McCain On Social Security

by hilzoy

From the AP:

"Wall Street turmoil left John McCain scrambling to explain why the fundamentals of the U.S. economy remained strong. It also left him defending his support for privately investing Social Security money in the same markets that had tanked earlier in the week.

The Republican presidential nominee says all options must be considered to stave off insolvency for the government insurance and retirement program, and top McCain advisers say that includes so-called personal retirement accounts like those President Bush pushed in 2005 but abandoned in the face of congressional opposition."

I'll bet he's scrambling. I can't imagine anyone would accept the idea of investing their Social Security pension in the stock market with equanimity right now. Even after Thursday's and Friday's rallies, with the DJIA close to its previous levels, the rate of return on the DJIA since the state of the union address in which the President proposed instituting private accounts is around 2% a year, well below the rate of inflation. A couple of days ago, it would have been well below that. And the actual rate of return on an individual account would have been lower still, given administrative costs and so forth.

This is exactly why we all went to the mattresses for Social Security back in 2005. No one's basic retirement security should be at the mercy of the stock market. We have just been reminded why that's such a stunningly bad idea. Apparently, the only people on earth who haven't figured it out are John McCain and his advisors.

I hope the Obama campaign repeats this every day from now until the elections.

Besides that, "top McCain advisors" are repeating another complete myth: that personal retirement accounts are a way to "stave off insolvency" for Social Security. If political journalists knew more about policy, McCain's "top policy advisors" might not have been able to complete the interview, because the reporters would have been laughing too hard. A statement like "all options must be considered to stave off insolvency for the government insurance and retirement program, and (...) that includes so-called personal retirement accounts" is, in fact, on a par with saying something like: "all options must be considered for making people healthier, including encouraging them to start smoking, operate chain saws while drunk, and take long, luxurious baths with their electric appliances."

It really is exactly that dumb.

Any plan that allows Social Security tax revenues to be diverted into private accounts blows a hole in the Social Security budget. How much of a hole depends on the specific provisions of the plan: how much it allows recipients to divert, whether it tries to save money by other means, like benefit reductions, etc. You can see estimates of the effects of several different plans here. They all make Social Security less solvent, not more, and by trillions of dollars. (The President's plan -- the one McCain campaigned for -- would add a cool $17.7 trillion in debt by 2050.)

Why? A few months ago, I drew up some goofy pictures to make the point as simply as possible. Since this issue has popped up again, I might as well put them up again. Here's the present system:

Under the present system, younger workers, on the left, pay for the benefits enjoyed by older workers, on the right. In time, the younger workers' benefits will be paid by today's toddlers.

Here's the proposal that John McCain thinks will make Social Security more solvent:

Here, the workers keep their own money, leaving Mr. Scream, who had paid the generation that came before him and been counting on being paid by younger workers in turn, with nothing. (Obviously, you can alter this picture in various ways. For instance, if people divert part, but not all, of their FICA taxes to private accounts, Mr. Scream can say: "Where's that part of my money?")

McCain has promised that Mr. Scream will, in fact, get his money. That money is the hole that private accounts blow in the deficit. If we don't want to leave Mr. Scream with nothing, the money has to come from somewhere, though: from the Social Security Trust Fund, higher taxes, or possibly Santa Claus.

You might wonder: since we, as a nation, have just bought a large insurance company, and are considering buying hundreds of billions of dollars' worth of toxic debt, is this really a good time to take on a project that adds trillions more to our national debt? Maybe not. But I'd be a lot happier if I thought that McCain knew that his Social Security proposal would actually cost money. The fact that he thinks it's a way of making Social Security more solvent is pretty scary.

Comments

[Ugh]

Uh, anyone else think that this "plan" to have Congress hand Henry Paulson $700B and have him hand it to his former Wall Street colleagues "on such terms and conditions as determined by" Paulson and that Paulson's decisions "may not be reviewed by any court of law or any administrative agency" a recipe for disaster for American taxpayers?

[Brett Bellmore]

Personally, I'm terrified by the equity stake the federal government would accumulate if social security were invested in the stock market; Literal public ownership of the means of production.

But there is a problem with that cute illustration; It kind of implicitly suggests that you've got a constant ratio of people paying in to people being paid out to, which would indeed be sustainable indefinitely. Whereas we're actually facing a demographic meltdown due to a declining ratio between the paying and the paid, with the scream in the end anyway.

There was a window where social security was taking in more than was being paid out, and the excess could have actually been invested in something productive, leading to a possible solution. But it got invested in buying votes, which was fairly predictable where the government is concerned. And the window is closing, it's too late now.

I'm only hoping that investing my 401-k in foreign stocks helps me escape the coming confiscation of private retirement savings, when social security finally collapses.

[Jonas Cord Jr.]

I happen to think that the illustration of the happy stick figures is misleading in that it assumes a constant number of young stick figures paying a constant number of retired stick figures.

Social Security can only be considered stable if you are willing to raise payroll taxes indefinitely with no cost to individuals or the economy; or reduce benefits accordingly when the ratio of workers to retirees becomes unfavorable.

And it's worth noting that in regards to investing for retirement, a stock market crash is only relevant to those who were planning to retire in the near-term and for some odd reason didn't move their portfolio into safer investments.

[now_what]

It kind of implicitly suggests that you've got a constant ratio of people paying in to people being paid out to, which would indeed be sustainable indefinitely. Whereas we're actually facing a demographic meltdown due to a declining ratio between the paying and the paid, with the scream in the end anyway.

No we're not. If you're specifically looking at Social Security, we've gone from 16 workers per SS recipient in 1950 to 3.3 workers per SS recipient in 2005. And in the next 22 years we are expected to get down to 2.1. That's no problem given any reasonable prediction for productivity growth. The demographic "meltdown" has already happened. Stop being scared.

If you're talking more generally about the "dependency ratio", the number of people working for each person not working, in the 1960s there were 1.05 workers per dependent. In 22 years, it is expected we will have 1.27 workers per dependent. That's right, we'll have more workers to support each dependent in the future than we did in the 1960s when, by all accounts, things went pretty well. Thanks, working moms.

Nothing to fear here other than the usual suspect.

Social Security can only be considered stable if you are willing to raise payroll taxes indefinitely with no cost to individuals or the economy; or reduce benefits accordingly when the ratio of workers to retirees becomes unfavorable.

It can also be considered stable if productivity per worker increases over time as it always has. And as noted above, the ratio of workers to non-workers is more favorable than in the past. We can afford to be more generous to retirees, the sick, the disabled, and other non-workers than we were in the past.

[rea]

I do get tired of people like a couple of the psoters above, who forget the '83 reforms, or why they were ineffective, namely, the verty people who are now calling for privatization spent all the surplus on tax cuts for the rich.

[Brett Bellmore]

No, I haven't forgotten them; It's a continual reminder that politicians can't be trusted around money.

[Tony P.]

Hilzoy,

You might get your point across better to Brett and Jonas if you change the moneybags to pies, in your illustration. I'm sorry to harp yet again on "real stuff" versus "money", but the demographic problem they both raise is easier to address, if we talk about "pie".

Once there were 16 workers producing pie and 17 people consuming it; someday soon there will be 2 workers producing pie for 3 consumers. But the pie each worker can produce keeps getting bigger. Even if each future worker has to turn over 1/3 of his pie to a retiree, that future worker still has more to eat than the worker in that glorious past who only had to share 1/16 of his pie.

We can (and do) endlessly confuse ourselves with sophisticated-sounding financial descriptions of this real-world pie-producing and pie-consuming activity that we lovingly call "the economy". GDP is just a big pie. It's all there is to divvy up between workers and retirees every year. Whether it gets divvied up by government action (e.g. Social Security) or by contractual arrangements (e.g. stock dividends and bond interest) or by family ties (e.g. taking the old folks in to live with you), it all still boils down to sharing pie.

--TP

[Jonas Cord Jr.]

Once there were 16 workers producing pie and 17 people consuming it; someday soon there will be 2 workers producing pie for 3 consumers. But the pie each worker can produce keeps getting bigger.

I understand this dynamic, but it is my understanding that it reduced by the fact that the benefits are indexed to wage increases and not by cost of living.

[Brett Bellmore]

Precisely; If the retirees today were being maintained at a 1950's standard of living, (Or the retirement age were raised to the point where a similar percentage of the population had died...) there'd be no problem, but AARP has too much clout for that.

[Jeff]

It's a continual reminder that politicians Republicans can't be trusted around money.

Fixt!

[russell]

From the SSA's Trustee's Report Summary:

Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 14 percent in payroll tax revenues (from 12.4 percent to 14.1 percent) or an immediate reduction in benefits of 12 percent or some combination of the two.

Raise the SS tax rate by less than two points, or reduce benefits by 12 percent, or some combination of the two. That will make SS solvent out seventy five freaking years.

Brothers and sisters, in seventy five years we'll all be dead. Actuarially, it's virtually forever.

If this was, remotely, the biggest problem we faced as a nation, we'd all be dancing a jig on Main Street. If it was even among the top 10, or 20, or 50, I'd be pleased to eat my hat and call it chowder.

Thanks -

[Gary Farber]

"GDP is just a big pie. It's all there is to divvy up between workers and retirees every year."

Except that the size of the pie slice going to the middle class has been shrinking and shrinking, and the share going to the richest 2% has been growing and growing.

Of course, that's not class warfare. It's only happened because the rich have used the power of their money to change and control the laws to make that happen, and that's not class warfare.

[Laura Vivanco]

we're actually facing a demographic meltdown due to a declining ratio between the paying and the paid, with the scream in the end anyway.

In the context of the discussion about immigration on another, recent, thread here I was wondering if immigration could/would help increase the numbers of younger people available to pay taxes. I suppose not, if many of the immigrants are being exploited and being used for cheap, illegal labour, but if they were allowed to come in legally and they then found jobs which allowed them to pay taxes, wouldn't that help solve the problem?

[Gary Farber]

"I'm only hoping that investing my 401-k in foreign stocks helps me escape the coming confiscation of private retirement savings, when social security finally collapses."

What year do you expect that to happen in, Brett?

[Gary Farber]

"I suppose not, if many of the immigrants are being exploited and being used for cheap, illegal labour,"

On the contrary, illegal immigrants pay into the Social Security system and take nothing out. They're a huge net gain for everyone else that way.

Cite. More detailed cite.

More:

[...] Illegal immigrants are paying taxes to Uncle Sam, experts agree. Just how much they pay is hard to determine because the federal government doesn't fully tally it. But the latest figures available indicate it will amount to billions of dollars in federal income, Social Security and Medicare taxes this year. One rough estimate puts the amount of Social Security taxes alone at around $9 billion per year.

[...]

The Social Security Administration estimates that about three-quarters of illegal workers pay taxes that contribute to the overall solvency of Social Security and Medicare.

The agency estimates that for 2005, the last year for which figures are available, about $9 billion in taxes was paid on about $75 billion in wages from people who filed W2 forms with incorrect or mismatched data, which would include illegal immigrants who drew paychecks under fake names and Social Security numbers.

[...]

"Overall, any type of immigration is a net positive to Social Security. The more people working and paying into the system, the better," Hinkle said. "It does help the system remain solvent."

The Social Security Administration drew from census and Immigration and Customs Enforcement data in 2007 to project the effects of higher and lower immigration patterns.

If net immigration is high at 1.3 million people a year, the SSA's combined trust fund would be exhausted in 2043. But the fund runs out four years earlier if annual net immigration amounts to about half that — 472,500 legal immigrants and 250,000 illegal immigrants.

The Internal Revenue Service doesn't have an estimate of how many illegal immigrants pay income tax.

But one indicator is the 9 million W-2 forms with mismatched names and Social Security numbers it received in 2004. The IRS said the W-2 forms with invalid Social Security numbers reported about $53 billion in wages and about three-fourths of that, $40 billion in wages, had taxes withheld.

The IRS also has been issuing Individual Taxpayer Identification Numbers, or ITINs, for 12 years to foreigners without a Social Security number. It's believed that many workers who seek the ITINs are in the country illegally, and the IRS reported that there were 2.5 million tax returns filed with an ITIN in 2004.

In 2006, then IRS Commission Mark Everson told Congress that "many illegal aliens, utilizing ITINs, have been reporting tax liability to the tune of almost $50 billion from 1996 to 2003."

An IRS spokesman said more recent figures aren't available.

The Social Security and Medicare taxes from mismatched W2s for the same period was $41.4 billion, Hinkle said.

That adds up to roughly $90 billion in federal taxes during they eight-year period.

[...]

Ford, of Middle Tennessee State University, said a majority of economists agree that illegal immigrants are a net benefit for the U.S. economy.

He said the tax contributions from illegal immigrants, including sales taxes, property taxes and excise taxes (such as the gas tax), are significant.

He calculates that illegal immigrants contributed $428 billion dollars to the nation's $13.6 trillion gross domestic product in 2006. That number assumes illegal immigrants are 30 percent less productive than other workers.

"If anything we need more immigrants coming into the country, not less, especially with the baby boomers retiring," he said.

So.

[liberal japonicus]

if they were allowed to come in legally and they then found jobs which allowed them to pay taxes, wouldn't that help solve the problem?

Nice question, I wonder how many immigrants the US could absorb. I'm sure someone who has thought as deeply on immigration issues as Brett could give us some numbers to plug in.

[liberal japonicus]

It was just noted on the Freaknomics blog that the Social Security system benefits from binge drinking. So I guess his election campaign is McCain's way of beefing up Social Security judging from the number of people who end comments with the phrase 'I need a drink.'

[Laura Vivanco]

illegal immigrants pay into the Social Security system and take nothing out. They're a huge net gain for everyone else that way.

That seems deeply unjust to me, and it's even worse if on top of that there's still resentment felt towards them by some of the people who benefit from all the taxes these illegal immigrants are paying.

[liberal japonicus]

to be fair, Laura, the people who are clamoring for closed borders probably don't give much credence to notions that immigrants are providing that much of a boost, and are convinced that all their problems can be linked to the fact that illegal immigrants exist. And if you present evidence that the boost from illegal immigrants is indicative of how a less protective regime might work, it would be fashioned into a claim that, as part of the political elites, you are being hypocritical, holding up immigration reform while arguing that it is the plain people of the US who are mistaken.

[Tony P.]

I understand this dynamic, but it is my understanding that it reduced by the fact that the benefits are indexed to wage increases and not by cost of living.

This is a perfect example of how fancy financial descriptions confuse simple real-goods-and-services truths. But let me stay with the financial descriptions, if you insist.

Consider that it's trivial to compare your wages with your neighbor's: both are in current dollars; if your wages are higher you can consume more of whatever basket of goods and services are on offer, today, than he can; you can afford a higher "standard of living" than he can.

Consider how much harder it is to compare your "cost of living", today, to your "cost of living" 30 years ago. The basket of goods and services on offer has changed (at least a little) during that time.

I am not saying that we ought to index to wages merely because it's computationally easier than indexing to cost of living. I am saying that "standard of living" is a different thing than "cost of living". If (and only if) you want to maintain the same ratio in the standard of living between the average retiree and the average worker as time goes on and the overall nation's standard of living changes, then wage indexing is the only way to go.

Of course, what we have now is wage indexing for the initial benefit level at retirement, with COLAs thereafter. But I assume it's the initial-benefit formula we're both talking about.

--TP

[Brett Bellmore]

I'm sure illegal immigrants are a net boost to Social Security, any Ponzi scheme benefits from bringing in fresh blood. The problem being that those new people eventually require even MORE new people to keep things going.

Look, it's a basic principle that things which can't go on, don't go on. We can't fix Social Security by endless population growth, when we've got finite land.

From 1980 to 2000, the US added some 55 MILLION in population, and most of that was due to immigration, the majority of it illegal. We're on a path to a population of over 400 million by the middle of the century.

Just how crowded do you want to be? Keep in mind that a lot of the country is essentially uninhabitable desert, and people are already competing for land with agriculture. A US of 400 million might not even be a net exporter of food.

[Jonas Cord Jr.]

Tony,

Of course, what we have now is wage indexing for the initial benefit level at retirement, with COLAs thereafter. But I assume it's the initial-benefit formula we're both talking about.

Nope. For some reason I could have sworn that SS benefits were always indexed to wages, even after retirement. Never mind!

[liberal japonicus]

So, how many can we take? Considering this list of cities by population density has the first US city appearing at 90th (note that I am not using population density by country, because that wouldn't be fair), it would seem that you really hate to give a number cause you know it would completely undermine your argument.

[cleek]

From 1980 to 2000, the US added some 55 MILLION in population, and most of that was due to immigration, the majority of it illegal.

cite ?

[Tony P.]

Brett, for all of history up to about a century ago, working-age people housed, clothed, and fed their aged parents and were housed, clothed, and fed by their children in their turn. This system required an endless supply of new participants, just like a "Ponzi scheme". Obviously it could not go on forever! Uninformed people called it "family" and carried on anyway. Lucky for us, eh?

--TP

[MeDrewNotYou]

Hilzoy- Best illustration ever. I always love to see it utilized.

I was going to refute the canard that Social Security is in crisis, but Russell http://obsidianwings.blogs.com/obsidian_wings/2008/09/mccain-on-socia.html#comment-131575870>beat me to it and said it much better than I could have. All I can add is that he's right and there's not really much to worry about. Check out some of hilzoy's previous posts on SS.

Now a question. I really doubt that McCain has any decency left, but does anyone else promoting SS privatization actually think it will help? How can any thinking person not see that putting money in private accounts makes the situation worse in both the short and long term? It's pretty obvious that if you take X dollars from the general fund to invest privately, then everyone else is out X dollars and those will need to be made up.

Even if (God forbid) McCain were elected, I'm pretty confident that he wouldn't be able to trash Social Security. We stopped Bush in 2005 when the economy was marginally better than now and we did so with overwhelming force. I think attempting to privatize is suicide and as long as we (Lefties) are vigilant, we don't have much to worry.

[bobbyp]

I, for one, absolutely refuse to discuss the Social Secuity system's far off prospects with anybody who mendaciously calls the program a "ponzi scheme". That marks them as either an ignoramus or a dissembler of the first order, and they deserve contempt, not a reply.

[cleek]

on noes! we cants haves old women living above the poverty line! iss 2 expesssiv! wah! fiscil sponsabilitee!

we bettr spen all our monee on invessmint banx! cause they too big an imporrunt to fail! old womin, you gohead and fail. you fail all you want. we gotsa make sure monee manajurs keep the lifestile they accussum too.

[Tsam]

I want to emphasize now_what's point that the demographics are only turning unfavorable for a limited time. Boomers will reduce their numbers and the squeeze on Social Security will abate. The squeeze is why a large trust fund surplus was acquired as a result of past adjustments. Getting Congress to pay back what it has borrowed from that surplus is going to be difficult, but it is necessary.

If further adjustments are needed, one practical answer would be a slight rise in the retirement age. This would make sense because life expectancy has increased. (Those unable to work in their 60s would need to retire as disabled, but most of us could work.) -- Myself 56, I am scheduled to retire at 67 but expect to need to work until almost 70.

[MeDrewNotYou]

Tsam: If further adjustments are needed, one practical answer would be a slight rise in the retirement age.

I agree that this is an acceptable solution, but I favor raising (or perhaps removing entirely) the SS tax on earnings. Rather than require later retirements, it strikes me as more fair to tax earnings up to a higher income, say $500k. The wealthier folks are already going to do well under SS retirement and most with that kind of income have personal plans too, making them better able to absorb the cost.

I don't think life expectancy is going to increase too much more, it seems better quality in the later years is more likely than living to 120. But in any case, any adjustments that are needed are slight and can be made with very little trouble on the system. We just need to be vigilant and refute BS claims like those of Bush 2005 and McCain 2008.

[Gary Farber]

"Just how crowded do you want to be?"

List of countries by population density! Check it out!

Place of the United States on the list? #180!

We've got 31 people per kilometer.

With 179 countries ahead of us, I think we've got a little stretching room.

Belgium has 341 people per kilometer. Terribly low quality of living, I suppose. That horrible "Netherlands" place has 395 people per kilometer, but they suffer so. South Korea has 498, but, gosh, they're so low-tech.

And so it goes.

But, then, I've been to Montana, and the Dakotas, and ridden across the entire U.S., back and forth, several times. I think we can squeeze in a few more hundred million.

And you really do completely undermine whatever credibility you might claim, Brett, with the "Ponzi scheme" thing. There's no excuse for trying to sell that to anyone with the faintest clue as to what the difference between Social">http://www.ssa.gov/history/ponzi.html">Social Security and a Ponzi scheme is.

[ral]

We could all stand on Zanzibar.

[The Crafty Trilobite]

I don't think life expectancy is going to increase too much more, it seems better quality in the later years is more likely than living to 120.

Comes out to the same thing for these purposes. The reason for Social Security was not to give seniors an Indian Summer of life during which to travel, take up new hobbies, and/or collect extra income while working, it was to provide a bare safety net for the years when they could not provide for themselves. If we were literally only living longer than in the 1930s but became incapable at the same age, we would really have a problem (see Gulliver's Travels for details.) But if we are improving late-life ability more than lifespan, it's the best possible outcome, and a good reason to extend the starting age for Social Security benefits.

I don't know the statistics on this, but my personal observation is that most still-living adults can reasonably keep working until 70. They may not want to, but some days neither do I. :) The ones who suffer more severely from age-related health problems early, can get SSDI or some other fill-in. Or we could create a semi-retirement period of 5 years or so during which people get half-benefits and can cut down their workload.

[Bernard Yomtov]

Look, it's a basic principle that things which can't go on, don't go on.

Brett,

Please read now_what on productivity and Tony P. on pie before commenting further on how demography dooms SS.

You might also look at the productivity assumptions behind the part of the trustees' report that Russell quotes.

a stock market crash is only relevant to those who were planning to retire in the near-term and for some odd reason didn't move their portfolio into safer investments.

Jonas,

No. It is also relevant to someone who is planning to retire some years in the future and is about to begin moving his portfolio into safer investments. In fact, it is relevant to anyone who has any stock market investments.

Market declines are real losses of value, and it is wrong to assume that they have no long-run impact. The market did not recover to its pre-crash 1929 highs for about twenty-five years.

[CMatt]

http://obsidianwings.blogs.com/obsidian_wings/2008/09/mccain-on-socia.html#comment-131594292>Tsam posted a good portion of my comment, more concisely than I would have. We only face a demographic crisis re. SS if we're going to decrease retirement age to ridiculous numbers (where some concern for AARP's desire -as with any instituion- for continued growth may be warranted); or the Baby Boomers are never going to, you know, die - and reset the current demographic bubble; or if the US is going to see a substantial decrease in population.

Several commenters touched on our ability to increase our population, but I'd like to add a point.

If we're supposed to be hard-headed pragmatists in the face of our demographic reality, then it seems necessary to note that if we can't support a population of, say 400 million, then there is no way that we can end this century the predominant (let alone sole) world superpower, short of thermonuclear war. Increases in productivity do not begin to pick up the slack. This does not mesh well with a worldview that sees this as a New American Century where we can and should be the predominant power (and only for Good, of course).

I know that this doesn't sum up [insert-commenter's-name's position], but is it too much to hope for that we should clue in our nominal 'allies' when they so badly need it?

I guess my problem is this argument too often posits this demographic hurdle only as regards one particular program -that commenters with this focus often don't support- but then doesn't carry that posited 'reality' through to examine its implications anywhere else.

Shorter?: We can't feed the Boomers, but we'll continue to rule the world. USA! USA!

[MouseJunior]

I don't know the statistics on this, but my personal observation is that most still-living adults can reasonably keep working until 70.

Not particularly. Blue collar work tends to wear bodies out. My mom and aunt (nurses) both have severe arthritis in one hand, and mild in the other from popping thousands of pills out of plastic. Both were having regular cortisol shots to keep it controlled the last few years of their careers. They've also got back issues from lifting hundreds of patients over the years.

My dad (military) has 60% hearing loss (combo genetic and lots of loud noises) and a bad back (too much lifting heavy things for too many years). My various uncles (farming, forestry, mechanic) are variously mostly-deaf, have lung issues, blood pressure issues, cholesterol issues, back issues, and as a kicker, periodic dizziness as a result of medications for treating the other ones, etc.

None of them managed to work in their fields much past 62 because of physical issues. And there aren't low skill jobs for young, healthy people in their area, much less people who aren't going to hear customers, or be able to put stuff on shelves.

Anecdotes aren't data, but I suspect that there's a pretty serious chasm between the viable work period for a blue collar and white collar worker, and their relative abilities to function in their jobs past 60 or so.

[ThatLeftTurnInABQ]

Comes out to the same thing for these purposes. The reason for Social Security was not to give seniors an Indian Summer of life during which to travel, take up new hobbies, and/or collect extra income while working, it was to provide a bare safety net for the years when they could not provide for themselves. If we were literally only living longer than in the 1930s but became incapable at the same age, we would really have a problem (see Gulliver's Travels for details.) But if we are improving late-life ability more than lifespan, it's the best possible outcome, and a good reason to extend the starting age for Social Security benefits.

I agree with that. The demographics of the onset of occupational disability have shifted since the 1930s both as a result in changes in health and mortality statistics and also due to a shift in occupations. Fewer people today work in agriculture and manufacturing compared with the early years of SS. SS benefit start dates should be adjusted accordingly to better fit today's demographics.

Anecdotes aren't data, but I suspect that there's a pretty serious chasm between the viable work period for a blue collar and white collar worker, and their relative abilities to function in their jobs past 60 or so.

This is a reasonable objection but one that IMHO should be dealt with as a healthcare and disability insurance issue at the individual level, by making sure that people who suffer an early onset of disability (whether for occupational reasons or for individual reasons), have the support they need to live out their remaining old age with a level of dignity and comfort which meets some minimum standard.

I don't think keeping the SS benefit age low, which will end up including people in occupational categories where disability sets in much later, is the best solution to this problem. We should target the average and deal with the exceptions as exceptions, allowing for some optimization in terms of balancing the number of exceptions vs the cost of lowering the benefits age for everyone.

Another point regarding SS which I haven't seen mentioned in this debate re: private accounts, is that unlike the latter SS also acts as a form of risk pooling.

The problem with private accounts is that unless you set very stringent limits on the choices each individual can make regarding how to invest their money (which nonetheless may turn out to be in vain - look what just happened recently with AAA rated securities), some people are going to get burned. When they lose their retirement funds (whether due to improvidence or mere bad luck), they then become a burden on society - the elimination of which was one of the original rationales for SS in the first place.

[liberal japonicus]

If Japan, with its rather medieval rehabilitation system, and problematic infrastructure for the elderly, can raise its retirement age by 3 years, SS oughta be able to.

[Mike Schilling]

I'm sure illegal immigrants are a net boost to Social Security, any Ponzi scheme benefits from bringing in fresh blood. The problem being that those new people eventually require even MORE new people to keep things going.

Nonsense. What you've missed is that illegals pay in but don't take out, so that no ever-increasing pool of illegals is required to fund their retirement. (Not that I'm advocating this system, mind you.)

I am, by the way, always amused by those who call Social Security a "Ponzi scheme", but insist that retirement for all could be funded if everyone just put their money into the stock market.

[calipygian]

Its all so obvious to me that Im suprised that it hasn't been talked about more.

You see, the powers that be (tm) saw this sub-prime meltdown and liquidity crisis coming five years ago. The sober money men evaluated the policy, crunched the numbers and said, "Mein Gott! We've a HUGE hole to fill in a couple of years!" They looked around and saw a money plug that would save them - Social Security.

In fact, if the Republicans were smart, they'd attack the Dems on the grounds that this mess happened because we DIDN'T throw away our retirements on the stock market.

Am I the only one to whom this scenario seems blindingly obvious?

[rea]

No, I haven't forgotten them; It's a continual reminder that politicians can't be trusted around money.

But, Brett, I thought you supported income tax cuts? Would you support a politician who proposed raising income taxes on people like Brett Bellmore to make good on the promise of the '83 reforms?

As far as I can tell for your posts here and elsewhere over the years, you are one of those people who claim to support cutting both taxes and spending, but who reliably support politicians (those guys with "R" behind their names) who cut taxes and increase spending, which is how we got in this mess in the first place.

[Brett Bellmore]

"n fact, if the Republicans were smart, they'd attack the Dems on the grounds that this mess happened because we DIDN'T throw away our retirements on the stock market."

If they're smart, (Fortunately for Dems they're not. Unfortunately for Dems, they sometimes take advice from people who are.) they'd attack the Dems on the basis that they tried to reform the system some years back, and were obstructed by some Democratic members of Congress who were raking in the kickbacks from the mortgage giants. Such as... Obama.

.....

Nice review of the nature of a Ponzi Scheme, Gary; I'd say it's a matter of taste whether you regard the differences between the private and public sector versions as being sufficiently large that you can't call them by the same name. But it's clear that we wouldn't be looking to massive immigration to help save the system, if Social Security didn't share too many traits of a Ponzi scheme for comfort.

[Brett Bellmore]

Oh, and I should note that the wiki explanation of why a pay as you go system isn't a Ponzi scheme fails to grapple with the existence of a surplus, collected on the basis that it would be invested, but merely being spent. Very Ponzi, that.

[liberal japonicus]

I'd say it's a matter of taste whether you regard the differences between the private and public sector versions as being sufficiently large that you can't call them by the same name.

So, tell us how many immigrants we can absorb so we don't fall prey to that. Can you give a cite for the 55 MILLION figure? Assuming that is correct, is that number too many and if so, how much would you reduce it?

But it's clear that we wouldn't be looking to massive immigration to help save the system, if Social Security didn't share too many traits of a Ponzi scheme for comfort.

Who said we were looking to massive immigration to 'save' Social Security? Do you believe that budget planners are utilizing the fact that illegal immigrants are paying into the system but not getting anything out in their calcuations? If so, could you show us something to indicate that?

[Phil]

Brett, I believe I asked you some questions which you still have not answered, here and here. I sincerely hope you'll consider answering.

I suspect, however, that you won't, as your answers will reveal your -- and by proxy a large swath anti-illegal-immigration movement's -- "enforce the laws" and "respect for the law" mantras as a pose. They're a convenient cover for what's really raw nativism, bigotry and racism. I don't, after all, see our friends in Texas, Arizona and New Mexico putting together Minuteman posses to track down people who aren't complying with state use tax laws, or sitting by the roadside throwing out nail traps to snare speeders. Nor do they have analogues in the north guarding the border with Canada, although I'm sure it's entirely a coincidence that most Canadians have white skin and speak English, unlike those pesky Mexicans.

[The Crafty Trilobite]

Rea, I'm not at all sure Brett votes Republican.

japonicus,
Do you believe that budget planners are utilizing the fact that illegal immigrants are paying into the system but not getting anything out in their calcuations?

I believe nothing, but I strongly suspect the budget planners are doing exactly that in effect by extrapolating from revenue to predict future income and by applying actuarial tables to the number and date of current social security registrations to predict future expenditure, without expressly discounting for the effect of illegal immigration. Why wouldn't they?

Nor do they have analogues in the north guarding the border with Canada

Or Greenland! NOBODY pays enough attention to the looming Scandinavian threat! I warned Ethelred, I warned Harold, now I'm warning YOU!

[John Thullen]

Where to start?

Brett: "I'm only hoping that investing my 401K in foreign stocks helps me escape the coming confiscation of private retirement savings when social security finally collapses."

That sentence is saved by the words "only hoping".

An American Index like the Standard and Poor's 500 is down -16.2% year to date. Losses year to date in mutual fund categories that invest in international, foreign and global equities range from minus -30.64% for Diversified Emerging Markets to -25.42 for European Markets to -21.75% for Foreign Large Value.

An Exchange Traded Fund investing in the BRIC countries (Brazil, Russia, India, and China) is down -38.16% year to date. India alone: -50.66%.

Just some samples.

That's O.K. You and me and Henry Paulson are equally ignorant.

But tell me how world markets will escape devastation if Social Security fails and baby boomer flesh-eating zombies come in through the window as you're watching the Money Honey on CNBC tell us how markets will save all of us?

Further, are you investing only in countries whose governments have no social insurance schemes? Canada, for example? Fidelity's Canada Fund is down -8.70% year to date, a number which you can feel free to use to prove everything .... or nothing ... the dual purpose for which numbers in the investment world were invented by Mr. Ponzi.

Jonas Cord:

"It's worth noting that in regards to investing for retirement, a stock market crash is only relevant to those who were planning to retire in the near-term and for some odd reason didn't move their portfolio into safer investments."

On the face of it and in general this is a perfectly rational statement. In its particulars, add yourself to the list of me, Brett, and Henry Paulson for knowing nothing. ;) I kid, sort of.

"some odd reason". Human nature. Full stop. Human Nature juked into believing the American mantra of optimism and the magic of compounding and investing. Probably trading on margin to boot because faith in American business is the Kudlow ideology. Turn to FOX for additional reasons, like patriotism.

But consider this too. In 1929 (we've already experienced a world of scant regulation and social insurance; why not consider that experiment a failure?) if you were 45 years old and invested in a stock market index, it took you (now 65 and looking at retirement, having not invested anymore money along the way because you were human, (oddity again), and probably were underemployed, at best, during the 1930s and scared crapless of doing so even if you did have the money) until roughly 1950 to get even in your portfolio.

More recently, the Standard and Poor's 500 is below were it was in 2001 before 9/11.

The retirement that did not loom then, looms now.

Well, the rational among us always have lentils and rice to fall back on in case the rational 45 year old in 1929 forgot to "adjust" his portfolio the day before the crash and in case the rational 57-year old in 2001 forgot to pick up al Qaeda's and AIG's plans on his fillings and act with pure rationality.

[Brett Bellmore]

I've voted both Republican and Democratic, (The latter where an NRA "A" rating was involved.) but generally vote for Libertarians where the option is available.

"Do I ever speed?" Occasionally, though I make a point of not being the fastest car around. In some places, you might notice, if you're driving the speed limit you're a traffic hazard. Must not be too bad a driver, my last ticket was back in the '70's. So I'd guess I speed less than most.

I gather your point is that I'm not relentlessly law abiding. True, but I'm not asking that would-be immigrants prove they've never jay walked. I'm asking that they comply with immigration laws.

[liberal japonicus]

Why wouldn't they?

Because that money is unattached to actual social security registrations. Of course, Brett suggests that people who are opposite his nativist viewpoint are actually being hypocritical because we want to continue to have SS buoyed in such a way. So the onus would be on Brett to provide some proof of that.

[Phil]

Must not be too bad a driver, my last ticket was back in the '70's. So I'd guess I speed less than most.

I haven't had a speeding ticket in 20 years, and I regularly drive 75-80 on the freeway. Try again.

How about those use taxes, Brett?

[The Crafty Trilobite]

Phil, Brett answered the basic question, is there some point to demanding that he incriminate himself (under what may be his actual name)?

That you, too, last got a ticket more than 20 years ago, proves nothing about which if either of you speed more than "most," especially as you live in different enforcement zones.

[Gary Farber]

"True, but I'm not asking that would-be immigrants prove they've never jay walked. I'm asking that they comply with immigration laws."

The point of the question is why you, and others in a tizzy about the Illegal Immigrantion Menace, are concerned with one set of laws, but not all sorts of others. He's wondering, I believe, why that is.

[xanax]

A fine song Younger Than McCain and a quality video.

Very funny.

[liberal japonicus]

The point of the question is why you, and others in a tizzy about the Illegal Immigrantion Menace, are concerned with one set of laws, but not all sorts of others.

Here in Japan, which has developed a rather unique mindset in regards to the notion of foreigners, what you have is that foreigners are arrested for visa violations. Those violations are dropped into data sets and as if by magic, foreigners are lawbreakers and the Japanese people need to be protected from them. Brett goes on and on about illegal immigrants, but the regime is set up to make almost everyone illegal. It's a racist bait and switch when done in Japan, and I don't see how it isn't one when Brett does it.

[Phil]

Phil, Brett answered the basic question, is there some point to demanding that he incriminate himself (under what may be his actual name)?

I think Gary and LJ covered this adequately.

That you, too, last got a ticket more than 20 years ago, proves nothing about which if either of you speed more than "most," especially as you live in different enforcement zones.

Exactly. Which was my point: There was no logic behind Brett proclaiming that he last got a ticket X amount of years ago, therefore he must not speed much.

[Phil]

Although in addition to Gary's and LJ's backup, I should mention the other half of the equation: Brett, believing in jury nullification as he does, clearly thinks there are times when people have not only a right but an obligation to ignore our laws. It just seems he's mighty selective about when, exactly, he feels people should ignore the law and when, exactly, people should be indifferent to the law. Although it all seems to coincide neatly with "whatever lets fewer monkey-talking brown people into the US."

[liberal japonicus]

Probably the thread is dead, but I find this link apropos

[Brett Bellmore]

"There was no logic behind Brett proclaiming that he last got a ticket X amount of years ago, therefore he must not speed much."

I think the reasoning is, if I'm not getting tickets, I must not be speeding unwisely.

"Although it all seems to coincide neatly with "whatever lets fewer monkey-talking brown people into the US.""

LOL! I should introduce you to my wife sometime; She could hide in a cave for six months and still be darker than Obama.

I think I was pretty clear about my position on immigration: I want the best immigrants for this country, out of the throngs that want to come here. I want us to turn the brain drain up to 11, and bring in people who don't particularly need to assimilate, because they've already got a productive value system and the ability to communicate with us.

Always thought it was a pity, when the UK shafted Hong Kong, that we didn't up and offer them all asylum; Would have done more for our economy than all the cheap gardeners in the world.

When it comes to immigration, in the long run "you are what you eat" applies as much to nations as people. Do we really want to become more like Mexico? Our politicians seem to think it would be peachy, but I suspect that's just because they envy the ability of Mexican politicians to get away with being on the take.

[liberal japonicus]

So, Brett, how many immigrants can we absorb? Just a ballpark figure. I won't ask the obvious question of how we define 'best', but for Social Security, the family whose parents may not be literate in English but has 12 kids who all get middle class jobs would be one definition of 'best'.

And, what is your opinion of this?

[liberal japonicus]

And concerning how dark your wife is, there is this

On the other side of the Fair, however, Fernando de Baca, 70, told a different story. The chairman of Bernalillo County Republicans argued that the Latino emphasis on hard work and family values, plus the Catholic church's opposition to abortion, made the community naturally conservative.

He offered another, blunter, reason why he believed John McCain would do well in New Mexico.

"The truth is that Hispanics came here as conquerors," he said. "African-Americans came here as slaves.

"Hispanics consider themselves above blacks. They won't vote for a black president."

Now de Baca explained his comment here, but I'm not sure why a description of history ends with an observation about who Hispanics will be voting for, but I leave it to the reader to decide.

There is also McCain's meeting with Hispanic activists here. Could I get your opinion on this?

[Phil]

I think the reasoning is, if I'm not getting tickets, I must not be speeding unwisely.

Oh, is there now a "speeding wisely" exemption to the posted speed limits? I'm pretty sure there isn't, but I suppose I'm in a position to be corrected.

Can you maybe elaborate for me a more precise position on when you feel people should and should not ignore the laws of the US? So far, I've sussed out: Speed limits, tax laws, jury trials = ignore at will, immigration laws = follow to the letter. Can you fill in the gaps for me?

LOL! I should introduce you to my wife sometime; She could hide in a cave for six months and still be darker than Obama.

Yeah, but she speaks English, therefore she is clearly actually white.

I want us to turn the brain drain up to 11, and bring in people who don't particularly need to assimilate, because they've already got a productive value system and the ability to communicate with us.

Undertaking a dangerous river crossing after which you might get shot by a racist goon squad, just to make a better life for your family by taking on crappy, low-paying jobs, seems like a pretty productive value system to me. Maybe you just have crummy values?

[wonkie]

How on earth did hard work get equated with conservatism?

Conservatism is the philosophy for the section of the electorate that wants something for nothing: earmarks and subsidies for themselves but someone else pay the taxes, deregulation but someone else clean upt the resulting mess, use public owned resources but be allowed to do so with subsidies and no regulation, etc. Conservatives are the people who can't do third grade math, the ones who think that mcCain can balance the budget in four years while still funding the war in Iraq and while cuttin taxes for the rich and that's after dumping billions into the bailout. Conseervatives are the section of the elctorate that is incapable of voting for anything except their own immediate shortterm benefit--and often they can't even get that right.

Hard work, my ass. Most Americans work hard regardless of how thhey vote or don't. It is jhust [part of the intellectual dishonesty that is the essential componenent of the conservative outlook that they claim superior work ethic.

[Jesurgislac]

Always thought it was a pity, when the UK shafted Hong Kong, that we didn't up and offer them all asylum; Would have done more for our economy than all the cheap gardeners in the world.

Meanwhile, the US shafts Iraq, and Brett is... silent... about the US failure to up and offer asylum to all Iraqis fleeing the US-created chaos.

Not that I can defend (or would wish to defend) the Conservative decision to keep the Hong Kong Chinese out of the UK. It was in part typical right-wing racism - but in part it was a shameful kind of prudence: the Chinese government would not have wanted another country to offer broad asylum to all Hong Kong Chinese who wanted to leave, and no country wanted to offend the Chinese Government*. The US certainly couldn't afford to do so now: the latest Republican "fiscal conservatism" has sold too much of the US's finances to the People's Republic of China.

*I thought at the time that the UK could probably have got away with it by an appeal to tradition - but maybe not.

[Phil]

Meanwhile, the US shafts Iraq, and Brett is... silent... about the US failure to up and offer asylum to all Iraqis fleeing the US-created chaos.

See "monkey-talking brown people," above. But, you know, he's got a dark-skinned wife, so it's cool.

[KCinDC]

if I'm not getting tickets, I must not be speeding unwisely.

So if I haven't been deported, I must not be violating immigration laws unwisely.

[cleek]

I should introduce you to my wife sometime; She could hide in a cave for six months and still be darker than Obama.

is that because, as Rush tells us, Obama isn't actually African-American, but rather Arab-American ?

[Gary Farber]

I think the reasoning is, if I'm not getting tickets, I must not be speeding unwisely.

Oh, is there now a "speeding wisely" exemption to the posted speed limits? I'm pretty sure there isn't, but I suppose I'm in a position to be corrected.

It's just like the "crossing borders wisely" exception: if you get caught, you're not crossing wisely, but if you're not caught, obviously you know what you're doing, and have passed the competency/intelligence test, and thus Brett wants you here. I'm sure that's what he's saying.

Well, almost sure.

[Glaivester]

Yeah, illegal immigration is the solution to all our budgetary woes.

I mean, provided the immigrants don't get sick and go to the emergency room, and presuming that they don't have children in the country, who actually do use those social services that the illegal immigrants pay into supposedly without taking anything back.

Yeah, and overcrowding isn't a problem, provided that people just need space in which to live, and don't need water rights, food, and other commodities, and don't produce pollution, etc.

[liberal japonicus]

Well, that's why I keep asking Brett how many immigrants we can take. Cause the "55 MILLION" illegal immigrants (according to Brett) is clearly making life so miserable that people are killing themselves over the quality of life now.