obama. I’m starting to think Obama will go down as one of the most politically inept Presidents in history (whereas Bush was just one of the most inept Presidents in history — there is a distinction there).
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p>Finally — we may be living longer than we did in decades previous, but that doesn’t mean we’re living longer, better. Quality of life issues has to be considered just as much as anything else. If we did as well with quality of life issues as we have been in extending life (and may I remind you that in America we’re behind the curve there), I don’t think people would be so quick to retire and enroll in Social Security to begin with.
… it seems to me, is not to simply oppose all changes, but to be involved in the changes that have to be made. i agree that, if we were to leave the problems solely in the hands of the Republicans, then the New Deal would be indeed be dismantled.
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p>But I would likewise not wish to hold onto the New Deal strictly for the sake of holding onto the New Deal. If FDR et al, could come up with the New Deal, in the environment they did, then we can stretch our moral and intellectual muscles and come up with an even better deal built upon the New Deal. Simply defending New Deal policies seems, to me, like a capitulation: as though we are giving in to the notion that FDR and the New Deal coalitions are the highest expressions of our Democratic principles and that we ourselves can go no higher.
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p>This I reject. Categorically.
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p>Personally, I think FDR, if he could speak to us today, would be dumbfounded. I think he’d say “I gave you a foundation… why haven’t you built upon it?” And, frankly, pissant GOP obstructionism wouldn’t, I daresay, serve as a good excuse for him.
All of your replies in this thread scream of missing the forest for the trees. The Middle and Working class is under attack and has been for quite some time now. Social Security is our flag, if it’s stolen, game over.
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p>The notion that we’re all in this together, that social safety nets are important, is one we cannot creep away from, not given the alternative (social darwinism). Our country has been moving in this wrong direction for decades. During the movement to get Obama into office and win our Democratic Majorities, the public made it emphatically clear we went too far and wanted to get back to ensuring the common good. Obama turned his back on the American people, choosing to instead suck at the corporate teat.
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p>We don’t have enough social nets as it is… why on earth do you want to go backwards? This issue is so much bigger than Social Security. This is everything, at least if you don’t count yourself among the wealthy elite (maybe you do?). I don’t want to live in an America in which we reject the ideals of the New Deal. That’s an ugly place, indeed. It’s an America, burned, without social or economic justice.
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p> I don’t want to be rude but the non is getting in the way of your sequitur, just there…
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p>Are we having the same conversation here? Are you using some kinda randomizer to post random samples to random blogs? You have to be some kinda mixed up to read what I wrote and think I am, in any way, advocating “going backwards“… You have to be wholly ignorant of some of the other stuff we’ve discussed in the past to think I want to reverse anything. Howzabout you go sleep it off and we’ll take this up some other time, when you’re sober.
It is indeed not the case that SSI is going to be “insolvent” at any fixed time because, despite the clever separate line on your paycheck, the funds are not escrowed, but mixed in the treasury. Surplus has been used to fill deficits along the way, and the general budget will be used to fund SSI in the future.
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p>So, I think that the government obligation to do so should be conceived as government debt, not unlike a treasury bond. Because the obligation increases with inflation, it might also be considered to be debt that accrues interest.
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p>When established in 1935, the life expectancy of men was 58, and for women was 61. As enacted in 1965, people were eligible for benefits at 65–after a significant portion of them were already dead.
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p>By 1960, the life expectancy had increased from 58 to 66 for men, and from 61 to 76 for women. Nevertheless, in 1962 the retirement age was reduced to 62– a massive increase in benefits. Other tweaks in the 60s and 70s (an increase in the benefit payment, automatic COLA) also increased the program.
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p>In the 80s, the retirement age was increased to 67– but only for those born after 2000. But, by now, the life expectancy for men has increased to 78 for men, and for women to 80. One can expect another significant increase in those numbers as the benefits of the health care reform are realized.
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p>It would not take much tinkering to make a significant dent in the size of that SSI “debt”– kind of like how making one extra payment in year 1 of a 30-year mortgage can cut far more than one month off the end of the period.
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p>So, we could increase the retirement age by one year for people born after 1970, two for people born after 1980, three, for people born after 1990, four for people born after 2000, etc. until we get the retirement age better aligned with how long people actually live. Second, we could increase the cap, even modestly, from $106K, to, say, $150K.
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p>Problem solved, so long as we avoid thinking of SSI as alimony– in which we are entitled to an income sufficient to enable us to maintain the lifestyle to which we are accustomed.
There are zero good reasons (from a public policy perspective) and a host of bad reasons for any wage cap at all on SS contributions.
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p>The SS tax is among the most regressive of individual tax burdens.
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p>Remove the wage cap, and the solvency problem is solved — without requiring changes to the retirement age.
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p>In isolation, the SS tax burden seems significantly regressive. The net combined federal tax burden (net of income tax liability and tax credits) though is not (seemingly by design).
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p>Further, SS benefit amounts are significantly progressive relative to contributions. Even when considering the shorter life expectancies of lower income contributors, the realized rate of return compared to contribution remains mildly progressive.
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p>That 13.2% new tax on wage (or self employment) income over the cap wouldn’t hit any resistance now would it?
Actually, it would be 12.4%, not 13.2%.
Right now, a retiree’s social security benefit payment is a function of the taxpayer’s average monthly income during his or her working life.
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p>So if you increase the cap on wages subject to the tax, you must also remove the cap on benefits paid to retirees, which brings you full circle.
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p>What good will it do to have the retired Roger Clemens, Jr. receiving tens of thousands of dollars each month on account of the payroll taxes he paid on 20 years of $20m/year salary?
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There is only one thing that can save Social Security – asset testing.
Here’s another one: Remove the income cap on SS taxes.
Problem solved.
that there’s a “problem” to begin with. But, yes, if they’re going to go with the zombie lie and the media won’t smack them down correct them, then at least we owe it to ourselves to “fix” this non-problem through the only fair means… raising the cap, or removing it altogether.
After I hit Post, I wanted to go back and put quotes around “problem,” but for some reason, I could not edit the comment.
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p>Possibly I should upgrade to BlueMass Professional Edition.
In general, commissions are a way to take action without doing anything.
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p>Asset testing? Does that mean if I own a house I don’t collect? (I’m a teacher, I won’t collect SS anyway).
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p>I prefer to lift the cap as Kirth says. I mean I feel sorry for rich people and all paying so many taxes, but what’s one more increase among the upper quintile?
One house? Probably not.
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p>Seven houses? Let’s talk.
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p>I’ve got nothing against lifting the cap, but there are many ways to collect money that are never counted as taxable income for Social Security purposes (teaching is only one of them). It’s why there are elderly millionaires of my acquaintance who qualify for senior citizen circuit breaker due to their low income who are worth eight figures.
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p>The genuinely rich can massage money in legal ways that keep it under certain radar limits (while W-2 and 1099 workers get itemized). But asset testing can prevent most of this more fairly.
The only problem is that if we used asset testing, the GOP would scream bloody murder over double taxation.
If a net worth of $6 million disqualifies you from collecting Social Security, how does that qualify as ‘double’ taxation?
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p>If you’re talking about ‘we paid in and don’t get out’ – most of the women of a ‘certain age’ in America paid in all through their working lives, but opt to take their husband’s survivor benefits as that’s more then they’d get due to the low wages women were paid during the time of ‘Help Wanted-MALE’ and ‘Help Wanted-female/second class’. Of course, while they paid in, women who never did work got the same survivor benefit. So LOTS of people have paid in while never being able to collect.
and let’s talk about an estate tax.
The money to buy/build those houses was already taxed – THAT is double taxation. But using an asset test to qualify for a benefit? THAT is NOT!
that staves off the aristocracy. Your children will benefit from this tax, even if the Wrigley’s didn’t.
It’s time to raise the cap, if not eliminate it altogether.
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p>In 2007, of the $6.4 Trillion in total payroll eligible for social security, $2.1 trillion, was earned by the top 33% of wage earners.
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p>So to suggest, as Peter does, that only an asset test can save social security, without counting some or all of that $115 billion, doesn’t really amount to an honest arguement, especially if we raised the tax on income higher than $107K to an even 10%…
Once you do that, it is a welfare program, plain and simple, and you do away with the immunity from hostility to welfare programs that FDR built into it.
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p>I’m not sure I want to see social security become AFDC.
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p>I do think that there are a number of tweaks that should be implemented. First, raise the income cap a bit; this number hasn’t kept up with the times.
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p>Second, benefits have to be reduced. This program began when, statistically speaking, most Americans could expect to receive benefits for a half dozen years before, um, ceasing to be qualified. People live longer now, and there is no reason that a working life should not extend to 75.
Did you stop and think for more than a second about potential reasons before you wrote that sentence down? People should work till they’re 75? Really? Why not create some sort of contraption that helps people “work” after they’re dead? I hear dead people make excellent Soylent Green.
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p>I’d sooner see Social Security killed dead than turn it into that kind of an absurd farce.
Just don’t expect a government pension when you do it.
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p>The program wasn’t designed to support people for the last 20 years of their life, even when there were more people working than people collecting. This is going to be much more of an issue as the working/collecting ratio is reversed.
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p>Another alternative would be to repeal or reduce the COLA adjustments, so that the program shrinks relatively.
The system is solvent now and will be almost indefinitely. Even the 2037 myth is pure zombie lies, that’s just the date in which we’d have to dip into the reserves, of which there is plenty. Even if, someday, a damn freaking long time from now, it became a problem and the reserve got low, simply increasing the 100,000 SS tax cap would solve the problem quite easily.
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p>Why are we trying to solve problems that don’t exist and won’t exist until a lot of us are dead? Our country is bad enough at solving immediate problems, but it only tries to “fix” two “problems” in advance… social security and medicare. I will submit to you that the reason for this isn’t out of necessity, but politically-motivated. To those who want to defecate on Grandma after she worked her guts off for 40+ years, because she’ll get to enjoy her retirement for 10 or 15 years (when she’s too old to work), instead of 2 or 3, I have some not-so-nice words I’d like to direct at them.
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p>CentralMassDad… if YOU don’t want Social Security, YOU don’t take it. Don’t tell me to retire longer. I’m not the one who has a complaint with the not-even-broken, perfectly-fine system.
But if you increase the cap how much would it decrease the deficit? Wouldn’t you also have to increase the benefits, because as someone upthread said, people have paid into Social Security all their working years. Suggesting it should be okay to cut their “benefits,” when they’ve paid into Social Security most of their lives, is just insulting.
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p>Isn’t it just as insulting for someone to pay more into the system for the same benefits they would have received before the increase?
that is pure mythology. Not now, not in 2037.
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p>Social Security is not and has never been an investment. You don’t get more for giving more into the system. That’s not how it works. It’s a social contract, a gaurantee that we make as a society to ensure none of us in our old age live in abject poverty, when we can least afford it and least afford to do something about it.
The SS system pays out more than it takes in. If that’s not a deficit, then somebody changed the definition of deficit.
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p>>>Social Security is not and has never been an investment. You don’t get more for giving more into the system. That’s not how it works.>>
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p>I’m pretty sure that is the way it works: someone who earned $100K per year gets more than someone who earned $50K who gets more than someone who earned $10K. Sure, the benefit caps out somewhere but by just upping the SS tax without granting more in benefits substantially changes the nature of the existing system.
It’s something like if you put money in your bank account for years, then when you retired and started withdrawing money, the bank said “sorry – you need to put in as much as you take out, otherwise we’re losing money”.
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p>(Come to think of it, the Obama administration will probably let actually banks do that soon – I hope Larry, Timmy and Ben aren’t reading this and get that idea…)
SS is NOT an investment. It never has been, and it would never have worked if it was. If you (or anybody else) were forced to limit your retirement income to the yield generated by the SS payments made on your behalf (by you and your employers), you would receive a small fraction of the benefits you are now eligible for.
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p>If you want the government to force workers to make mandatory investments in retirement plans, say so — but don’t simultaneously claim to advocate for “smaller” and “less-intrusive” government. Such an approach is nothing but another federal giveaway to the already-wealthy financial services sector — which is why the prior administration failed so miserably in its attempt to do so anyway.
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p>The fundamental premise of SS is that TODAY’S workers pay a modest tax to fund benefits for TODAY’S retirees. Always has been, always should be.
Seems like sometimes it’s treated like a tax, and sometimes treated like a savings plan – whichever is most convenient.
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p>I tend to to think we should just call it a tax to fund current retirees, and be done with it. However, the Catfood Commission will doubtless continue to claim it’s a savings plan, yet change the bank’s rules and cut benefits for future recipients after they’ve paid in.
was included because it was assumed that, past a certain level of income, people didn’t need the security of social security, and therefore there is a cap on benefits.
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p>It would certainly be a rational policy decision to un-link the cap on wages subject to the cap from the maximum benefit allowed. It would certainly be highly “progressive” to the extent that progressives advocate redistribution.
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p>But it would also be a fundamental alteration of the system. It would no longer be a pension system, in which one’s benefits are linked in some way to one’s contributions. It would be more like a welfare system, in which one’s benefits are not related to one’s contributions, but are determined on some semi-objective measure of “need.”
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p>But the reason it was structured as it is is because FDR wanted everyone contributing to have a stake in it, because this would make it unassailable by its opponents. He was certainly correct in this assessment. Converting it to a welfare system would undo that, and expose the entire system to the fate of AFDC.
First of all, social security is being assailed. The Republicans want to privatize it (taking all the welfare out) and centrists want to cut benefits (including raising the retirement age). I agree that it would be an alteration of the system, but the disability provisions and the no cutoff, regardless of age, already make it a welfare system. Tying the payout to contributions doesn’t make it a pension plan, it makes it a retirement savings account. One could rewrite your critique as such:
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p>And it would be equally valid. My first reaction was to accept your notion that social security isn’t welfare – I was wrong – it is welfare – the kind of welfare that we need more of.
You seem to define “unassailable” to mean “accepted as is, forever.” Of course certain Republicans want privatization– decades ago they wanted repeal. I note that the 2006 effort at privatization was a spectacular failure, and made the Bush administration– previously viewed as ruthlessly efficient in getting what they wanted out out of Congress– look to be politically incompetent.
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p>I also don’t understand your comparison to 401(k)s. This was the entire issue in 2006; the present system is nothing at all like a 401(k).
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p>In a 401(k), I make my contributions during my working years, and then spend down during retirement. Once the principal is spent, it is gone. So if the economy tanks, or if I put it all in Enron or GM, I’m screwed. The benefit is variable and volatile.
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p>SSI is a defined benefit plan, in which my benefit doesn’t depend on my investing skills, or the stock market’s performance when I am retired. But my benefit is still more if I contributed more.
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p>The positive relationship between working-years contribution and retirement benefit is a superficial similarity that obscures this MAJOR difference.
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p>You want to cut the link, so that the benefit is measured by… what, need? Measured by what?
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p>Why should someone else pay for the retirement income of someone of wealth who, through good estate planning, has no assets? Or who, because he can live off wealth, has had no income? Or, who chose a low income trade or profession in order to get other benefits such as leisure time or personal satisfaction?
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And the Republicans did attack it and will attack it again. The present commission might just be looking at making changes, but anything that forces people to work longer is a cut in benefits and as someone who wants people to have to work less, not more (my personal definition of progressive), forcing folks to work an additional two, three or four years feels like an attack…
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p>Your right that SSI is a defined benefit plan, my point on 401(k)s was that SSI shares with 401(k)s the individual contribution. My issue with your position is that your claim de-linking individual contributions would make SSI a welfare system as opposed to a pension system, when in fact there are plenty of pension systems that aren’t linked to individual contributions or compensation.
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p>As to what I’d base the payout on? I was pretty clear: years worked. I’m not looking for a needs test. I want us to look at what it will cost to fund social security at current levels (or even higher levels) and come up with some way to pay for that. Given that the last twenty years has seen enormous growth in wage disparities in the US, my suggestion is to take it out of the wealthiest.
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p>That was true for the elderly retiring in the 70s and maybe into the 80s. But now, the returns on investment are closer to reality such that boomers and younger, paying into the system all their working life receive, actuarily speaking, what they put in, plus a return on their ‘investment’. People earning more receive a lower return and people earning less receive a greater return.
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p>There are plenty of online discussions of the social security return on investment: For example
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p>That’s the system: you receive what you put in plus a return. In addition to that there’s welfare built into the system for disability, widows, minors of deceased parents.
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p>And, the system takes in less than it pays out.
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p>To remedy the deficit, some in this thread say, just raise the cap and don’t raise their benefit, effectively and unfairly suggesting that only the top 20% should fix the problem.
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Except that the bank didn’t put your money in the safe. It spent it. You are relying on the bank to be able to cash your deposits when you decide to withdraw. In other words, you are a creditor of the bank. If the bank has no cash when you attempt to withdraw your cash, you are up the creek.
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p>Just so with taxpayers and Social Security. The cash we put in now is used by the bank to pay our parent’s monthly benefit, as our parents’ tax payments were once used to fund their elders’ benefits. We are relying on the bank’s ability to fund our withdrawal. If it can’t, we, like the depositor, are up the creek.
When it comes time to get money from the government? Always plenty of cash to fund banker bonuses, but the rest of us get cat food.
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p>Marvelous.
I guess I don’t follow the thread here.
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p>I suppose that the TARP happened because it is hard to pay present benefits from present wage earners when no one is working.
TARP, and the $12 trillion in taxpayer guarantees of junk assets, was the most expensive and risky way to do this. And, remember, it was done with zero new regulation to change the behavior that caused the mess – which is why we find ourselves seriously f&*ked up again.
what, exactly?
is a better “creditor” than, say, CitiBank.
Let’s say I earn 100 golden bananas a year, but only spend 80 of them. Let’s say that after 50 years, I’ve saved up 200 golden bananas. Let’s say that, suddenly, my costs have increased, so now I have to spend $101 golden bananas — and I don’t earn anymore than I used to before. If I ignored all those golden bananas I saved up in my Golden Banana Hoard, you could say I was in a “golden banana deficit.” However, that would be a lie. The truth of the matter is, if my Golden Banana earnings and costs stayed the same, I could go on for 201 years before I’d be in a golden banana deficit, longer if my hoard collects interest. I wouldn’t have to worry at all about something like this:
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p>Because, in reality, things look a lot more like this:
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p>SS isn’t projected to pay out more than it pays in until 2037, but even then there isn’t a “deficit.” That’s ignoring the fact that there’s a very large trustfund behind Social Security that can sustain it for years, and ignoring the fact that we can just choose to collect a few more bananas from those who have the most, if need be. It also ignores the fact that we print our own money grow our own bananas.
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p>Your lesson in basic math brought to you by:
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In that case, the earlier surplus doesn’t count, apparently.
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p>(I cannot fucking believe that we have a “Democrat” doing this shit to us. FDR must be spinning in his grave with sufficient vigor that, if harnesses, could light the entire East Coast)
What a brilliant piece of political fiction that was.
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p>The way it really works is:
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p>You earn you 100 golden bananas in a year. You spend 80 golden bananas, and put 20 golden bananas into a jar labeled “Trust Fund.” So far so good.
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p>Hmm, says Ryepower12, I should invest those 20 golden bananas in the Trust Fund jars. But how? I know, I’ll lend them–to Ryepower12. His credit is excellent even better than Citibank.
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p>So, you take the 20 golden bananas out of the jar and lend them to Ryepower12. In the jar goes a promise: I Ryepower12 promise to pay to this Trust Fund 20 golden bananas, plus interest of 1 golden banana ten years from today.
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p>Now, Ryepower gets an extra 20 golden bananas to spend! And the Trust Fund jar grew! It says right there on the balance sheet that it is worth 21 golden bananas.
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p>Calling that Trust Fund a “hoard” is pure, unmitigated indefensible political fiction, on the level of “WMD in Iraq” and “9/11 hijackers linked to Saddam.”
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p>What do you think has happened to all of the Social Security surplus collected over the decades? Do you think it is in a savings account, or in a vault at Fort Knox?
.
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p>In fact, that’s pretty much exactly how it works today for retirement benefits:
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p>For wages (and self employment income) below the contribution limits, you do get more for contributing more into the system. Your historical wages (and hence contribution amounts) are tracked and used in calculating both eligibility and eventual benefit amount.
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p>Raising the contribution cap without raising the associated benefits paid on those additional contributions would, in effect, amount to a 13.2% marginal “welfare tax” on wages above the previous contribution cap (note, this new “welfare tax” would only be imposed upon wages and the self employed and not other forms of income). IMHO, given the existing benefits are already extraordinarily progressive, I see absolutely no legitimate rationale for making wages above some arbitrary threshold to be subject to, in effect, a new confiscatory “welfare tax”.
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p>Actually, it would be 12.4%, not 13.2%.
I did not say that the system is “insolvent” or suggest that the checks would bounce. This, however, does not mean that everything is perfectly fine. That, just like “insolvent social security” is true only for politicians and political polemicists. Which is to say, not true.
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p>The trust fund is largely irrelevant because SSI is a pay-as-you-go system. Originally, it had a lot of workers supporting a few retirees, because people generally didn’t live that long after retirement.
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p>Now, we are approaching the time when a few workers will support a lot of retirees– the Baby Boom. And, unless the health care reform is a bust, those retirees should be living long after their retirement.
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p>The obligation to pay people in the future is debt. When benefits are increased, whether through legislation, Medicare, or through people living longer, the amount of debt increases. That this obligation is debt is made abundantly clear by the assets held by the trust fund– treasury bonds.
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p>On top of this debt, we pile on decades of deficit spending, new health care reform, new financial reform, one arguably necessary war and several unnecessary wars, stupid tax cuts, bailouts, a failed stimulus and maybe a new not-yet-failed stimulus. Oh, and we’d really like single payer. That is a lot of debt.
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p>The issue with a lot of government debt is that it is destructive over time of the larger economy, because it necessarily entails painful benefit cuts, painful tax hikes, reduced defense spending, and inflation.
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p>Pretending that this is “perfectly fine” is truthy, but not true.
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p>If you agree that there’s no risk of insolvency now, in the near future or even several decades from now, then the only reason left to change it is because you think we’re essentially too generous to old people. I reject that notion, but if that’s the argument that you and others who would like to make cuts to Social Security want to make — fine. At least its honest. However, that has to be the argument that’s made by you and others sharing your viewpoint, including right-wing extremists with a political agenda.
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p>Saying we can’t afford Social Security is a bald-faced lie, but that’s the only argument the right-wing makes, because it knows that if the public realizes we can, in fact, afford social security, they’re not going to agree to cutting it for the sake of cutting it.
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p>It’s “pay-as-you-go” because we’ve historically taken in way more than we needed to spend. That doesn’t mean you get to ignore the fact that there is a trust fund and we can use it when… almost 3 decades from now… we’re projected to no longer be taking more than we put out annually. That’s why the trust fund is there, for heaven’s sake.
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p>This is just a lie, or you don’t understand what you’re talking about. If a small, tiny sliver of the ‘benefits’ are coming out of the trustfund…. in 2037 mind you… that’s not “debt.”
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p>Who the heck is talking about increasing benefits? No one. That is a total straw man, and a ridiculous one at that. The cat-food commission is not going to come out and recommend increasing the benefits of social security. Come back to reality. Sheesh.
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p>Dude…
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p>Uploaded with ImageShack.us
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p>you need to get your facts straight.
For days I have been talking about debt, not the deficit. This is a nice chart that makes excellent points for inclusion on a blue blog or on Kieth Olberman, but is otherwise beside the point. The assumption that there would have been an economy at all without TARP reveals that it is mere propaganda.
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p>It is, in any event, outdated: the “Bush tax cuts” seem likely to be extended by a Democratic Congress and President, so they should be described as “Democratic Tax Cuts” or perhaps, “tax cuts.”
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p>When people collect benefits for 20 years instead of 5, we spend more. The increase in spending is an increase in benefits. The obligation to pay those benefits is debt.
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p>The “trust fund” is irrelevant, because the only thing in the trust fund is government debt– treasury bonds. The government has borrowed, and spent, every bit of the “surplus” collected. That means that the only way the trust fund is “drawn down” is if the government pays the debt. “Trust fund” makes for nice sound bytes, but is almost entirely smoke and mirrors, useful only for political bullshittery.
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p>That is why talk about the solvency of “the system” is politician’s flapjaw, both when attacked by Republicans and defended by Democrats. When they talk about this, you can rest assured that they are attempting to distract you from the real problem, because the real problem is not fun for politicians to talk about. The issue is government debt, and how much of it there be.
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I agree that you’ve been talking about government debt for days — making absolutely incorrect assertions all the while.
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p>You have, for whatever reason, chosen to believe that “the issue is government debt” — and once again, you cite that personal belief as your only rationale for why government debt is “bad”. Your argument here, more succinctly, is:
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p>”Government debt is bad because, well, government debt is bad.”
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p>The society around us is filled with real issues — too many people are suffering, too much of our public infrastructure is crumbling, too many of our people are utterly incapable of following simple logic, too many of our children are morbidly obese, too much our day-to-day energy needs demand impossibly unsustainable fossil fuels.
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p>We learned, in 1937, that attempting to “solve” the government debt “issue” by ignoring the others is a prescription for societal disaster. You demand that we, collectively, re-experience that awful lesson.
And the Democrats in Congress think that this is a problem in the same sense that the sun going supernova is a problem.
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p>It isn’t that the debt issue is imminent and upon us, it is the insistence that it could never be, and can therefore be dismissed, that illustrates how Democrats are now operating in a fictitious universe of their own creation. It is almost like the guy at the bar who says he is sober and okay to drive, so why not have a few dozen more rounds.
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p>In other words, progressives and Democrats are economic incompetents. Indeed, most of their argument on economic issues of late is that the Republicans are incompetent, too, the political equivalent of “but he started it”.
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p>They’re unquestionably right. The republicans drove the car into a ditch. But that doesn’t mean I have any interest in having the Democrats set the car on fire.
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p>When faced with two political parties, one of which wants to wreck the economy with government spending, and the other of which wants to wreck the economy with tax cuts, the most sensible and beneficial electoral outcome is gridlock.
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p>Gridlock has the benefit of preventing the Democrats from spending us into penury to shower money on their special interests, while also preventing Republicans from spending us into penury by showering tax cuts on their special interests.
that means it’ll happen long after we’re all dead and buried and the Vulcans have come to say hello. All kidding aside, this bothers me:
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p>Please name me 5 examples of figures considered central to the progressive movement who have made that argument. Good luck. In all actuality, it’s progressives like Paul Krugman who have been declaring Red Alert from the top of their lungs. Note: Democrat =! Movement progressive.
and Harry Reid, for two, both at campaign rallies for Reid held within the last week. “Why give the car keys back to the guys who drove the car into a ditch?”
is for the zombie lie to finally die and stay dead. What’s the metaphorical equivalent of a corpse burning for zombie lies?
Under the evil conservatives and neo-conservatives we had endless war. Economic collapse. Environmental disaster. Diplomatic failure. Targeting of the middle class to pay for the wealthy.
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p>Now, under a glorious liberal administration we have glorious endless war. Magnificent economic collapse. Super environmental disaster. World-wide diplomatic failure. On-target fleecing of the middle class.
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p>Hooray for the oligarchs and their government puppets!
are even worse, so we can’t possibly challenge any Democrats via primaries. It might give Republicans ammunition.
It matters little the name of the puppet or the party. They seem to be dancing to the same tunes set forth by the same puppet masters. It matters little to me if the tyrant be of any political party if the actions are the same.
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p>Just when I feel the country lost, I see a small glimmer of hope. May the puppet masters feel the young mother too small a target to wreck their wrath upon her and her family. The government has declared open season on the citizenry. A nation of men, not of law.
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p>Maybe it was always this way. Certainly it is more blatant now.
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p>Outside Independence Hall when the Constitutional Convention of 1787 ended, Mrs. Powel of Philadelphia asked Benjamin Franklin, “Well, Doctor, what have we got, a republic or a monarchy?” With no hesitation whatsoever, Franklin responded, “A republic, if you can keep it.”
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p>Did we?
Right now, things are looking really, really bad — and Obama can’t make the same “hindsight is 20/20” argument that was buyable (if not forgivable) for the Bush admin. Obama knows our recession could double-dip or turn into a depression, yet he’s pushing for austerity. He knew MMS was a walking disaster, yet pushed for more off-shore drilling. He knew the Republicans couldn’t be trusted, yet always seemed to bargain starting at the half-glass-full position, so we’d always end up with nothing, or worse. Politically, he’s proven incompetent.
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p>While the Bush administration was one of the worst ever because the policies they pushed were wreaking havoc on our country and they didn’t give a damn about actually running it (without an agenda) when it came to domestic matters, they never suffered from political incompetency — not when Karl Rove and Dick Cheney played The Brain to W.’s Pinky. Snarf.
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p>Any incompetence in the Bush administration was purely intentional. For example, they did not appoint Good Job Brownie thinking he’d do a good job. They appointed him because they didn’t give a damn about FEMA, not when the Republican Party’s ideology is centered around you’re-all-on-your-own (even when the hurricane comes) social darwinism.
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p>In the end, Obama’s political incompetency may prove just as damning, no matter his (hopefully genuine) intentions. One could argue for some “hope” of a new kind, ie the learning kind, in that competency issues can be solved by half-time adjustments, but from what I’m seeing surrounding Mr. President nowadays actually suggests he’s getting less competent, at least when it comes to economic issues. As I said, things are looking really, really bad.
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p>Aside from that, “Republicans are even worse,” is not exactly a winning argument, or a slogan to pin hope on in either this next election or ensuring we run government competently. I’m beginning to suspect that Republicans think politics is a game of winner takes all, while the Obama administration thinks it’s the Harvard Model Congress. Meanwhile, the services people depend on from the government is decidedly grounded in the real world, with real people depending on them, or suffering when the government fails to deliver. When we don’t treat government with a deadly seriousness, lives are ruined, hard-earned tax dollars are wasted and our soldiers needlessly die. May someone like Howard Dean have the spine to primary Obama from the left; our country desperately needs it.
I should have added “snark alert” when presenting the argument.
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p>I probably have less confidence than you that Obama’s intentions can be taken at face value. He deliberately continues too many of Bush’s policies for that. On the other hand he’s given a few bones to progressives, e.g. lifting the global gag rule, signing the Lilly Ledbetter Act. The health care reform, for all its shortcomings, is at least an improvement. For the bones, I’ll give him a nod.
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p>I agree with most of your points, except I am not convinced that trying to negotiate with Republicans was sincere. It provided cover for not pushing for more liberal policies.
Blaming Obama for failures brought on by the Bush Administration.
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p>The Republicans thank you for parroting their talking points.
Krugman
The Congressional Budget Office which Krugman quotes says Social Security is fine.
Do you really want me to relist the previous prediction errors of the CBO?
but I would prefer less exuberance with the exclamation points.
I’ll tone it down but why does it get under your skin?
I don’t know about KBusch.
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p>I do remember Mr. Vincent Gibbs — English teacher, Robert E. Peary High School, Rockville MD, circa 1960’s.
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p>Mr. Gibbs would generally accept one exclamation point in an entire piece, if the phrase it terminated described something most extraordinary. No student of Mr. Gibbs forgot what happened with more than one in an entire assignment, never mind stacked up like little pieces of kindling (“How can there be more than one most extraordinary thought?”).
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p>I was taught, by Mr. Gibbs, that there can only one superlative — a phrase like “the most tallest man” is definitely, offensively, wrong.
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p>Mr. Gibbs saved special ire for more than one exclamation point in a row because it is not only ugly on the page, bad punctuation, and bad grammar, but doesn’t make any sense anyway.
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p>I’m sure that if Mr. Gibbs is still alive and reading this someplace, he will certainly appreciate your attempt to restrict yourself to just one exclamation point in a row 🙂
I’ll try to limit my !’s to one per page… if any at all.
is not conducive to civil discussion.
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p>Your hordes of piled up exclamation points and question marks communicate that.
in their life (saved money, bought what they could afford, invested wisely, worked hard to get higher wages…) then let’s not forget somehow screwing them/us out of our 401K money. Maybe anyone with over X dollars in their 401K gets no Social Security checks so we can pay the prodigal sons who partied their asses off their whole life and didn’t plan for the golden years.
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p>Also, anyone with another pension (state, military, Union…) should not get an Social Security checks.
served their country in the military, choose public sector work over private sector and paid into their own pension fund and most importantly, screw workers who choose to stand up collectively and fought for a contract with a pension benefit (and who are still paying into SS). But damn don’t screw those “successful” people.
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p>Right, starting your own 401K makes you more deserving than people who join the military or fight for their fair share in the workplace. IMO joining a union and supporting the collective bargaining process counts as your:
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I would prefer none of the above was done and we simply stop giving people’s money away to others who don’t deserve it. Look how easily people suggest having a “means test”. People contribute the SS their entire lives and now we’re suppose to stop giving them even their initial money back and give it to the slackers who will probably consume all the money they contributed in the first few years of them collecting.
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p>I’m actually in favor of people collecting multiple pension checks. If you contribute then you should get it back… with interest. You want to remove the cap then remove the cap for how those people get checks. You gave more into the system so you should get more out!
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p>As for unions, I just disdain them. A pox on all of them.
left her after she had seven kids, with one very sick and in and out of the hospital. She was a single parent, divorced in a time period where that had a much larger social stigma than it does now, in a day and age where women could only do a few jobs — and my grandmother could do fewer still, because when she got married and had her first kid, she left college. This in a day and age when the concept of child support was probably considered laughable, at best.
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p>That she and her children “struggled” was an understatement, but it had nothing to do with having made the “wrong” decisions. People are not inclined to making the “wrong” decisions on a continual basis when it comes to matters of survival. That this country created social security, however, was a godsend — it created a system in which we could insure that few of our seniors ever suffered in poverty, no matter what life smacked them with in the years that came before 62.
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p>All that said, thanks for admitting you’re full-on-board the Social Darwinist train. I honestly pity you and whatever warped world you grew up in that made you think that way.
My Grandmother’s story was similar (7 kids… 6 girls) and they threw my drunken grandfather out of the house rather then deal with his violence and drinking. This was during WWII which was not a good time for many “average” families never-mind the needy ones.
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p>I am not against Social Security however I do think the system is abused by many and has turned into a “retirement” system when it really was suppose to be a “supplemental” system.
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p>I also will not back down from my statements about people living their lives as if tomorrow doesn’t matter. I know tons of people who are not planning for tomorrow (retirement) nor do they make the right decisions in buying a car, buying a house, when to vacation and when not to. Who am I to tell someone not to spend their money in anyway they want? I’m not trying to but I am saying I don’t want to foot the bill later when they cry poor mouth and need the “net” to help them.
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p>Social Security is still a “supplemental” system — it provides a very modest pension, which people supplement with other retirement plans, family support, saved cash, etc. It certainly isn’t and never was intended to be a get rich scheme — unlike the very sort of private sector scams and Ponzi schemes that strengthened the movement towards Social Security int he first place. It was intended to ensure that America’s elderly didn’t have to spend the last years of their lives in the poor house — something the program was remarkably successful in accomplishing.
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p>So I guess I don’t see your distinction.
… until right here:
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p>You ought to re-read Krugmans blogpost. The same post you linked to… It’s a typically excellent piece and one with some salient points. Chief amongst that saliency is the impossibility of having it both ways.
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p>The system, as it is set up, is rife with, and depends upon, inequalities but Simpson and the other zombies insist upon a straight (balanced) equation to understand the system and to demand reform… So to do people such as yourself who insist that changes, of much of any kind, amount to “you’re about to be screwed“. The logic that Simpsons uses to demand changes is the same logic you use to assert that those under the age of 58 are “about to be screwed“
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p>It ought to be no surprise that I think both of you are wrong.
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p>I don’t consider that I’m going to be screwed… (so long as they don’t privatize SSI. And, as a practical matter, I think privatization impossible, mainly because such proposals rely on much the same logic as I’ve outlined above: advocates of privatization imagine a linear, balanced equations system which is a far cry from the bone-deep inequalities at the heart of the system…) I do consider that a good chance exists that, absent significant changes, I’m going to make out like the proverbial bandit by living far longer than the system expects and thus collecting far more than I’ve ever put in. An extreme example of this is Ida May Fuller, the first official recipient of social security. She began paying into the system in 1937 and retired in 1940. She paid in no more than 25 dollars. Total. She collected for the next 35 years until her death at the age of 100 and, according to wikipedia, was paid out nearly 23,000 dollars over that time. This happened because the system expected most people in her income and social bracket to die well before the age of 100, but also expected, and allowed, the slim possibility of it’s occurrence. That, too, is why the system has been phenomenally effective. I suppose, to be scrupulously fair, one must calculate the SS taxes one has paid and, upon receiving that amount in benefits, shoot yourself in the head or otherwise find a way to refuse the benefits….
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p>Furthermore, they would have to make significant changes to ensure that I get less than I paid in… and even if they did I consider the incalculable benefits of a longer, healthier life (due, I assert, in no small part to social security progams like SSI, medicare and medicaid. ) I’ve already been the recipient of its benefits. We all have.
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p>So they’d have to privatize, or scrap the thing altogether, in my view, before I would feel, at all, “screwed.
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The problem is easy to solve. Remove the cap and allow everyone to pay SS tax on all money they make. Again, I am not sure why both Republicans and Democrats are protecting the richer folks among us.
And if someone contributes based on a proportion of all money they make, their benefit should be DRAMATICALLY higher. I don’t see how Bill Gates having a huge Social Security income fixes anything.
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p>If he must contribute based on all income, but gets no benefit, then it is no longer a pension system, but a welfare system. As a welfare program, it ceases to be the 3rd rail of American politics, and becomes the lightening rod, and would then be subject to privatization, reduction, or outright repeal.
I started to write this above, but you’ve written it much better.
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p>I think it’s important to keep SSI as a pension system, not a welfare program. This means that raising the cap shouldn’t help, and that asset/means testing isn’t appropriate.
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p>If SSI is paying out more than it’s taking in, there’s only two changes that make sense to me: (1) take more in, or (2) pay less out. If you’re going to do (1), you’ve got to do it in a way which doesn’t increase the expected payout; going from 6.2 to 6.3 might be enough to make a huge difference for all I know. If you’re going to do (2), I don’t think it’s right to reduce the monthly payout since SSI is designed to keep seniors out of poverty. Instead, you’ve got to raise the retirement age. What’s the right number? I have no idea. I do think that looking at life expectancy isn’t quite so simple. For starters, the life expectancy of people who are 60 is higher than those who are 0 (they’ve managed to avoid all the perils from 1-59). For another, being alive and being capable of working are two different things, and the gap between those two has certainly grown as modern medicine has gotten better at keeping hearts beating. If you’re living longer but not capable of working longer, then pushing the retirement age back makes things substantially worse.
I would just add that it is far easier to do this very prospectively (the 1983 adjustment applies to people born after 2000). Little tweaks now make a big difference down the road.
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p>That was why the Bush proposal in 2006 was absurd. Not because there is no problem at all, but because little actions today have big impacts down the road.
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p>I imagine the other problems you rightly note could be handled in some administrative manner, sort of like how someone younger than retirement age but unable to work can get disability now. I don’t know how smooth, or how vulnerable to fraud, those existing systems are.
Why the benefit should be calculated, exclusively on the dollar amount, and not hours or years worked, is beyond me.
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p>In many defined benefit pension plans the benefit is calculated based upon a set multiplier times the years of service. Worker A with an average hourly rate of $20 per hour over their 30 years of service gets paid $50 X 30 every month. Worker B, with an average $30 per hour for their 30 years, gets the same.
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p>In an employee stock ownership plan, also a qualified defined benefit plan, stock can be allocated based upon an individual employees proportion of payroll, or on an equal allocation based on the number of employees.
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p>Some pension plans are based on what you’ve earned – these are fine, but there’s no reason to think these are better and plenty of reason to think they’re less fair. Lets have a national conversation on equality, engage the 6% of americans who make above the cap and then ignore them if they disagree… (at which point dhammer wakes up from his dream world and remembers, only those 6% make policy…)
but my concern (and CMD’s) is that if you untie the contributions and the distributions, you’ll generate an awful lot of opposition from, wait for it…
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p>”the 6% of americans who … make policy.”
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p>The experience of Medicaid and the Earned Income Tax Credit seem to argue against this. Both are means-tested programs that not only have been difficult for Republicans to attack (indeed, some profess to be supporters of both programs), but have expanded very rapidly in recent years.