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October 30, 2007

Comments

Yup. Right on. Anyone who was reading TPM even perfunctorily in early 2005 -- and really, why wasn't Obama or the people who work for him? -- has to be acutely aware that messing with Social Security is a shortcut to annoying a lot of liberal voters (including me).

In a way, the real question isn't political, it's substantive. If you tell a physics teacher to draw up a syllabus, choosing creationism is going to tell you a lot about how he or she sees the world. The very fact that Obama puts Social Security on his "syllabus" is disturbing even if it were politically astute, which it isn't.

Agreed. This is bad politics and a silly issue to raise.

I think he has some bad advisors. Not that that's an excuse.

This is whar annoys me about Obama-the-candidate:the man who is so often right on the money in terms of legislation or policy pulls they tone-deaf blooperrs on the campaign trail.

For example, in another post, hilzoy brought up a serious problem, the privitizing of the military, and it turns out, Obama introduced legislation to address the problem already. It's barely an issue, barely registering on the blogosherre and or in public debate geneally, and already he has tried to addreess the matter.

But out on the campaign trail, out of the blue, he oes after Hilary over a non issue, well, worse than a non issue, a Repblican talking point false issue.

He's being all clumsy and wishywaswhy about the anti-gay preacher fiasco, too.

Agreed. I want to like Obama and then stuff like this happens. Also, I think I understand what he's trying in SC and it may help for a bit there, but it's hurting everywhere else that matters to me. I hope Edwards does attack, because of them all, he'd be at least as good a President and is by far, even factoring in Bill's help, the strongest campaigner in the bunch. And if he was nominated, Bill would rally to his side anyway. BTW, what's an elderly lowan? I think I may be one.

Publius: Are you claiming there is no problem at all with SS? No future shortfalls at all? Even with the boomers etc? Following your links, that seems to be the position.

As others note, the false sense of crisis was the single-biggest threat to the wildly-successful Social Security system. It’s also the crown jewel of the liberal blogosphere’s mighty, mighty empire

Who wouldn't be proud of the wildly-successful constant transfer of wealth from the poor, working and middle classes to the weathiest demographic of people in the history of mankind? Crown jewel, indeed!

OCSteve, the point is that whatever problems Social Security may have, they're not a crisis and are far, far down the list of problems we have to deal with at the moment. It's ridiculous for Obama to be attacking Clinton for not addressing the issue.

Granted, he's not saying it's a crisis and he is saying Bush exaggerated the situation, and he's certainly not suggesting anything related to privatization. But I'm still very disappointed to see him taking this tack.

Yes, OCSteve, there's no problem with Social Security. Social Security has a huge surplus, which has been invested in government treasury bonds. Eventually, if/when it does start paying out more than it takes in in taxes, those will start being paid back.

Which, given how many politicians have been using the Social Security surplus to cheat on the rest of their spending, may cause them problems. But that's not a problem with Social Security.

But the "crisis" is created by conflating this monster of "socialsecuritymedicaremedicaid" whose costs are going to "explode". Which is due to health care costs going up, which is a health care problem and not going to be resolved until we get some kind of rational health care debate and not just insurance company scare tactics. And the projections the Bush administration was using to try and scare people about Social Security were as fake as the "anthrax vans" in Iraq. They assumed economic growth far below what we've had even in the horrible Bush years, and the most pessimistic Social Security projections possible.

Most of the possible problems down the road in Social Security could be solved by getting rid of the income cap so it taxed everybody and wasn't so regressive.

OCSteve,

Social Security was the subject of many excellent discussions in my early days commenting here, beginning in December 2004. My view is that Social Security is not in a crisis, and at most minor tinkering (such as raising the cap on wages taxed for Social Security to the 90% of wages level agreed to in the 1980's plan) would be sufficient to assure solvency, while any privitization plan causes more problems than it solves.

They assumed economic growth far below what we've had even in the horrible Bush years, and the most pessimistic Social Security projections possible.
Not only that, but the solution offered, private accounts invested in the stock market, wouldn't have helped if we had run into such horrible economic times, since the stock market would be devastated along with the rest of the economy.

I couldn't agree more with publius.

It's possible, depending on how the economy goes in the coming decades, that there will have to be a minor tweak to Social Security to keep the balance of payments flowing in the right direction. This is something that can be done in a simple, bipartisan fashion just as previous Congresses have done. There are far greater priorities to address right now, including Medicare and the health care system in general.

I was a strong supporter of Edwards in '04, but had been torn this time, because of the advent of Obama, who I found/find to be impressive in many ways. But...it's still Edwards who has the most coherent message, would run the strongest in the General and who would, I'm convinced, seize the moment most fully. Perhaps it's been Obama's curse to have become an instant front-runner. And, yes, he's got some very cheesy political advisors (cough..Axlerod..kaff), but he has some impressive policy ones (eg S. Powers). Par for the course, I guess. At least if he falters this time, Obama will still be around in coming years, which is a very good thing.

Obama's comments may have been tone-deaf, but I don't see how he's wrong. According to Atrios: "It's true that Obama didn't assert that there was some huge crisis. But the fact remains that he put the idea out there that Social Security had a 'problem' which needs to be fixed and that any serious presidential candidate needs to address the issue in clear detail."

My understanding of the Social Security situation--in part from following Josh Marshall assiduously during the privatization debate--is that unless the most optimistic economic predictions come true, the Social Security trust fund will no longer be in surplus between ten and thirty years from now, and will be empty between forty and eighty years from now.

So given two choices, leave the status quo and go at this with a massive fix in a few decades, or tweak the system now so problem never becomes crisis, why on earth would we choose the former? Similarly, why would we choose another candidate who was willing to ignore problems now and leave them to become crises in future years, when we've already identified the problem?

Spot on. I had the exact same reaction to Obama's inexplicable foray into the Social Security debate. I like the guy and have been rooting for him for a while now, but this not only annoys me, it makes me question his political smarts. This is clearly the brainchild of some clueless beltway consultant. It's the kind of thing you would come up with if you wanted to win over Tim Russert, but is disastrously stupid in a Democratic primary.

Obama's comments may have been tone-deaf, but I don't see how he's wrong.

Beside the point. Any of the three leading dems will have a more/less rational approach to SS. This is a primary campaign. Obama has the Democratic disease of Campaigning in Prose, I'm afraid, notwithstanding his poetic notion of a 'new politics' - 'poetic notion' seems to be mostly what it is (not that there wouldn't be more than a little power in the spectacle of the US following the Bush years with the election of a truly brilliant mixed race son of an African immigrant, etc.).

That he's right about this is beside the point? Is this discussion all about the horse race and not at all about the substance of the issue? Egads.

While Bush was threatening to "reform" Social Security I understood the wisdom of putting all our efforts into debunking the myth that the system was on the verge of collapse -- there was no chance that any functional reforms that were brought to the table would be enacted, and such proposals only provide cover for Bush's privatization efforts -- but now that those efforts are dead and buried and we have the chance to elect someone who would do it right, what is wrong with taking back the narrative from the right-wingers who would destroy the system in order to save it?

SS may not be in a crisis situation but it's a fair portion of a larger problem of entitlements, principally for the baby boomers. And as mentioned above, Medicare is a larger issue. Given all the things most of us think the government ought to be doing, where's all that money going to come from? That's the crisis.

And please don't even mention the trust fund; in fact, when anyone does mention it, I automatically assume they've got some agenda that doesn't involve complete honesty.

“As others note, the false sense of crisis was the single-biggest threat to the wildly-successful Social Security system.”

I’ve heard this other places and disagree with the assessment. Congress uses cash accounting and the books show a ~$300 or so billion deficit, which wouldn’t be anything to worry about. President Bush is proud of this. If a publicly traded corporate account used cash accounting though, he would be guilty of a felony. Accrual accounting puts our annual deficit at around $3 trillion (t), a higher number than the federal budget. We’re already $70 trillion in the hole from empty promises per Senator Coburn, M.D., freshman Senator and member of the Senate budget committee. He asks to be called ‘Doctor’ rather than ‘Senator’.

We spend ~$170 million (m) every day in Iraq/Afghanistan and incur ~$9 billion (b) every day in unfunded entitlement promises.

In comparison, China holds around $1 trillion in US government securities. They are threatening to sell them off, and may already be doing so (gold $784). If they do, or if we continue to degrade our creditworthiness by making promises to the electorate that we can’t afford, our ability to borrow more money at non-junk-bond rates will go away. Or maybe there’s something I’m missing.

Gromit,

"but now that those efforts are dead and buried and we have the chance to elect someone who would do it right, what is wrong with taking back the narrative from the right-wingers who would destroy the system in order to save it?"

Two problems:

1. It's not dead and buried. "Reforming" Social Security in the Bush manner is still a staple on the right side of the aisle. By campaigning on the "we need to fix Social Security" bandwagon, Obama is giving cover for the Republicans to resurrect the privitization schemes.

2. By not strongly saying what he is for, he doesn't take back the narrative. Unfortunately, lifting the cap on Social Security contributions or other minor tinkering is not much of a vote winner. But saying Clinton is not taking the issue seriously is just providing fodder for a Republican ad next fall.

cw,

"And please don't even mention the trust fund; in fact, when anyone does mention it, I automatically assume they've got some agenda that doesn't involve complete honesty."

And when someone says there is no trust fund, I assume they that have an agenda which starts from the assumption that we have collected, and continue to collect, trillions of dollars from the lower and middle classes to fund the Boomers retirement obligations under false pretenses.

Gromit, how does using Social Security reform as a cudgel to attack other Democrats take back the narrative? What is the point of talking about SS during the primary campaign, when there's no real difference between the candidates on the issue?

I'm still supporting Obama, but he'd better drop this issue and get onto something more important that's designed to reach out to Democrats rather than to the Very Serious People, who aren't likely to give him much credit for it anyway.

KCinDC: But saying Clinton is not taking the issue seriously is just providing fodder for a Republican ad next fall.

Are you saying the Democrats need an 11th Commandment, or are you saying Obama needs to get on board with the Clinton nomination before anyone even votes in the primaries? Because Clinton (and others) sure haven't been shy about using national security as a cudgel against Obama, and this plays into Americans' doubts about Democrats far, far more than does the mouldering corpse of Social Security reform. Which do you really think is going to be a bigger issue come 2008? SS, or the War on Terror?

I'm not saying I think it's a great issue to run on, but the idea that everyone should cower in fear at the mere mention of Social Security seems a bit neurotic.

Oops! That should be attributed to Dantheman above. Sorry to both involved.

Who has suggested a Democratic 11th Commandment? No one I've seen has said that Obama shouldn't criticize Clinton. I for one think he probably needs to do it more. I just think that choosing Social Security as the issue to do it on is stupid, because it reinforces a Republican theme and because there's nothing wrong with Clinton's position (which I don't believe is actually different from Obama's).

Gromit,

"Are you saying the Democrats need an 11th Commandment, or are you saying Obama needs to get on board with the Clinton nomination before anyone even votes in the primaries?"

Neither. I am saying that in a case like this, where there is no real substantive differences between the candidates, and where is a large differences between the parties, and the differences are over a "crown jewel" accomplishment of the Democratic Party which Republicans have been trying to reverse for decades, don't hand the other side any ammunition.

Hmm, maybe I should just let Dan take over for this thread and go get some actual work done.

KC,

I am heading out to lunch soon, so stay in touch.

That he's right about this is beside the point? Is this discussion all about the horse race and not at all about the substance of the issue? Egads.

Oh yes, 'egads'. Also 'for gosh darn sake' and 'gadzooks'. It's called 'politics', and you have to know how to win and then wield power to get anything serious done. Beastly, frightful business, Adlai, but there you are. Not much at stake, really - just who lives and who dies, who has hope and who has none; minor stuff compared to the maintenance of our precious illusions about how civilized we actually are...

Don't mean to pick unduly on Gromit (not personally anyway), but this sort of talk is like stopping in the middle of heated foreplay to discuss the fine points of which Connecticut private school a possible future child should attend and why. Obama is not in even the remote vicinity of 'taking back the SS narrative' from the GOP, nor scoring points on HRC. This is a typical feckless beltway consultant move - so stupid that only a 'professional' could come up with it.

Hey, I tend to agree with Josh Marshall that Iran is a much better issue than this. But getting from there to considering writing Obama off altogether is a tremendous leap.

I would strongly consider voting for Obama, Clinton is at best just going to mean I don't vote for President.

That said, I want to correct one thing about the trust fund. The reason it is just an accounting fiction is because its existence or non-existence does absolutely nothing to change the choices to be made when the Social Security surplus which has been helping pay for general fund expenditures ceases to do so (which last I checked was 2017 and the size of the gap in direct funding shoots up from there)

The choices with the trust fund are:

1. Raise Taxes
2. Cut benefits
3. Print More Money
4. Borrow More Money
5. Combination of the above.

The choices if the trust fund magically 'disappeared' tomorrow are:

1. Raise Taxes
2. Cut benefits
3. Print More Money
4. Borrow More Money
5. Combination of the above.

All for exactly the same amounts of money.

Now this may or may not be a 'crisis' depending on your view of the particulars. But whatever it is, your view of what we can to do about it, or not do about it, shouldn't be influenced even one little bit by the existence or non-existence of a 'trust fund' because it doesn't change things even one little bit.

jonnybutter: Oh yes, 'egads'. Also 'for gosh darn sake' and 'gadzooks'. It's called 'politics', and you have to know how to win and then wield power to get anything serious done. Beastly, frightful business, Adlai, but there you are. Not much at stake, really - just who lives and who dies, who has hope and who has none; minor stuff compared to the maintenance of our precious illusions about how civilized we actually are...

This strikes me as characteristically reactive Democratic strategizing. Good luck with that, it's worked great so far.

I'm mostly concerned about Obama's political judgement. I agree SS could use some reforms, and what he's discussed is in the ballpark of what's needed. That's pretty typical of him, proposing good policy aimed at getting support from across the aisle. But basically, he's been running a general election campaign (reforming SS, bridges to RW evangelicals, ending the partisan divide, collecting beaucoup bucks) to win an uphill primary. That's dumb. To beat Hillary he has to appeal to *core democrats* better than she does. Not this. Assuming he gets the nomination, how do I know he won't follow up with a primary-oriented campaign for the general election?

I'm also dubious about his "Hail Mary" (as the HuffPo puts it) strategy. He's going to attack Hillary. Well, he really should have noticed that Hillary has high positives among Democrats (sorry, Naderites, but it's true). Attacking Hillary directly is not the way to get ahead. The way to get ahead is to appeal to Democrats better than she does - which is doable with her notorious slipperiness and cautious approach.

The Blackwater business is a perfect example. He *already had* proposed reforms. He *should* be pounding the podium about mercenary armies, the need for the military to be subordinate to civilian power, the shamefulness of underpaying the Army so big Blackwater executives get big bonuses. If he were on that the Democratic primary voters would be eating out of his hand (and in this case the Independents too). But no, when he has an opportunity to score big politically and get another issue for the Dems in general to work with instead he chooses to "attack" one of the most respected Dem leaders because she's sticking to the party line on Social Security. Sigh.

Well, a long time ago I said he need to be governor of Illinois first. Guess that's the way it's going to happen, if he ever wants to be more than an influential Senator.

I tend to agree with Josh Marshall that Iran is a much better issue than this.

Sorry, but you 'tend' ('TEND'?) to agree that speaking out about an incipient additional, possibly even more catastrophic, war in the ME is a 'better issue'? I am so confused. Here is where the issue itself is MUCH more important - more urgent - than the horserace; or rather, where the horserace and issue are congruent - the most obvious and best kind of politics. SS will have to be tweaked someday. Bush and Cheney want to start another disasterous war within a year. ????

I'm not trying to be the Language Police; I just honestly don't get this.

The choices with the trust fund are:

1. Raise Taxes
2. Cut benefits
3. Print More Money
4. Borrow More Money
5. Combination of the above.

All true, if you assume that Social Security is the source of our fiscal problems so we have to make "choices with the trust fund."

But that's not true.

The choices we need to make relate to the country's fiscal situation, of which the debt to the trust is a part. We could add to the list, for example, "make major cuts in defense spending," or "default on treasury bonds held by foreign governments and central banks." Either of these would go a long way toward making it easy to repay the debt held by SS.

The critical point to be understood is that SS, taken as a self-contained entity, is not in serious financial trouble. Indeed, it may not be in any financial peril at all, though some minor tweaks might be prudent. The "crisis" that it faces is that it is owed money by the Treasury, and there seem to be people who are happy to let the Treasury default on these debts as a way of solving broader fiscal problems.

This has been explained endlessly, yet somehow we continue to hear of a "Social Security crisis," and not a fiscal problem.

That's well-put criticism, Curt, and sums up my concerns about Barack well.

As for Social Security, it's worth reviewing some facts. Each year the government prepares three financial projections for use in SS planning, pessimistic, optimistic, and middle of the road. The only one that ever shows major financial trouble for SS is the pessimistic one, and it has yet to ever agree with reality - it includes assumptions like no net immigration, real growth about half of what has been the case over the last several decades, and so on. The middling projection, which is the one that usually accords best with current trends, shows only a pretty mild shortfall, easily fixed by (as it happens) exactly the kind of measure Obama is proposing, simply removing the cap on income taxable for SS. In the optimistic case, which became more removed from real developments thanks to the Bush/Cheney years catastrophe, even that mild adjustment becomes unnecessary.

There has been a multi-decade effort to suppress the basic facts on SS financing to stampede the public toward foolish measures. The alternatives all end up being, depending on circumstances, unviable or unnecessary - for instance, an economy prosperous enough to allow long-term good returns plus coverage of costs for individual retirement accounts would be more than good enough to cover the shortfall within actually existing SS. Republican campaigners and their allies in useful think tanks have been lying to us all for a long time about it.

What's troublesome about Obama's remarks is not his solution - which is good and sensible and well worth doing - but his speaking as though any part of the crisis rhetoric were true with regard to Social Security. It's not, and every Democratic candidate should start by telling the public that there's no crisis in Social Security.

And yeah, as Bernard says, the only serious threat to Social Security would be the government defaulting on its bonds. That would crash the US economy (and the world's) but good, and one of the things that first made me realize that Bush was going to be more than just another bad president was when, early on, he talked apparently quite seriously about how nobody should trust government bonds because it's all just paper. As the years since then have shown us, he really does have no sense of obligation to inherited responsibilities unless they give him a thrill or something. So in that sense, yes, Social Security would be at risk if we elected another such buffoon.

Obama is figuring as one of the biggest political disappointments in years.

I think his courtship of the homophobic evangelical vote is sincere in that he's previously criticized Democrats for not being fundie-friendly. But I just don't get the point of bringing up SS.

It's as if he's decided to run to Clinton's right, which makes no sense at all.

Anway, as I've said before, the more I hear and see of Obama, the more I like Clinton.

"All true, if you assume that Social Security is the source of our fiscal problems so we have to make 'choices with the trust fund.'"

That isn't what I said.

I said "The reason it is just an accounting fiction is because its existence or non-existence does absolutely nothing to change the choices to be made when the Social Security surplus which has been helping pay for general fund expenditures ceases to do so"

The choices with or without a trust fund are precisely the same. Cutting benefits can be in Social Security or elsewhere from the general fund. All the other choices are equally interchangeable between the general fund and Social Security.

You can decide that it isn't a big deal. That is a judgment (in my opinion wrong, but whatever). But your judgment shouldn't be influenced at all by the existence or non-existence of the 'trust fund' because it doesn't change the choices *at all*.

From a political theater point of view--this seems to be a netroots overreaction. If you think Republicans are suddenly going to make up their minds about Social Security bases on Democratic Primary talk, you have an odd view.

If you think Obama loses points for telling the truth and being factually impeccable about it in this statement, I don't know what to say.

Considering that Bill Clinton made hundreds of statements exactly like that in both of his election campaigns, I'm not sure what you want.

"And yeah, as Bernard says, the only serious threat to Social Security would be the government defaulting on its bonds. That would crash the US economy (and the world's) but good, and one of the things that first made me realize that Bush was going to be more than just another bad president was when, early on, he talked apparently quite seriously about how nobody should trust government bonds because it's all just paper."

Bruce, which of the 5 options I outlined are changed by Social Security having a trust fund?

It isn't a 'default issue'. It is a "loans to yourself don't help you financially" issue. Default isn't necessary. Just cut programs, or cut benefits, or raise taxes, or borrow money, or print money. The existence of the 'fund' doesn't change any of that.

Bruce Baugh: What's troublesome about Obama's remarks is not his solution - which is good and sensible and well worth doing - but his speaking as though any part of the crisis rhetoric were true with regard to Social Security.

Wasn't the "looming crisis" verbage all the reporter's? I haven't yet found Obama's verbatim remarks, but this is from an op-ed he wrote on the subject back in September:

Some have argued that the problems are severe and that Social Security is fundamentally broken. This is an exaggeration. The underlying system is sound and the actual problem, a projected cash shortfall over the next 75 years, is relatively small and can be readily solved.

If anyone can find the remarks that were paraphrased by the Des Moine Register, if it turns out he's talking out of both sides of his mouth on this one, that might help me understand better what has everyone so hot under the collar.

Right, as Bruce says, the only real threat to SS as a system is a US government default. And, right at the moment, the best thing to reduce the chances of that are to get out of Iraq PRONTO because it's costing us several hundred billion a year that we don't have. Why can't Obama (or any of the other democrats) drum on *that* way to shore up social security? Talk about a winning political issue.

jonnybutter: Sorry, but you 'tend' ('TEND'?) to agree that speaking out about an incipient additional, possibly even more catastrophic, war in the ME is a 'better issue'? I am so confused. Here is where the issue itself is MUCH more important - more urgent - than the horserace; or rather, where the horserace and issue are congruent - the most obvious and best kind of politics. SS will have to be tweaked someday. Bush and Cheney want to start another disasterous war within a year. ????

Where is this hostility coming from? Yes, "tend" ("TEND"!). I don't live in Iowa. I don't know that Iowa voters -- even Democratic ones -- are singularly focused on Iran to the exclusion of domestic issues. Maybe they have people there who plan on retiring one day.

I'm not trying to be the Language Police; I just honestly don't get this.

Of course not, you are just freaking out over a simple turn of phrase. Sorry if I don't emote strongly enough for you. I apparently just can't match your fervor.

Sebastian,

But the only specific option you list is "cut benefits." This suggests to me that you consider defaulting on the trust fund debt, but no other government debt, as a viable policy. That does seem to imply that you regard that debt specifically as the source of the problem. Equally, you suggest no other spending cuts, implying that the level of non-SS spending bears no relationship to the SS issue.

It's not clear to me what you mean when you talk about the case in which there is no trust fund. Are you describing a scenario where payroll taxes were collected at the same rates, but simply funneled directly into general revenue? If so, you are correct that the situation would be the same, but then again the options would be broader than your list. And of course, this presumes that the jump in payroll taxes that created the trust fund could have been enacted without the promise that the money would be used to fund future SS benefits. Without that promise the payroll tax would be quite a nasty and regressive tax. Proposals to default on trust fund debt turn it into that retroactively.

Gromit, if it turns out that I've been responding to media floppage rather than Obama floppage, I will be glad. I'll see what I can find out.

Not to say that anticipating media spin isn't crucial to competent campaigning, but these sorts of Obama stories always somehow seem much worse in the Liberal blogospheric headline version, then once you dig a little they typically prove to be much more innocuous. At least that's been the pattern -- this might be an exception.

Dantheman -

And when someone says there is no trust fund, I assume they that have an agenda which starts...

Please don't take my comment personally. As several posters have written, the existence or not of the trust fund doesn't mean squat in our real world. And when anyone claims otherwise, I wonder why.

My main agenda would be to maintain an effective and solvent government, and the question remains, where's all this money going to come from?

If the Social Security Trust Fund doesn't mean anything, then the 1983 payroll tax was a giant tax hike on lower and middle income people to pay for general revenues, aka to pay for the Reagan tax cuts. Which means the Republicans then were arguing in bad faith about Social Security, or the Republicans now have decided to retroactively make those arguments into bad faith.

Or the people who say the Trust Fund doesn't matter are effectively endorsing a gigantic transfer of wealth from the vast majority of Americans to the very wealthiest sliver of Americans, since those are the people who have benefited from the Bush and Regan tax cuts (the former originally justified by the surplus that was mostly a result of the Social Security Surplus).

If that's the case, can we please lay to rest the fake claims of the Republicans to be anti-tax?

And to the people who are honestly concerned about the Social Security shortfall, and don't think the Treasury Bonds matter, then I would suggest politely that you should be far more concerned about the occupation of Iraq, which is costing us many billions of dollars, far more than the (pessimistic) projected Social Security deficit.

cw,

I am sorry. When I read a comment which states "I automatically assume they've got some agenda that doesn't involve complete honesty", I get the impression that, to the author of the comment, people are supposed to look at the person's advancement of that specific argument as a way of telling whether that person is honest. So were you being honest in saying that you assume those of us who believe that there is an obligation to honor the debts owed to the Social Security trust fund shouldn't take your allegations as to our honesty personally?

As to the merits, the size of the Social Security shortfall under even the most pessimistic of projections is far less than the size of the Defense Department shortfall, or the farm subsidies shortfall or numerous other shortfalls in the Federal budget (since few other programs have a dedicated funding source). So talk of a Social Security crisis, and not a larger government budget crisis, strikes me as off-base.

Finally, in prior discussions on budget issues, I noted that government spending as a percentage of GDP is roughly at its post 1960 average, while revenues as a percentage of GDP are at post 1960 lows (the popular perception is exactly the opposite). In other words, we are trying to have Great Society programs while not paying for them. To me, this suggests that, as long as no one is seriously talking about reversing the Great Society programs, we need to add revenues to pay for them.

KCinDC: the point is that whatever problems Social Security may have, they're not a crisis and are far, far down the list of problems we have to deal with at the moment.

OK – that is a statement that is much more reasonable. Whether there is a looming crisis and how far away it may be are certainly open to discussion. I mostly objected to Atrios’ statement “There is no problem with Social Security. None at all” and the seeming endorsement of that.

Others that were linked or commented seem to feel like there is no looming crisis and no issue that can’t be fixed beyond minor tweaking. I don’t agree with that but I think it’s a more reasonable position than “no problem at all”.

"But the only specific option you list is "cut benefits." This suggests to me that you consider defaulting on the trust fund debt, but no other government debt, as a viable policy."

I think I may have caused terminology problems. I meant 'benefits' in the sense of cutting things that the government does not in the strictly limited sense of cutting "Social Security Benefits". So restated for clarity the options are:

1. Raise Taxes
2. Make cuts in government programs
3. Print More Money
4. Borrow More Money
5. Combination of the above.

But I will note that even if we posit the useful existence of the Social Security Trust fund, it never guaranteed specific levels of benefits--so talking about changing the formula for determining benefits for people 10 or 15 years out shouldn't automatically invoke the character judgment which has already started in this thread.

"It's not clear to me what you mean when you talk about the case in which there is no trust fund."

If the trust funded vanished tomorrow--all records of it were destroyed and could not be recovered--it would make absolutely no difference to any of the discussions we are having.

If the trust fund magically doubled the number of T-Bills that it had, it would make absolutely no difference to any of the discussions we are having.

The existence or non-existence of the trust fund has no bearing whatsoever on the finances of the discussion.

1. Raise Taxes
2. Cut benefits
3. Print More Money
4. Borrow More Money
5. Combination of the above.
Add: default.

A: Federal Budget ~$3 trillion +
B: Accrued Exposures ~$3 trillion/yr and accelerating

Raise Taxes:
Top 1% income earners already pay over half and raising rates may have a negative effect on revenues. Capital Gains guys are mobile and can just leave, most are smarter than us and untouchable (Caribbean). The taxes would have to be on the middle class. Good luck getting elected on that platform.

Cut Benefits:
Good luck getting elected on that platform.

Print More Money:
Being done. $500 billion+ 'liquidity' for 'credit crunch'. Dollar very low, going lower. Borrowing costs go up to fund deficits.

Borrow More Money:
See above.

Default:
Credit rating goes away. The fifty plus percent addicted to government employment and programs are in trouble. Balkanized islands of dependency fueled by ethnocentric friction go without. Violence. Public demands security.

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship."
--Attributed to Alexander Tyler, 1787

Capital Gains guys are mobile and can just leave,

Was there massive emigration of "capital gains guys" when the rate was 20%, just a few years ago, or even 28% in the late 80's? What about when dividends were taxed as ordinary income rather than at 15%

Somebody probably decided Social Security was a good place to mount the cannons because of Iowa demographics. Obama has got to be placing a huge amount of emphasis on Iowa.

As interesting as the SS debate is (and I agree that it's a better issue for the general than the primaries), I think the bigger issue is the whole tactic of confronting Clinton more aggressively.

If the media is to be believed, the push for this tactic is coming from supporters who are nervous about how he's polling. Supporters have some great ideas, I'm sure, but they're not the ones he needs to win over.

Although he doesn't like it, he has made his bed, in a way, with the "politics of hope". From NYT:

"I’ve been amused by seeing some of the commentary out of the Clinton camp, where every time we point out a difference between me and her, they say, 'What happened to the politics of hope?' which is just silly," he said, laughing.

Asked why it was silly, he responded: "The notion that somehow changing the tone means simply that we let them say whatever they want to say or that there are no disagreements and that we’re all holding hands and singing 'Kumbaya' is obviously not what I had in mind and not how I function. And anybody who thinks I have, hasn't been paying attention."

The problem is that it's not silly. He needs to make sure that we "get" him even if we're not paying attention. He needs to give a this-is-what-the-politics-of-hope-*really*-means speech, and I think it needs to be a doozy.

He's got to differentiate himself from Clinton - I honestly think that's his biggest issue - but there are much better ways to do it than the ones he's using.

Catchiest meme wins.

"Attributed to Alexander Tyler, 1787"

So, Bill, you believe democracy is a system doomed to failure.

Why do you hate America, Bill?

It's no wonder you don't cite your sources for made-up quotes, though. Good job.

Really, does an income of $200 million make your life at all different from what $100 million gives you, except for the ability to point to your position in a ranking relative to other ultrarich people?

His policy proposal is fine. His campaign strategy continues to utterly bewilder me. He knew how to run a long-shot primary campaign in Illinois; I don't know what's come over him.

He & Clinton are both running general election campaigns to some extent, but the strategy makes some sense for her, & she's also being reasonably careful trying not to let Obama or Edwards outflank her too much on the left. It makes no sense for him.

Where is this hostility coming from? Yes, "tend" ("TEND"!). I don't live in Iowa. I don't know that Iowa voters -- even Democratic ones -- are singularly focused on Iran to the exclusion of domestic issues. Maybe they have people there who plan on retiring one day.

Sorry. It's not personal hostility, just exasperation with a certain kind of Dem complacency. First you complain about substance vs horserace vis a vis SS, then suggest that Iran merely *might* be a better...horserace (political) issue than SS. I am aware that voter complacency may match or mirror that of many Dems, but I think that's a giant problem. Dems lose, and therefore cede political power to really dangerous people, because, rather than lead (in this case alert people about another very large mistake about to be made), they tend to simply react to the GOP and/or fiddle around the edges of issues. If the US starts a shooting war with Iran, there will be virtually no other issues in the air in the '08 campaign. It will have been designed that way.

We have a real foreign policy catastrophe on our hands - and I don't think I'm being at all hyperbolic - and some treat it as just another issue, virtually equal to others (like what to do about SS in 30 years) simply because it's on a laundry list. I don't understand that. No personal offence meant, though (just impersonal).

Dantheman -

You and I may agree that there's a moral obligation to use the trust funds as they were intended. At age 61.5 it would certainly be in my interest to have the trust fund honored. My point is that the any binding obligation was effectively discarded as soon as the SS surplus was counted as part of the regular budget. All we are left with is politicians' honor, which I'm guessing will get discarded as soon as its politically useful to do so.

politicians' honor

Funniest line of the day. ;)

cw,

Your comments are a bit of a non sequitir to me. It seems as if you are saying that there is a moral obligation to use the trust funds solely for Social Security purposes, but that anyone who says so is dishonest, and at least implying that anyone who says there is no trust fund is honest. Can you clarify?

"All we are left with is politicians' honor, which I'm guessing will get discarded as soon as its politically useful to do so."

Actually, it's the full faith and credit of the United States Government, and if that's "discarded as soon as its politically useful to do so," then we might as well all emigrate now.

It's a remarkably anarchistic view, though.

Kevin Drum and many other liberal commentators have hammered away for years -- that wacky Paul Krugman, for instance -- at how relatively trivial are the changes necessary to keep Social Security in solvency beyond the 47-years-from-now point at which we're all supposed to be in a tizzy about. It's unsurprising that folks in either camp are unfamiliar with the other's basic arguments -- that's perfectly common -- but it does tend to protract repetitive conversation, alas.

Again. Just one sample of many times again.

Bernard, the world has gotten much smaller in the last two decades.

(1) A rise in Capital Gains tax rates from 15% to 20% or 28% or even 40% will not close a budget gap of $3 trillion per year. Not even remotely close. Some would argue that receipts would go down.
(2) For those future less-adventurous people to be targeted; Australia is welcoming newcomers. They just need to know that you have the financial means to be an independent Citizen. The linked example details how you are invited if your tax returns show better than A$41,302 for the last two years. Australia recognizes the threat dependency on the government represents to civil society. A large percentage of the 5,000 young English professionals that leave each week go to Australia and New Zealand.

http://forums.australia-migration.com/archive/index.php/t-3127.html

Gary; here’s your link.
http://www.mcsm.org/democracy1.html

America is the greatest nation the world has ever seen, and I’m confident that it will continue to be. We’re just in the process of learning a little lesson about economics and dependency on government. It’s a painful but healthy process, kind of like a vaccine. Google ‘A Republic, if you can keep it.’

"Actually, it's the full faith and credit of the United States Government, and if that's "discarded as soon as its politically useful to do so," then we might as well all emigrate now."

That's nice Gary. Which of the options changes based on the existence or non-existence of the trust fund?

"A large percentage of the 5,000 young English professionals that leave each week"

You were previously asked for a cite on this, and you've not responded. Simply repeating an unsourced assertion doesn't actually make it more credible.

Bill: "Gary; here’s your link."

Hee. I point out that your quote is completely phony (see again here, and your response is to quote it again.

Res ipsa loquitur.

Because since the Trust Fund exists, it requires that that money be paid back to Social Security, and commits it to that particular use. Social Security is not the problem.

Irresponsible tax shifts and wars are the problem, not Social Security. The future funding deficit is not a specific Social Security problem. The Occupation of Iraq is costing us many times the projected "shortfall" for Social Security. The Bush tax cuts for the rich have cost many times more than the pessimistic projections for Social Security.

So why are we talking about Social Security, when the problem is irresponsible wars and tax giveaways? Or even talking about farm bills, airline bailouts, or subsidies for other profitable companies?

Because the modern Republican party wants to get rid of Social Security, and has wanted to for years. That's where the "Social Security Crisis" myth came from.

Also, Sebastian: Option 5. A good bit of 1, and some of 2.

Of course, when the Democrats are forced to do that by the complete fiscal mess Bush II (and Reagan and Bush I before them) left them, the anti-tax crusaders will come out of the woodwork and savage them, of course. Just in time for the next Republican president to "justify" his tax giveaway to the rich on the small surplus finally created.

Dan,

Most folks would agree there is some sort of moral obligation to use taxes collected for a certain purpose to actually be used for that purpose. But money is fungible, and it's fairly common to move money around so you have the appearance of spending the money properly, when as a practical matter, you aren't. The trust fund is there to provide that appearance.

Here in Ohio, one of the promises when the Lotto was enacted was that the proceeds would go to the schools. You can all guess what really happened. They spent the money previously spent on schools on other things, and the schools were just as poor as before.

Given that all the payroll tax money we've been paying all these years has already been spent on other things the government will have to take whatever benefits they pay us out of total revenues (which would include future payroll taxes), in competition with other programs. Our benefits will depend on the political calculations of our politicians, and have nothing to do with the trust fund (other than maybe some residual sense of honor - LOL, OCSteve). Today there'd be a high political price to be paid for cutting benefits, but at some point in the future the price may be just as high on the other side.

When I seen anyone arguing differently I (perhaps incorrectly) leap to the assumption that they are trying to muddy the discussion, not clarify it. Perhaps the "honesty" comment is too combative, sorry.

Gary,
Actually, it's the full faith and credit of the United States Government,

Actually, no. At least not that the trust fund be used only as intended. Congress has the ability to change the benefits, all the way to zero, if they want to, regardless of the condition of the trust fund.

But as you say, we've had this conversation a hundred times or more.

I don't necessarily agree that Obama showed poor judgment in introducing this issue into the primary campaign. After all, Bill Clinton was amenable to a partial privitization of soscial security as recently as 1998, and might have accomplished same had he not been brought low by scandal. Hillary is in the pocket of Wall Street just as much as Bill, and she's given no indication that I know of that her views are significantly different from her husbands.

Possibly, Dog, except that Obama's the one saying something needs to be done and criticizing Clinton for ignoring the subject.

Gary Farber;

I’ve been looking for the link to the 5000 Brits weekly and have not been successful. It was in a Brit paper (Sunday Times?) and was featured on the Drudge report. It’s real.

As a substitute here’s commentary on a ‘California Is Seen in the Rear View Mirror’ story from the LA Times. The original story had been removed from the web by the LA Times, which is what I suspect happened to the Brit story (or maybe its lack of search engine skill on my part). In any case:

Great Britain has ~60 million people, California ~38 million. 2.2 million people left California between 1995 and 2000. That’s over 8,000 per week. As a Nevada resident, I can state without equivocation that things accelerated significantly after 2000. Interstate emigration is driven by the same forces as British innercommonwealth emigration, namely immigration issues, the associated social costs, and taxes. The 8,000 Californians per week were driven by a ~8% tax differential, a minute fraction of what currently exists between the US and countries to the south. Hispanics assimilate way better than Muslims. Google housing developments in Panama, Costa Rica, Belize, and Mexico. Trump is building in Panama.

As Hillary tells excellent doctors how much they can charge, and then tells families of means that they are not allowed to pay for medical care outside of the government system, guess what happens? In my opinion, it is unethical for politicians to get people addicted to programs that they know are going to go away.

http://www.vdare.com/francis/real_terminator.htm

And here’s how we avoided losing the “full faith and credit of the United States government” last month:

http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-28T003622Z_01_N27415556_RTRIDST_0_USA-CONGRESS-DEBT-UPDATE-1.XML&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2

"I’ve been looking for the link to the 5000 Brits weekly and have not been successful. It was in a Brit paper (Sunday Times?) and was featured on the Drudge report. It’s real."

Real facts are easily citable. End of story.

"As a substitute here’s commentary on a ‘California Is Seen in the Rear View Mirror’ story from the LA Times. The original story had been removed from the web by the LA Times, which is what I suspect happened to the Brit story"

Indeed. The conspirators are everywhere.

But it's lovely of you to cite VDARE. Let's let the founder speak for himself:

By Peter Brimelow

Notoriously, the modern definition of "racist" is somebody who is winning an argument with a liberal…or with a country-club Republican battling servant problems. So, as a veteran of the immigration reform movement, I wasn’t surprised to see the anti-illegal immigration initiative Defend Colorado Now smeared in a recent RMN article (Funding questioned: Critics say some Defend Colorado money tainted, by Kevin Flynn, July 15 2006).

[...]

Now I will boldly go etc. We also publish on VDARE.COM a few writers, for example Jared Taylor, whom I would regard as “white
nationalist
, in the sense that they aim to defend the interests of American whites. They are not white supremacists. They do not advocate violence. They are rational and civil. They brush their teeth. But they unashamedly work for their people — exactly as La Raza works for Latinos and the Anti-Defamation League works for Jews.

Get used to it. As immigration policy drives whites into a minority, this type of interest-group "white nationalism" will inexorably increase.

Good to know what you regard as a credible source of information.

Meanwhile, you've asserted multiple times that "5,000 young English professionals" leave Britain "each week." (I guess conditions are less oppressive for the English in Scotland, Wales, and Northern Ireland.)

You can't actually find any support for this factoid, so you offer "[a]s a substitute here’s commentary," something about another topic entirely, something about California, and that "Hispanics assimilate way better than Muslims" and that "Trump is building in Panama."

This is an interesting style of attempting to support simple assertions of fact, and I wish you luck with it.

"As Hillary tells excellent doctors how much they can charge, and then tells families of means that they are not allowed to pay for medical care outside of the government system, guess what happens?"

You get drugs that help alleviate your confusion of your imagination with reality?

"In my opinion" is not a phrase that substitutes for cites to facts, or for writing that coherently makes a case for something.

There do seem to be a remarkable number of folks out there in certain communities who seem to be entirely confused about this.

But let's look at your new claim, Bill:

[...] As a Nevada resident, I can state without equivocation that things accelerated significantly after 2000. Interstate emigration is driven by the same forces as British innercommonwealth emigration, namely immigration issues, the associated social costs, and taxes. The 8,000 Californians per week were driven by a ~8% tax differential
Your link to a cite to support your claim that "[i]nterstate emigration is driven by the same forces as British innercommonwealth emigration, namely immigration issues, the associated social costs, and taxes" is?

Your link to a cite to support your claim that "[t]he 8,000 Californians per week were driven by a ~8% tax differential" is?

It would save time if you would bother to include links to cites, rather than wait to be asked. It's SOP in productive discussions. It's the only way to establish what is and isn't testable fact.

"And here’s how we avoided losing the 'full faith and credit of the United States government' last month"

Pray forgive me for not understanding your point: what is it?

"Possibly, Dog, except that Obama's the one saying something needs to be done and criticizing Clinton for ignoring the subject."

This is symbolic of the total misunderstanding of what Obama said.

First of all, he was pointing out that SS is supposedly something nobody is supposed to talk about, but he is willing to. Starts out by pointing out that it isn't in big trouble and then gives his plans for what tweaks are probably needed to handle the long term sovency issues, which are really there.

True, they are not as big as the Republicans want to say they are, and not really needing any major over haul, and he did not suggest any.

The real issue is not SS, however. The whole point he was trying to make, and if people weren't so quick to look for something to jump on him for they would see, is that HRC has a habit of avoiding concrete statements. In the instance he was speaking about, HRC was asked a question about SS. She totally sidestepped the issue, but then spoke to the questioner in private afterwards where she mentioned basically what Obama suggested.

Is point is that she did not need to sidestep the issue to begin with. Look at most of her statements including the Kyl-Lieberman amendment, the whole issue of torture and executive powers, and even the telecom ammunity issues and she is being very coy. She states words that can be used any which way in the future.

She is a worse panderer than Romney, in that he is only really tryingto impress the base, whereas she is trying to be all things to all people.

I realize that most politicians are that way, but what is wrong with Obama pointing that out?

Have a good night Gary, I’d like to buy you a beer sometime. I think you need one. Google state income tax rates.

Did everyone miss what Obama was saying?

His argument wasn't about SS particulars, but rather that HRC was not truthful to her approach when she talked about it.

That is basic to the difference between the two of them...not policy but practice.

His point was take a position and stick with it...don't amend it according to who you're talking to.

We can do better than the same triangulation we get from the Reps these days.

Telling Gary Farber to Google is sort of like bringing coals to Newcastle, only with an added danger of meta-ironic implosions...

Results 1 - 10 of about 4,460,000 for state income tax rates. (0.15 seconds

I don't have time to read 4.5 million documents, and I don't think Gary does either. Can you pare it down to maybe a cool million for me?

G Davis - If that's his point, then I agree.

I watched the debate, and it looked to me like we're going to have the "simple yes or no" crap that Bush pulled on Kerry in the last election.

Is "it's not the optimal solution, but I support it" too nuanced a view for people to understand?

Josh Marshall has a bit on Social Security, which addresses some of the "the Trust Fund isn't real!" claims, and why we shouldn't listen to them.

It doesn't address the Trust Fund isn't real claims. It merely restates that he thinks it is. He is correct that pretending there is a trust fund is enabling ridiculous spending by pretending that loaning money to yourself is fiscally responsible. But that doesn't make it less of a pretense.

Either we should treat Social Security as being funded by the payroll tax, or we should just think of the payroll tax as one among many revenue sources going into general funds. Under the first view, the debt owed to the "trust fund" must be paid back. Under the second, there's no reason to care about whether the payroll tax is enough to cover the costs of Social Security benefits, any more than we should care whether the payroll tax covers the Defense budget.

Also, under the second view, Reagan's payroll tax increase was justified by a lie, and when combined with income tax cuts was simply a huge transfer of tax burden down the income scale.

"Under the first view, the debt owed to the "trust fund" must be paid back."

What does this even mean? It isn't the same people getting paid back. It isn't the same people 'paying back' that were 'borrowed from'. Again, if you are going to say the trust fund means something, you should tell me what choices financial choices its alleged existence changes. Which taxes won't have to be raised because of its existence? Which programs that would have to be cut can avoid it because of its existence? How much money can the government not print because of its existence? How much borrowing can we avoid because of its existence?

If you are going to take that tact, it is just rich baby boomers screwing everyone else. Under your analysis it is just that high paid baby boomer earners get the best of all worlds--best of payroll tax limitations and lower income tax while they are at the peak of their earnings, high spending, jack up income tax later when they are retired and have low earnings. In point of fact, I think it isn't a very useful way of looking at it--but if you are going to play the 'broken promises' game the promise being broken is the promise to give the baby boomers the best tax environment with unlimited spending at all phases of their life to the detriment of all the people who are in different phases of life from the baby boomers.

In other words, yes, the payroll tax increase was just a permanent transfer of the tax burden down the income scale, and it was based on a lie. If that's the case, then it's immoral that even now we're collecting extra money from workers and claiming that it's going to be spent on Social Security when it's just going into the general fund.

I'm not claiming that the "trust fund" changes what options exist, and I don't think anyone else is either. The argument is about the morality of decisions related to those changes.

I just don't understand how one can take the position that the payroll tax simultaneous is and is not there to fund Social Security. If it is, then the extra money that's been collected all these years should go to Social Security. If it's not, then who cares whether the payroll tax is paying for SS or not? The relationship isn't any more important than that between the estate tax and Iraq spending. Let's just count the payroll tax in with the income tax and stop making taxes look more progressive than they are.

IMHO, Obama pulled the issue out too early. It would play well nationally if he gets the nomination but kills him with the base. Even then, it wouldn't do much. Don't touch the third rail unless you're grounded.

But the "crisis" issue somewhat bugs me. Bush muffed the privatization pitch. Even though I am in favor of some form of privatization his plan would have exacerbated the problem. That is not the same thing as saying there is no problem now.

Here is a quote from the 2007 SS Trustees report:

"Although the program passes our short-range test of financial adequacy, it continues to fail our long-range test of close actuarial balance by a wide margin. Projected OASDI tax income will begin to fall short of outlays in 2017, and will be sufficient to finance only 75 percent of scheduled annual benefits in 2041, when the combined OASDI Trust Fund is projected to be exhausted.

Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent or some combination of the two. Ensuring that the system is solvent on a sustainable basis beyond the next 75 years would require larger changes. To the extent that changes are delayed or phased in gradually, larger adjustments in scheduled benefits and revenues would be required that would be spread over fewer generations."

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

So the shortfall starts in 2017 (not 2018 as earlier projected) when we start cashing in the government bonds. And who pays those back? Us. Where will the money come from? Either increased revenues (i.e. taxation or the economy) or spending cuts (not going to happen)

And look at what it would take to fix it RIGHT NOW. I don't know how you can say a 13% increase in payroll taxes at this point isn't some form of serious problem. And as the trustees say, wait longer and the amount just goes up.

The non-crisis folks say we are solvent for 38 years so. But at that point there is hell to pay.

Bc, why on earth would anyone agree to an increase in payroll taxes to pay for a supposed future Social Security shortfall when we're being told right now that the extra money collected from the previous increase in payroll taxes doesn't incur any obligation on the government to spend it on Social Security? If as Bush says it's just worthless pieces of paper, why would we want to buy still more of them?

The non-crisis folks say we are solvent for 38 years so. But at that point there is hell to pay.

no, there's my little brother's generation to pay. he's trouble, but not hell.

"I just don't understand how one can take the position that the payroll tax simultaneous is and is not there to fund Social Security."

Sure you can, but it shouldn't be grabbing large surpluses.

It could be to fund Social Security now.

The problem with the design of Social Security is that it requires an ever increasing number of workers and that isn't necessarily going to happen. When there are lots of retirees compared to workers, the current workers end up paying a lot more in taxes.

So then you have to decide what to do about that fact.

The problem with the trust fund 'solution' is that it doesn't do anything useful. When the time comes, and there are fewer workers, they still have to pay lots more money. Whether they have to pay lots more in payroll tax in 2030, or lots more in income tax to cover the 'trust fund' does nothing to change the fact that they are paying lots more taxes.

That is why I would prefer more of a forced savings approach. The money goes to an account (like a simple 401k or something) which is actually yours. Then you get a stipend from it after you retire. If the government wanted to cover the unexpectedly lucky people who outlive that, so be it.

The problem is getting there from here. The people who were paying as we were going still have to be covered. But if the transition is spaced over 15 years (especially if while the baby boomers are still working and at the height of their income earning years) it is managable without totally screwing one generation or another.

The problem with the design of Social Security is that it requires an ever increasing number of workers . . .

Or a constant supply of workers each generation of which earns -- and thus pays in payroll taxes -- a LOT more than the previous one. Too bad wages have been pretty much stagnant for 30 years, huh?

Sebastian Holsclaw:

Amen on your solution and amen on the problem. Getting from here to there is the problem.

Consider how poorly (IMHO) the returns are on social security. I worked for one year for a state (Alaska) that opted out of the system. My 12.26% (both employee and employer contribution) went into an investment account (called SBS) that I could somewhat control. Most employees making $50k or more have over $500,000 when they retire (purely my anecdotal experience), and some far more.

For example, an employee working 20 years earning an average of $50k/year would have $236K at 6% on their 12.26%. Using the average S&P 500 rate of return for the past 20 years:
http://www.moneychimp.com/features/market_cagr.htm

the amount shoots up to $409,000. Work 30 years and that amount is $1.26 Million. Even the $10/hour (average) worker would have $170,000 after 20 years and $1.5M after 40 years (what should be typical if you work from after high school until normal retirement age). Even if you use 6%, the amount after 40 years is around $423K.

I used the SS benefit calculator as if I made $10/hour starting a little after high school.

http://www.ssa.gov/retire2/AnypiaApplet.html

My benefit came out at $1,080 at age 66. Yet I could have as much as $1.5 million if my 12.26% were invested each month at average S&P 500 returns. Which would you prefer?

Even adjusting for inflation, a 66 year old person today expected to live 20 years with $423,000 today using a 5% rate of return could withdraw $24k per year for 20 years, double the $1k ss benefit. I could withdraw the ss amount of $1,080, live to be 106 and still leave $200K to posterity at 5% rate of return in retirement.

All Alaska employees have participated in SBS system since 1980 (along with a pension system). How do you think they are doing? Alaska recently moved away from the pension to a 100% defined contribution plan.

IMHO, that might be a bit much. And this doesn’t take into account disability or death benefits. I know those are a huge part of ss. But let’s take a look:

For the $10/hour employee, $30/mo. on the State of Alaska’s disability plan (avg. over time) would pay for 70% of wages while disabled. Taking out another $50 for life insurance (this is more or less a random number; it would pay for $250k at standard rates through age 40; on a national level it would cost less than this but then the death benefit should go longer so I picked the higher number). Although I can’t be sure, it looks like these benefits would significantly outpace the current ss benefits.

So out of the $212.50 per month that would go into the plan, $80 would come out to pay for disability and death. The $10/hour employee would still have $265K after 40 years at 6%, or $976k at S&P 500 rates.

A system like this could allow for choice in many areas such as the amount of life and disability insurance to purchase (as the State of Alaska does). You could mandate minimum levels. You could require exhaustion of these benefits before any government money comes in like a Medicaid spend down. The beauty of such a system is that it gives participants and incentive to save. It would also, IMO, weed out at least some of the bogus disability claims as those claims tend to rise due to economic conditions.

http://www.socialsecurity.gov/policy/docs/chartbooks/disability_trends/sect05.html

For the market adverse, you could mandate a percentage in U.S. Bonds just as ss is doing now. Think of how this would increase the SAVINGS rate for the country instead of the SPENDING rate the current ss system promotes.

The problem with Bush's plan is it took too much revenue away to fund future payments by keeping the funds with those that contributed them (for shame!!). But if we started now and did it in conjunction with fixing the problems we now face, the system could be all that much better as sebastian holsclaw notes.

Disclaimer: I say all this with no economics degree or a whole lot of background in ss and without the benefit of really studying any of the privatization proposals. I might be missing something here. I welcome any pointers on what I have wrong.

"Bc, why on earth would anyone agree to an increase in payroll taxes to pay for a supposed future Social Security shortfall when we're being told right now that the extra money collected from the previous increase in payroll taxes doesn't incur any obligation on the government to spend it on Social Security? If as Bush says it's just worthless pieces of paper, why would we want to buy still more of them?"

Good point. I don't want a payroll increase especially if it feeds the government junkie as Marshall suggests. You are right that this is what would happen under the current system.

Maybe we should (shudder) invest in the market? It's not allowed, but a change would stop the bleeding. It's so simple it's sickening. Don't lend the surplus to the government. Invest it and get a decent rate of return. Like Alaska does with its permanent fund:

http://gov.state.ak.us/omb/results/view_details.php?p=150

Maybe we could save and buy part of Europe. ;)

where'd everybody go? did I say something wrong?

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