Will Wilkinson - Latest Comments in Social Security Crisis on Infinite Earths

Re: Social Security Crisis on Infinite Earths

James Kabala — Wed, 12 Jan 2005 14:12:47 -0000

It isn't a "one man crusade;" Josh Marshall is also arguing that there is no crisis.

Re: Social Security Crisis on Infinite Earths

JollyBuddah — Fri, 24 Dec 2004 19:00:11 -0000

It's been fun, but the real world calls. For your Christmas enjoyment from I'm Just Sayin'
Nooooooo!

Merry Christmas and Happy Festivus

Re: Social Security Crisis on Infinite Earths

JollyBuddah — Fri, 24 Dec 2004 18:17:20 -0000

Micha:

JollyBuddah is just a blog alias. Ain't no biggie. If pragmatism is dishonest then I plead guilty. If I could wave a magic wand and eliminate all dishonest politicians that would essentially abolish government. In the meantime, I accept the government set up by our founders for the precise reason that we will never have a "government of angels".

I have no illusions whatsoever about electing the "right" politicians. I would like to see some sort of parliamentary type reforms that would give us a political system more like Canada's, where four to six political parties can their candidates elected to office. My rationale is not for particular policy preferences, but because I believe it would result in a diffusion of power, which would be good for citizens and bad for political power brokers.

Your suggestion that S.S. benefits be means tested has been attempted, and as I mentioned in a previous post:

To answer your specific question Micah, the program is not means tested because that would erode the broadspread political support that S.S. has in the general population. That is why Ted Kennedy is the most adamant opponent to means testing. The supplemental retirement portion of S.S. is also responsible for it's broad support in the general public.

I suspect that this idea will continue to be blocked by a majority of Democrats. There is a group of Democrats that Josh Marshall over at Talking Points Memo is calling the [Fainthearted Faction http://www.talkingpointsmemo.com/archives/week_2004_12_19.php#004289] because their position on privatizing S.S. is suspect. There is a full court press by Dems to call for as many sanctions against wayward Dems who might consider supporting privatization as are legally allowed. (And perhaps illegal as well, i.e. DeLay and Hastert's "bribery" of Rep. Smith? on the Medicare Prescription Drug abomination)

This is going to boil down to a fight between Bush and possibly a majority of House Republicans and a fairly solid block of Dems. At this point it looks very unlikely that Republicans will be able to present a united front in the Senate. Any change to S.S. is going to be a very hard sell for any politician from Florida or Arizone for example.

The reason Bush isn't showing any cards is because any position he endorses will automatically draw fire. If S.S. reform legislation does get passed I strongly suspect it will happen the same way Medicare Prescription Drug "reform" passed; very high pressure tactics and legislation that they get a few hours to read and lots of pork thrown in to buy votes.

I don't think Republicans will risk the political fallout. Again from Josh Marshall:

And what about those Republicans who might not quite be ready to sign on to President Bush's plan to phase out Social Security? You know, the Conscience Caucus. Florida's Mark Foley told the AP a few days ago that out of the 232 member GOP caucus in the 109th Congress, between 125 to 150 of them might need "a lot of hand-holding" to get them to sign off on ending, or ... okay, okay, partially ending Social Security. And Illinois' Ray LaHood seemed to be thinking along the same lines. (Interesting how my font gets reduced when I use block quote HTML. The part here in parens is actually outside the HTML instruction)

Those are just the problems in the House. Unless Bush and the Republicans can fashion something that pulls in at least a dozen Dems in the Senate, Republicans won't have enough political cover. It'll be interesting and dirty and a whole lot like making sausage. Those with queasy stomachs should turn off their TV and stop reading the paper.

Re: Social Security Crisis on Infinite Earths

Micha Ghertner — Fri, 24 Dec 2004 17:41:34 -0000

Gary - or JollyBuddah - or whatever you decide to change your name to next,

I wasn't criticising your influence but your personal choice to engage in dishonesty. I know you're not that influencial - if you were, you probably wouldn't be talking policy wonkery with me on a Friday night.

And you were indeed honest about the true nature of Social Security, but then you proceeded to endorse the current deceptive system as it exists. That is not honest.

I'm afraid your criticism of my plan suffers from the same flaw of many statist utopians (utopians because they recognize that government is rife with failure and corruption while at the same time claim that if we could just elect the right politicians or implement the right policy, things would be all better and government would work again, even though its never worked as planned in the past) - an unwillingness to address my arguments directly, but to instead attack empty strawmen. My proposal is significantly different from the Cato proposal in that I propose means testing, thereby excluding a large portion of the population from withdrawing benefits. Now, you can claim that this plan "doesn't intersect with the real world" because it might be politically unpopular among those who have been lied to for their entire lives about the nature of Social Security. That much is true, and I agree, my proposal is not likely to be accepted any time soon. (Then again, people said the same thing about Cato's and now look how far they've gotten.)

But what you cannot claim is that my proposal would exacerbate the unfunded liability problem. The plain fact is, it wouldn't, because it writes off the government's liability to pay the wealthy and much of the middle class completely, by means testing them out of the picture. This satisfies both a libertarian and an egalitarian notion of justice, and should satisfy nearly everyone concerned, except for those who wish to force people to save for savings sake, and those who are more concerned with winning elections than doing what they know is right.

The fundamental problem is that a free market without a government is a non-sequitur. It can't happen.

Of course, despite the fact that I am indeed a market anarchist, my proposed solution is far from my desired goal. It is not a solution devoid of government, and it preserves the stated function of Social Security that your yourself argued for - namely, that the program should be a considered a social welfare program and not a retirement program. And that is precisely what I have proposed. Now you are trying to contradict yourself because you don't like where your own logic leads. Too bad. Pick a side and stick with it. Don't dilly dally.

Money will never flow from the rich to the poor. In the real world the rich benefit from government welfare just as much if not more than poor people and always will.

Incidentally, I agree with this, which is yet another reason to oppose government in all of its forms, because it is always the rich and powerful who rule over the poor and politically insignificant. But the least self-professed Democrats and other leftists can do is stop supporting the very policies they recognize as regressive. You can't seem to bring yourself to do that, despite your anti-market credentials. Strange.

We will never stop corporate welfare, which to the best of my knowledge does not go to poor people. The best we can do is slow it down.

Agreed. But starving the beast is a utopian pipe dream. It must be killed entirely.

Re: Social Security Crisis on Infinite Earths

JollyBuddah — Fri, 24 Dec 2004 16:20:10 -0000

Micha:

First, you give me far too much credit for "supporting the dishonest policy of politicians". I am not nearly that influential. Second, I thought I was setting the record straight by pointing out the deception, not endorsing it.

As far as the conversation between Lloyd and Harry, I tend to trust Brad DeLong over Lloyd and Harry. I didn't see anywhere in Lloyd and Harry's conversation where they had real government bonds earning 6% per year.

I'm afraid The Ghertner Plan to save S.S. suffers from the same flaw that affects most arguments from free market utopians. It doesn't intersect with the real world. The CATO plan suggests allowing wage earners to invest the full 6.2% FICA contribution in private accounts. The problem is that this would move the 2018 date at which S.S. payments become less than benefits up dramatically. Immediate deficit, therefore immediate crisis. Not many practical politicians are going to agree to a plan that turns a crisis forty years in the future into a crisis four or five years in the future (est.) If anything, The Ghertner Plan would exacerbate this flaw.

A common complaint of Free Market Utopians is that plans to privatize the energy market, prisons, education and war are not real privatization. That's the problem Micha. The real world is limited to solutions that can be implemented in the real world. A utopian free market where no government regulation ever affected the decisions of sovereign citizens may be wonderful. We will never know.

The fundamental problem is that a free market without a government is a non-sequitur. It can't happen. Government is necessary to protect the sanctity of contract. Ergo, no government, no free market. Markets will therefore always be flawed. The best we can do is try to limit the deleterious meddling and come up with the best pragmatic solution we can get from the government we got. That's why I suggest Al Gore's lock box principle. It was probably the only good idea the man had. Well, aside from inventing the internets.

No, that's a direct result of the system that you support. Under my type of proposal, that would no longer be the case. People would own what they earn rather than having it taken from them only to be partially given back later (and only if they live long enough), with more money flowing from the poor to the rich than the other way around.

That's exactly what I mean by Free Market Utopian thinking. Money will never flow from the rich to the poor. In the real world the rich benefit from government welfare just as much if not more than poor people and always will. The Mortage Interest Deduction is one example. Bill Gates gets what is essentially subsidized government housing to the tune of several million dollars per year.

We will never stop corporate welfare, which to the best of my knowledge does not go to poor people. The best we can do is slow it down. Where is Senator Proxmire when you need him and what the hell happended to the fiscal conservative wing of the Republican party?

Here are 12 Reasons Why Privatization is a Bad Idea linked text These are real world problems, not conversations between Lloyd and Harry.

Re: Social Security Crisis on Infinite Earths

JollyBuddah — Fri, 24 Dec 2004 15:45:43 -0000

Not surprisingly, Brad DeLong has the specifics on the bonds in the S.S. trust fund linked text

Trust fund assets are invested in government bonds: Social Security trust fund assets, currently worth over $1.5 trillion, are invested in special, non-tradable government bonds. Each year the U.S. Treasury issues these government bonds, up to the amount of the Social Security trust fund surplus, to be added to the account. The bonds earn an interest rate comparable to the market interest rate for tradable government bonds. During 2003, the effective annual interest rate earned on all bonds held by the trust funds was roughly 6.0%.

Social Security is not going broke ...

Re: Social Security Crisis on Infinite Earths

Micha Ghertner — Fri, 24 Dec 2004 14:38:55 -0000

Whenever someone tries to explain how the so-called Social Security trust funds are real, I'm always reminded of the following conversation:

LLOYD: Okay, here’s the plan: We borrow a few bucks -- just a small loan -- from the briefcase, and we check into a cheap motel.

HARRY: Sounds good.

LLOYD: And we’ll keep track of the money we spend with IOUs.

HARRY: We’ll be meticulous - right down to the last penny.

LLOYD: That way, whatever we borrow we can pay back.

HARRY: Absolutely. We’re good for it.

LLOYD: You know, as soon as we get jobs.

HARRY: It’ll come right out of our first paycheck.

Taken from my post:

Just when I thought you couldn’t get any dumber, you go and do something like this… and totally redeem yourself!

Re: Social Security Crisis on Infinite Earths

Micha Ghertner — Fri, 24 Dec 2004 14:24:05 -0000

Micha: I'm afraid your S.S. proposal is as vague as President Bush's proposal. I searched through the thread and didn't see a real proposal, just suggestions.

See if this blog post will help. I just posted it a few hours ago.

I can hardly be held responsible for politicians lying to the American people. I'm afraid it has become a hallowed practice in both parties.

Sure you can be held responsible for the lies because you continue to support the same dishonest policy throughout the rest of your post. You realize that hiding the true nature of Social Security is the only way that it can continue to receive political support. If people realized what a rip-off the program really is, and how much more they could earn if they could keep their own hard-earned money instead of being coerced into handing it over to government planners for "safekeeping," how many people do you think would continue to support the system? If you think the system is such a great deal, and so popular with the masses, why not make participation voluntary and let people exit if they want?

The rich may get a slightly better deal than poor people and African American males. That's life.

Don't apologize or excuse what you consider unjust - oppose it.

First, I would protect Social Security from the grubby hands of politicians in both parties with a lockbox. Social Security problem solved.

Here's a better idea: Why not protect the right of people to own property and do with it as they see fit from the grubby hands of politicians in both parties? Social Security problem solved.

The advantage of my plan is that it focuses on actual people and what benefits them, rather than what benefits a government program that doesn't.

Re: Social Security Crisis on Infinite Earths

Gary — Fri, 24 Dec 2004 14:07:20 -0000

Chester: Don't get upset with me because Bush is squandering your inheritance. The only real fiscal problems we have are (1) Bush's extravagant government spending and (2) Bush's fiscal abomination prescription drug gift to the pharmaceutical companies.

The "trust fund" is not a metal box like Fort Knox where bars of gold boullion are stored, but it is not a meaningless construct. Our government, under both Democratic and Republican administrations, has taken the FICA payments of wage earners and used it for other nefarious purposes. In exchange, our government has issued bonds, which are a promise of future redemption based on the full faith and credit of the U.S. government.

The bonds or treasury notes held in trust by the Social Security trustees are just as valid as treasury notes held by individuals or foreign governments. They are a promise to pay even though they are not hard assets.

President Clinton proposed investing 15% of the S.S. reserves in the stock market. Republicans opposed Clinton's idea because they didn't want him getting credit for making S.S. completely solvent forever. The proposal itself suggests that S.S. trust funds are negotiable bonds that could me offered on the market. Although I have not seen any discussion of the actual type of bonds the trustees hold, I assume that is because they are identical to any other government bond or treasury note.

If Bush and the Republicans wanted to, they could take our FICA payments and invest them in the market just as Clinton suggested. As Daniel Gross points out in his Slate Article linked text The Unlocked Box: How Bush is plundering Social Security to close the deficit the S.S. surplus will be close to a trillion dollars over the next ten years.

Clinton's proposal to invest 15% of the reserves in the market, and my proposal to invest current FICA payments in a safe market fund basket, are both alternate possibilities to Bush's decision to spend those payments. That means the Bush administration is choosing to borrow one trillion dollars from the S.S. trust fund, and the U.S. government is obligated to repay it on his behalf.

Micha: I'm afraid your S.S. proposal is as vague as President Bush's proposal. I searched through the thread and didn't see a real proposal, just suggestions.

So in other words, let all of us who know better lie to the American people in order to get them to support a program that really is nothing more than welfare for the elderly, whereas we will make them believe they're actually saving their money in a retirement investment program so that they will support it.

I can hardly be held responsible for politicians lying to the American people. I'm afraid it has become a hallowed practice in both parties. Social Security is not just a welfare program, it is the largest and most successful welfare program ever devised by man. The supplemental retirement feature is a brilliant feature that gives the program widespread political support.

Or as Orwell put it so well:

"In our age there is no such thing as 'keeping out of politics.' All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia."

A perfect description of our last election.

Payroll taxes represent a larger portion of a middle to lower class worker's income than an upper class worker's income. Further, the poor, who tend to have lesser access to health care compared to the rich tend to live shorter lives and thus collect less. The same is true regarding African American males.

Social Security is somewhat regressive, but not onerously so. The truth is it's a pretty good deal for everybody. Administrative costs are extraordinarily low and benefits are quite reasonable for the price. The rich may get a slightly better deal than poor people and African American males. That's life. I don't know any aspect of modern life where that's not a reasonably accurate generality. The rich get richer and the poor get poorer, especially under a Bush administration. That's hardly a unique criticism of S.S. that justifies any particular course of action.

Even without knowing what your proposal is Micha, I am partial to my own proposal of Social Security Plus. First, I would protect Social Security from the grubby hands of politicians in both parties with a lockbox. Social Security problem solved.

Second, I would implement a Thrift Savings Plan linked text that is also suggested by The National Center for Policy Analysis linked text

For more details, I have a rather long diary at MyDD linked text that I believe would be quite rude to post in its entirety here. Since it is not my blog, but rather a diary I don't believe this is whoreblogging, although I've never been exactly sure what that is.

In anticipation of accusations that this is another big spending liberal welfare program and we can't afford it, please visit this link linked text comparing the unfunded S.S. liability to Bush deficits.

My proposal for Social Security Plus will cost far less than extending Bush's tax cuts. It dramatically raises the appallingly low savings rate of Americans, which is probably the single most effective step we could take to strengthen the U.S. economy. Finally, it is a simple choice between tax cuts for the top 10% or a genuine retirement system for the bottom 90%. I report, you decide.

Re: Social Security Crisis on Infinite Earths

Micha Ghertner — Fri, 24 Dec 2004 12:37:21 -0000

Gary,

To answer your specific question Micah, the program is not means tested because that would erode the broadspread political support that S.S. has in the general population.

An accurate description of politics in general, I might add, consisting of little more than deceit and theft perpetrated on the ignorant.

Or as Orwell put it so well:

"In our age there is no such thing as 'keeping out of politics.' All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia."

Some complain that S.S. payments go to wealthy retirees who do not need it, but the theory is that they paid into it at the same rate as everybody else so they deserve the benefit.

But this theory is obviously false. As you yourself just stated, SS is a welfare program, not a retirement program.

Let me ask you as an honest individual and not as a political strategist: What objections would you have to my proposed reforms compared to the current system?

Re: Social Security Crisis on Infinite Earths

Chester White — Fri, 24 Dec 2004 11:18:17 -0000

Gary: You say "In it's [sic} initial form, and to a very large degree today, S.S. was an insurance program to provide a modest level of support for people who were incapable of providing for themselves."

Then it's a DAMN EXPENSIVE one, absorbing 1/8 of most people's income (yes, the worker pays ALL OF the employer's "contribution," even if he doesn't understand that, or ever touch the money).

There is no SS "Trust Fund." Or rather, there is, but it means literally nothing.

Let's start at the beginning. Exactly what is a bond? A bond is a promise of one entity to pay an amount of money to another on a specific date in the future, typically with interest. Sometimes it's backed by collateral, sometimes not. Right?

So the SS "Trust Fund," a *part of the Federal Government*, has some "extra" money laying around after honoring current obligations. It "loans it" to another *part of the Federal Government* and gets some bonds, which it lays aside. OK, great.

Now, when the time comes in 2018 or whenever, the "Trust Fund," *a part of the Federal Government*, send the bonds to another *part of the Federal Government* and asks for the cash.

But the latter HAS NO CASH, and no assets, other than the ability to borrow or extract the money from citizens. So it has to tax somebody currently, or borrow from yet a third party, to fulfill the obligation.

It's not like the money originally loaned goes into constructing a building or something, creating an asset which throws off income.

It's exactly the same as if I "funded" my retirement by writing myself an IOU with my right hand and put it in my left pocket. $1,000,000 or $5,000,000 or $1,000,000,000,000, it makes no difference. It MEANS NOTHING.

Or, I could loan money to my wife, and she could pay me interest every year and eventually return me the principal. But if we always put all our assets and income in the same pot, the transactions don't MEAN ANYTHING.

By analogy, the "Trust Fund" could therefore be $1 or $1,000,000,000,000,000,000 . It is an utterly meaningless construct.

Re: Social Security Crisis on Infinite Earths

Chester White — Fri, 24 Dec 2004 11:13:26 -0000

There is no SS "Trust Fund." Or rather, there is, but it means literally nothing.

Now, when the time comes in 2018 or whenever, the "Trust Fund," *a part of the Federal Government*, send the bonds to another *part of the Federal Government* and asks for the cash.

It's not like the money originally loaned goes into constructing a building or something, creating an asset which throws off income.

Or to try it another way, I could loan money to my wife, and she could pay me interest every year and eventually return me the principal. But if we always put all our assets and income in the same pot, the transactions don't MEAN ANYTHING.

By analogy, the "Trust Fund" could therefore be $1 or $1,000,000,000,000,000,000 . It is an utterly meaningless construct.

Re: Social Security Crisis on Infinite Earths

Gary — Fri, 24 Dec 2004 07:26:24 -0000

Micha: Here is a link to the following index of the original 1935 S.S. legislation linked text

TITLE I- GRANTS TO STATES FOR OLD-AGE ASSISTANCE
TITLE III- GRANTS TO STATES FOR UNEMPLOYMENT COMPENSATION ADMINISTRATION
TITLE IV- GRANTS TO STATES FOR AID TO DEPENDENT CHILDREN
TITLE V- GRANTS TO STATES FOR MATERNAL AND CHILD WELFARE
PART 1- MATERNAL AND CHILD HEALTH SERVICES
PART 2- SERVICES FOR CRIPPLED CHILDREN
PART 3- CHILD WELFARE SERVICES
PART 4- VOCATIONAL REHABILITATION

In it's initial form, and to a very large degree today, S.S. was an insurance program to provide a modest level of support for people who were incapable of providing for themselves. It is a welfare program, not an investment program. It has been modified over the years, and most people think of it as a source of supplemental retirement income because (a) the majority of people are fortunate enough that they never need the disability benefits portion of the program (just as the majority of people do not ever receive the benefit of any insurance policy), and (b) for their own reasons the Democratic party, Republican party and the media have all allowed the public to believe myths about the program.

I'm not sure what you mean by your suggestion that poor people pay into the program to benefit the wealthy. Everybody pays 6.2% on the first $87,000 of their income into S.S., which is matched by their employer. Some complain that S.S. payments go to wealthy retirees who do not need it, but the theory is that they paid into it at the same rate as everybody else so they deserve the benefit.

Bernard: The Social Security surplus over the next ten years will be approximately $1 trillion. In about 2018, S.S. benefits will exceed FICA payments into the program by a small, but increasing amount. In 2042, according to projections by S.S. actuaries, the "trust fund" will run out and S.S. will be "bankrupt" because the program will only be able to pay 75% of the S.S. obligation promised to retirees.

First, nobody puts much faith in 40 year forecasts for economic growth. The question is why believe there is a crisis based on a forecast that uses a 1.6% base growth rate? If we have 2% economic growth over 40 years, S.S. continues to run a surplus. Problem solved.

If the U.S. actually experiences 1.6% economic growth over the next 40 years, S.S. is the least of our problems. Try plugging in a 1.6% growth rate to the CBO deficit projections over the next ten years and see what happens to our budget deficit. Of course, if the CBO projection of 2.5% over the next ten years is accurate, then we would need to experience .6% growth over a subsequent ten year period to balance out to 1.6%. Once again, if that happens, S.S. is the least of our problems.

For a comparison of S.S. and Medicare unfunded liability problems Kevin Drum provides an excellent graphic: linked text That is why any analysis that combines S.S. and Medicare into a single program is misleading. Medicare is in far worse shape than S.S.

Another great graphic from Kevin over at Political Animal shows that in the last ten years the so called S.S. crisis has actually been getting pushed furthur into the future. linked text

Once again, if we have even a 2% growth rate over the next forty years, which is low by historical standards, there is absolutely no S.S. crisis. Maybe we should fix Medicare, which is broken, and in worse shape since Bush and the Republicans passed their Prescription Drug Benefit program for the pharmaceutical companies.

Re: Social Security Crisis on Infinite Earths

Bernard — Fri, 24 Dec 2004 03:25:19 -0000

Iren, your claims both look erroneous to me.

You claim that social security is ameliorating the wider fiscal crisis claimed by the paper Will references because it takes in more than it's putting out. If you read the measure they use again, "Fiscal Imbalance", you'll see that the calculation is based both on present and projected future cash flows. The long-term obligations tied to the current social security setup are a significant factor.

Secondly, where did Will 'concede there is no crisis'? You appear to have read between the lines and found something which wasn't there.

Re: Social Security Crisis on Infinite Earths

Micha Ghertner — Fri, 24 Dec 2004 03:04:26 -0000

Gary,

If investment for retirement is not its purpose, why structure the system as it is currently structured? Why not means test benefits, restricting them only to truly needy elderly, and fund it from general revenues, as other welfare programs are structured? Why make poor workers pay a large percentage of their income so that the wealthy (who tend to live longer) can reap the benefits?

Re: Social Security Crisis on Infinite Earths

Gary — Thu, 23 Dec 2004 19:24:27 -0000

The purpose of the Social Security Act:
(on Archives.gov) On August 14, 1935, the Social Security Act established a system of old-age benefits for workers, benefits for victims of industrial accidents, unemployment insurance, aid for dependent mothers and children, the blind, and the physically handicapped.

You will notice that investment for retirement is not a purpose. Visit The Social Security Network linked text for 12 Reasons why privatization is a bad idea.

Re: Social Security Crisis on Infinite Earths

Nat — Thu, 23 Dec 2004 15:48:24 -0000

Gary and Irenicist are correct. The gist of your argument is Social Security is in crisis because our President trashed the general fund and the Medicare Trust Fund over the short and the long haul. And Social Security sucks!

As for your second argument, you are very late to the party. Where were you in 1935? In 1983? C'mon, none of this "I wasn't born yet" whining! It made sense in 1935 because there was the immediate need of impoverished elderly and few sane citizens trusted the stock market. 1929 did that to people. More Americans post Nasdaq bubble-burst should feel the same way, especially with real estate bubbles and a swollen current account deficit.

Any change to the SS system will screw someone. I went along with the Fica/Seca hike in 1983 because it was a reasonable request. Keeping the system intact honors intergenerational promises made 70 years ago and 21 years ago. If you do not want to honor the commitment from 1983, I think the 153 billion a year extra Fica/Seca should be repealed immediately.

The SS Trust fund solvency hinges entirely on the health of the general fund. Talk to Bush & Co., and those who voted for him, about fixing the general fund. They broke it.

Re: Social Security Crisis on Infinite Earths

benton — Thu, 23 Dec 2004 15:33:59 -0000

Why is Cato recommending private accounts at all? First this meansthe government is mandating that I must save my money. Second it is mandating that I do it in a program with Shearson or Goldman Sachs or somebody. Third it is limiting the vehicles I have to make that savings option. This is wrong, wrong, wrong. Its big government libertarianism. How is that even a sentence you can put together?

Re: Social Security Crisis on Infinite Earths

Irenicist — Thu, 23 Dec 2004 11:10:25 -0000

1. Your first point is to say not that there's a social security crisis but that there's a general fiscal crisis. But social security ameliorates this crisis, since it's taking in more than it's putting out.
2. Your second point CONCEDES there is no crisis and make the point INSTEAD that social security, in crisis or out, is a lousy idea.
Concerning a crisis in social security, there's no disagreement between you and Matt. You implicitly concede that (just as it did in 2002 to get us mired down in Iraq) the administration is engaging in threat inflation--this time to destroy social security.

Re: Social Security Crisis on Infinite Earths

Gary — Thu, 23 Dec 2004 10:43:18 -0000

As it turns out the CBO is projecting 4.8% growth this year and 4.2% next year, slowing to 2.5% in 2010. Economic forecasts over a 40 year period are always problematic, but the Social Security Trustee's 1.6% projected growth rate is unduly pessimistic.

See? No unfunded liability from Social Security after all. The most urgent reform we need in Social Security is to implement a lock box, which Bush promised in the famous Gore/Bush lock box debate, about which absolutely nothing else even remotely memorable was said by either party.

A David Gross Jan. '04 article in Slate claimed that the Social Security surplus was going to mask close to a trillion dollars in budget deficits over the next ten years. If the, Social Security surplus is factored out the Bush surplus for '04 is close to 6%, comparable to Reagan's historically high deficits as a percentage of GDP.

Re: Social Security Crisis on Infinite Earths

Gary — Thu, 23 Dec 2004 10:22:12 -0000

Jacob: The reason you get such a low return from Social Security is that it is an insurance program. If you don't like your anticipated returns on Social Security you might try calling your auto insurance agent and asking why you are getting such a poor return on your investment in auto insurance.

Re: Social Security Crisis on Infinite Earths

Gary — Thu, 23 Dec 2004 09:39:37 -0000

Combining Social Security and Medicare gives a misleading picture of both the problem and the solution. I just skimmed Gokhale and Smetters's paper, but it is clear that Social Security's unfunded liability is $7 trillion and Medicare's was $34 trillion. Since Bush and the Republicans have presided over massive increases in the budget deficit and just increased the Medicare liability, with the legislative abomination on Medicare Prescription Drug benefits, it is clear who is responsibile for our fiscal problems.

The projected unfunded liability for Social Security is based on a 1.6% growth rate in GDP. Even a small increase in growth to 1.8% eliminates the S.S. liability. We have massive current account deficit and unfunded liability problems that are not being addressed. Social Security is the least of our fiscal problems. I haven't checked yet, but am curious (a) what estimated growth rate in GDP CBO used for their recent budget deficit projections and (b) what would happen to the S.S. "trust fund" if the CBO growth rate was used instead of 1.6% and (c) what the Bush deficit projections would look like if the CBO used the 1.6% growth rate.

CATO's solution is as much of an impossibility as cutting discretionary spending 107.8%. There is no serious discussion of allowing wage earners to invest their entire 6.2% FICA contribution in private accounts.

If we are concerned about increasing savings rates and economic justice, a preferable option would be adding a genuine retirement program to our Social Security Insurance program. The Thrift Savings Program for federal employees and the Uniformed Services, known as Social Security Plus, is an excellent model.

Re: Social Security Crisis on Infinite Earths

Jacob — Thu, 23 Dec 2004 04:42:18 -0000

"the abundant practical and moral merits of the reform proposal"...

There are also overwhelming ECONOMIC merits or resons for reforming Social Security. It is very simple: under the Pay as You Go system (even under unsustainable current benefit rates) you get back (at retirement) a small portion of what you pay into the system over your lifetime.
Under an ownership (saving) system you'll get out of it what you pay in (plus interest), which is much more than you get today.

The saving (ownership) system is a much better deal.

Re: Social Security Crisis on Infinite Earths

brooke — Thu, 23 Dec 2004 04:08:33 -0000

To add to Krybo's comments,
Pay as you go spending rules work well for things like the military which get short term appropriations--ten year projectons like the one Kenny is talking about make sense for this kind of spending. Entitlements should not be funded using PAYGO rules for the simple reason that entitlement spending promised today (such as Social Security benefits) won't be at issue for decades, unlike military needs--there's no guarantee, for example, that elected officials thirty years down the line will feel like keeping the promises made today. If benefits were pre-funded, that wouldn't be a problem.

You can't very well prefund military funding, because you don't know the specific needs in advance or when they will arise; wise leaders can anticipate the need for greater military outlays in the future and budget accordingly, but you can't really prefund it. With SS, we know exactly what the promises are and when they will come due; entitlement spending is unique in that way, and requires unique rules.

Re: Social Security Crisis on Infinite Earths

Luka Yovetich — Wed, 22 Dec 2004 11:15:46 -0000

What does everyong think was more sad? The death of the Flash or the death of Supergirl??

Personally, I was more moved by the death of Supergirl. That speech that Superman gave at the end of that issue as he was taking her body to its final resting place (I assume) was quite moving...