Social Security redux

Social Security zombies

No matter how many times you try to kill the mythical Social Security crisis, it just keeps coming back.

David Ignatius:

Pelosi describes with relish her strategy for trouncing Bush’s plan to privatize Social Security — which was to blast it mercilessly, without offering an alternative. The implicit message is that negotiation and compromise are for losers. The reality that Social Security is facing bankruptcy seems not to interest either Pelosi or Reid.

The Congressional Budget Office:

CBO’s projections indicate that future Social Security beneficiaries will receive larger benefits in retirement—and will have paid higher payroll taxes—than current beneficiaries do, even after adjustments have been made for inflation and even if the scheduled payments are reduced because the trust funds are exhausted.
Oh, and CBO projects that the trust funds will last until 2049.

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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

Social Security

Part of the reason the public is misinformed about social security... "its not going to be around when we need it..." is the media does not do its job.

Outsource to Dean Baker:
The Washington Post War On Social Security Continues

The Post yet again is complaining that politicians who are unwilling to deal with a Social Security shortfall that is first projected to hit in 2049, when John McCain will be 113 years old. To try to makes it case sound more compelling it refers to the date 2018 when the Social Security trustees project that tax revenues will first be inadequate to meet benefit payments.

Of course 2018 is completely irrelevant to the finances of the program. At that point the program is projected to have accumulated more than $5 trillion in government bonds. But the Post wants to scare readers to advance their Social Security agenda so they trot out 2018 as though it is a date that anyone needs to worry about.

The positive side of this story is that Social Security's finances look much better than the Post's. If it keeps making up scare stories about Social Security, perhaps the date of its demise will be hastened.

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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

Social Security...

Here is the Congressional Budget Offices report on Social Security.

Its not going to run out of money...
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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

Social Security

Citizen Jay comments:

Citizen Jay said...
"I believe that when we Americans look deep into ourselves and ask us what we want our government--because it is our government: it is our agent to do what we want with our money..."

Why not eliminate a percentage of social security taxation, if not altogether? Why should the money go to government? Why can the money not be placed in a retirement account untouched by government? Why could the money not be placed into Roth IRA accounts, or a percentage of the amount currently taxed as social security?

That is a very sad statement. Social Security keeps millions of elderly people above the poverty line. If anyone made this country great... if anything about what we currently have is good. We can thank those who came before. To say that government should not protect those who have given so much to us... is just a view of government I find appalling.

If you stated it just for philosophical quandry... I once again see the pathology of philosophers who like to debate ideas for the sake of debate... yet ignore the fact that others are pertutating those ideas in an attempt to undermine government and our economy.

The idea that government shouldn't touch these peoples money speaks to two flaws. One the idea that its "peoples" money is wrong. The people would have no economy, no jobs, no money without that which the government provides. So the concept itself is incoherent.

Two: the idea that government is not in the business of protecting people is a very sad position. The conservative revolution has had a huge impact in promoting this view. Government is there to protect and empower people... without government we would have nothing. A Hobbesian all against all.

He goes on to state:

You and I will not see a dime of social security come retirement age. I want the people to have direct control over their money (and it's use towards the long-term future).

Factually not true. Its right wing propagandha... you've been watching too much fox news.


The Crisis that isn't

Barack Obama has been running for president full-time for nearly a year. While he has impressed millions of people across the country and managed to garner substantial support for his candidacy, he is still mired in second place in the polls. Second place does not win nominations, so with time running out, Obama is getting a bit desperate.

This is the only way to understand his attack on Hillary Clinton for not having a plan to close Social Security’s projected shortfall. As Senator Clinton rightly pointed out, the projected problems with Social Security are distant and relatively minor. There is no reason that she needs to develop a plan for plugging a hole that is not projected to arise until 2046, almost thirty years after the latest date that she can leave the White House.

Obama’s own plan called for raising the income cap on the payroll tax, which would be a modest tax increase on upper middle income workers, and a very substantial tax increase on the highest paid workers. Proposing tax increases is not generally a smart way to win elections, but Obama clearly hoped to be rewarded with positive news stories and editorials, and praise for his courage from the print and broadcast pundits. His plan did earn him some praise from these quarters, but not enough to raise him from his distant second place standing in the polls.

While Obama’s attack can be dismissed as simply bad political judgment, the deeper issue is that attacking Social Security has so much resonance with the media elite. This group has been blatantly ignoring and/or misrepresenting the facts in its attacks on Social Security for almost two decades. They have used their power over the news to force politicians to respond to their agenda, praising those who advance their Social Security crisis story and damning those who try to keep the projections in perspective.

Politicians who refuse to say what we should do with Social Security are not dodging a tough issue, they are simply being realistic. We don’t know what the world will look like in 2040, 2050, and 2060. Under very plausible assumptions, Social Security will remain fully solvent right through these decades with no changes whatsoever. However, even if the program needs to be changed to maintain solvency, none of us has great insight as to how those who have not yet entered the workforce will opt to divide their lives between work and retirement.

If it is necessary to make up a Social Security shortfall, will people in 2050 prefer to retire later, get lower benefits, or pay higher taxes? We don’t have any real basis for answering this question. Furthermore, the people alive in 2050 will not care how we did answer the question. The country will almost certainly reshape the Social Security program at least once before 2050 regardless of what we might choose to write into law in the next few years.

Social Security is an issue where good policy is also good politics. The best thing that progressive politicians can do for the program is to use their megaphone to counter the scare stories. After hearing a steady drum beat of stories about Social Security’s pending bankruptcy, tens of millions of people question whether they will ever see the benefits they have earned. These people must be assured that the program faces no major financial threats, only political threats from those who want to cut and/or privatize Social Security.

It is unfortunate that much of the elite media must be included on the list of Social Security’s opponents. This makes the necessary public education effort far harder than would otherwise be the case. On the other hand, the influence of the elite media is dwindling rapidly. Newspaper readership is plummeting, as is the audience of the network newscasts. People are increasingly turning to the Internet for their information and finding a much broader range of sources.

The Internet was crucial in defeating President Bush’s effort to privatize Social Security in 2005 and it will undoubtedly play an extremely important role in combating any future efforts at privatization. As the importance of the Internet grows and the traditional media shrinks, time is clearly on the side of those who want to protect Social Security.

It is unfortunate that Senator Obama fell in with the bad guys on this one. If he wants to gain ground on Clinton he will have to find a more legitimate issue.

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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

can they do math? or will they make too much money by not doing it...

Census Bureau Trashes Social Security Trustees Immigration Assumptions

That could have been the headline of an article reporting on a new set of projections for immigration from the Census Bureau. According to the article, immigration will rise from its current rate of 1.3 million a year to more than 2 million a year by the middle of the century.

By contrast, the Social Security trustees intermediate scenario assumes that immigration will fall from its current rate to just over 1 million a year by the middle of the century. Even the low cost scenario assumes immigration of only 1.3 million a year by the middle of the century.

A more rapid pace of immigration improves the financial situation of Social Security. If the Census projections prove correct, then close to 30 percent of the projected Social Security shortfall would be eliminated. This point should have been mentioned in the article.

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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

Krugman 3 for 3...

A Speculative Fiction will be having its own exciting Social Security segment coming hopefully very soon... but to dust off the social security file lets step over to Krugman

Social Security is a government program supported by a dedicated tax, like highway maintenance. Now you can say that assigning a particular tax to a particular program is merely a fiction, but in fact such assignments have both legal and political force. If Ronald Reagan had said, back in the 1980s, “Let’s increase a regressive tax that falls mainly on the working class, while cutting taxes that fall mainly on much richer people,” he would have faced a political firestorm. But because the increase in the regressive payroll tax was recommended by the Greenspan Commission to support Social Security, it was politically in a different box - you might even call it a lockbox - from Reagan’s tax cuts.

The purpose of that tax increase was to maintain the dedicated tax system into the future, by having Social Security’s assigned tax take in more money than the system paid out while the baby boomers were still working, then use the trust fund built up by those surpluses to pay future bills. Viewed in its own terms, that strategy was highly successful.

The date at which the trust fund will run out, according to Social Security Administration projections, has receded steadily into the future: 10 years ago it was 2029, now it’s 2042. As Kevin Drum, Brad DeLong, and others have pointed out, the SSA estimates are very conservative, and quite moderate projections of economic growth push the exhaustion date into the indefinite future.

But the privatizers won’t take yes for an answer when it comes to the sustainability of Social Security. Their answer to the pretty good numbers is to say that the trust fund is meaningless, because it’s invested in U.S. government bonds. They aren’t really saying that government bonds are worthless; their point is that the whole notion of a separate budget for Social Security is a fiction. And if that’s true, the idea that one part of the government can have a positive trust fund while the government as a whole is in debt does become strange.
But there are two problems with their position.

The lesser problem is that if you say that there is no link between the payroll tax and future Social Security benefits - which is what denying the reality of the trust fund amounts to - then Greenspan and company pulled a fast one back in the 1980s: they sold a regressive tax switch, raising taxes on workers while cutting them on the wealthy, on false pretenses. More broadly, we’re breaking a major promise if we now, after 20 years of high payroll taxes to pay for Social Security’s future, declare that it was all a little joke on the public.

The bigger problem for those who want to see a crisis in Social Security’s future is this: if Social Security is just part of the federal budget, with no budget or trust fund of its own, then, well, it’s just part of the federal budget: there can’t be a Social Security crisis. All you can have is a general budget crisis. Rising Social Security benefit payments might be one reason for that crisis, but it’s hard to make the case that it will be central.

But those who insist that we face a Social Security crisis want to have it both ways. Having invoked the concept of a unified budget to reject the existence of a trust fund, they refuse to accept the implications of that unified budget going forward. Instead, having changed the rules to make the trust fund meaningless, they want to change the rules back around 15 years from now: today, when the payroll tax takes in more revenue than SS benefits, they say that’s meaningless, but when - in 2018 or later - benefits start to exceed the payroll tax, why, that’s a crisis. Huh?
I don’t know why this contradiction is so hard to understand, except to echo Upton Sinclair: it’s hard to get a man to understand something when his salary (or, in the current situation, his membership in the political club) depends on his not understanding it. But let me try this one more time, by asking the following: What happens in 2018 or whenever, when benefits payments exceed payroll tax revenues?
The answer, very clearly, is nothing.

The Social Security system won’t be in trouble: it will, in fact, still have a growing trust fund, because of the interest that the trust earns on its accumulated surplus. The only way Social Security gets in trouble is if Congress votes not to honor U.S. government bonds held by Social Security. That’s not going to happen. So legally, mechanically, 2018 has no meaning.

Now it’s true that rising benefit costs will be a drag on the federal budget. So will rising Medicare costs. So will the ongoing drain from tax cuts. So will whatever wars we get into. I can’t find a story under which Social Security payments, as opposed to other things, become a crucial budgetary problem in 2018.
What we really have is a looming crisis in the General Fund. Social Security, with its own dedicated tax, has been run responsibly; the rest of the government has not. So why are we talking about a Social Security crisis?

Dean Baker always far ahead of the game...

All he thinks to add to this wall street journal article

"Stocks Tarnished By 'Lost Decade' U.S. Shares in Longest Funk Since 1970s;
Credit Crunch Could Prolong Weakness"

is this question

Supppose we had invested Social Security in the stock market?

Social Security...

Romney backs personal retirement accounts

Republican Mitt Romney yesterday praised the notion of personal accounts for Social Security recipients, a key aspect of the Social Security reform plan of President Bush that never made it out of Congress.

Romney said it would be a good idea to use the Social Security trust fund to allow personal accounts, which could earn higher rates of return for beneficiaries.