By Lynn Parramore, a contributing editor at Alternet. Cross posted from Alternet
Trying to convince the public to cut America’s best-loved and most successful program requires a lot of creativity and persistence. Social Security is fiscally fit, prudently managed and does not add to the deficit because by law it must be completely detached from the federal operating budget. Obviously, it is needed more than ever in a time of increasing job insecurity and disappearing pensions. It helps our economy thrive and boosts the productivity of working Americans. And yet the sharks are in a frenzy to shred it in the upcoming “fiscal cliff” discussions.
The most popular red herring Social Security hustlers have unleashed into the waters of public discourse has grown into such a massive whale of a lie that liberals frequently subscribe to it. The idea goes like this: We need to somehow “fix” Social Security because people are living longer – “fix” in this context being code for “cut.” Two groups stand to benefit in the short-term from such a scheme: the greedy rich, who do not want to pay their share in taxes, and financiers, who want to move towards privatizing retirement accounts so they can collect fees. As for the masses of hard-working people who have rightfully earned their retirement, the only “fix” is the fix they will be in if already modest benefits are further reduced.
Here are five clear reasons why the life expectancy argument is nonsensical, counterproductive and based on a pack of lies.
1. Social Security’s original designers considered rising life expectancy.
On our red-herring tour, let’s start with the oft-repeated claim that the original designers of the program did not consider rising life expectancy in their calculations. Fortunately, public records pertaining to the lengthy and detailed discussions of the Roosevelt administration’s Committee on Economic Security (CES), tasked with constructing proposals for Social Security, are available for anyone to see. It is absolutely clear from the record that the designers knew that the number of people over the age of 65 was going to increase and that people were going to live longer.
There were differences – as there are now – on exactly how to project this demographic shift, but the idea that a growing rate of older folks taking payouts was bound to happen was a topic of intense scrutiny. Consider the Old Age Security Staff Report, dated January 1935:
“At the time of the last Census (1930) there were six and a half million people 65 years of age and over in the United States. They constituted 5.4% of the population. As a result of a declining birth rate in this country, which manifested itself about 1820 and persisted from that time, the ratio of aged persons has shown a continuous growth from the date. The increase was very slow for 40 years, more rapid from 1860 on, and noticeably accelerated between 1920 and 1930. The latter was due to a rather sharp decline in birth rate which set in about 1920. This decline is expected to persist, moreover, and will of course produce a correspondingly sharp increase in the ratio of the aged to the population as a whole. The recent improvement in mortality rate makes its contribution to this situation.”
That’s right: Not only did the designers know full well that a larger population of older folks was coming, they actually made projections based on that assumption well into the future. They even produced this handy table which projects that increase all the way up to 1980, anticipating a 140 percent increase in the 60 years following 1920:
Ratio of Aged General Population: 1860 – 1980 (By Decades)
7.7 (140% increase)
*This forecast includes survivors of assumed net immigration of 100,000 annually in years 1935-1939 inclusive, and 200,000 annually in 1940 and thereafter. There will be more than twice as many aged in 1960 as there were in 1930.
2. Life expectancy gains since 1935 have been modest.
Another popular argument for cutting Social Security by raising the retirement age assumes a vast difference in human longevity between 1935 and today. You’ll hear this group of hustlers claiming that life expectancy for Americans was less than 62 years in 1935, and now it's more than 77 years, so the program must be inadequate. Alan Simpson of the infamous Simpson-Bowles Commission, who ought to know better since he has been weighing in on Social Security policy, is a fan of this line of argument. Clearly, Simpson has not bothered to read the actual public record on Social Security, or he is knowingly lying.
Here’s the truth of the matter: The early figure was based on life expectancy at birth. That is a vastly different matter from projecting how long people will live after they reach the age of 65 and start collecting benefits. In the 1930s, there was much higher infant mortality, and children died much more frequently from diseases that are now preventable through immunization. Because our parents’ and grandparents’ generations had a high rate of early death, the life expectancy at birth in 1930 was indeed less than 62 years. But here’s the catch: Social Security is funded by the workers who collect the benefits, along with their employers. Obviously, if you die as a child, you are not going to collect benefits. So the significant measure is not how long you’re going to live after you are born, but rather how long you’re going to live once you hit 65.
In reality, the average life expectancy once a person has reached the age 65 has increased only a modest five years on average since 1940. Makes a big difference in how you look at retirement:
Table 1: Life Expectancy for Social Security
Year Cohort Turned 65
Percentage of Population Surviving from Age 21 to Age 65
Average Remaining Life Expectancy for Those Surviving to Age 65
So let’s be clear. Workers who reach the age of 65 today are only living five years longer than their parents. The designers of the program were fully aware of this possibility when they calculated the retirement age and they constructed the program accordingly.
3. The Greenspan Commission already raised the retirement age two years.
Back in 1983, just as Reagan was ushering in the destructive era of supply-side economics, the Social Security hustlers conspired to raise a great hue and cry about the program, which led to the creation of the Greenspan Commission. The Commission looked at the future increase in retired Baby Boomers and also considered increases in overall life expectancy. The result? People like me who were born after 1960 will have to wait until they're 67 to collect full benefits. If you’re younger than 52, two years of your retirement were taken away in the name of “permanently fixing Social Security.” For those a bit older you've had one year shaved off.
The Greenspan Commission demanded raising the payroll tax, cutting benefits and gradually raising the retirement age on future retirees. After these changes were enacted, Social Security accumulated enormous surpluses in its trust funds. As economist Robert Reich has explained, until 2012, Social Security took in more payroll taxes than it paid out in benefits and lent the surpluses to the rest of the government. The only reason the program took in less than it paid out in 2010 was due to the Wall Street-driven financial crash. But guess what? Social Security is so well-designed that the interest paid on government bonds more than made up for that difference.
1983 is a long time ago, and because the full increase in retirement age has not yet affected retirees (that experiment is waiting for those under 52) it’s easy for the Social Security hustlers to pretend that it never happened. But it did, and we do not yet know the social impacts of that decision. Since the people who had their Social Security cut are likely to suffer from increased job insecurity and a lack of traditional pensions, we may expect that the impact will not be pleasant for future retirees, excluding the very wealthy.
The Social Security hustlers have already gambled with our future, and now, using the excuse of the recession, they have committed themselves to doing it again.
4. Longevity gains have gone mostly to high earners.
Exhaustive research has clearly demonstrated that income inequality leads to poorer health among people who are not well-off, and that gains in life expectancy have primarily gone to high income workers. A report in the New York Times, “Gap in Life Expectancy Widens for the Nation” explains that while longevity for the whole country has gone up, affluent people have gained more, and this has cause a widening gap in life span:
…Gopal K. Singh, a demographer at the Department of Health and Human Services, said "the growing inequalities in life expectancy" mirrored trends in infant mortality and in death from heart disease and certain cancers….
Dr. Singh said last week that federal officials had found "widening socioeconomic inequalities in life expectancy" at birth and at every age level.
In the same NYT report, Nancy Krieger, a professor at the Harvard School of Public Health, rejects the idea that such a gap is somehow inevitable as better and more expensive medical treatment becomes available:
"The recent trend of growing disparities in health status is not inevitable," she said. "From 1966 to 1980, socioeconomic disparities declined in tandem with a decline in mortality rates."
The creation of Medicaid and Medicare, community health centers, the "war on poverty" and the Civil Rights Act of 1964 all probably contributed to the earlier narrowing of health disparities, Professor Krieger said.
Income inequality is notably awful in the US, and according to the centrist Brookings Institute, our life expectancy is predictably lower than that of other industrialized countries. Our ranking among the 34 countries in the Organization of Economic Cooperation and Development is a shameful 27. Of the 21 large OECD countries with the highest incomes, America finishes “dead last."
Life expectancy among the less educated and those with lower incomes has actually dropped. New research shows that between 1990 and 2008, white women lacking a high school diploma lost a shocking five years of life, while their male peers lost three years.
Under these circumstances, it’s clear that raising the retirement age is a direct assault on those at the lower rungs of the economic ladder, women in particular, and that it would only serve to increase income inequality even further and diminish the chances of long life among anyone but the rich.
5. Life expectancy rises are likely to slow in the future.
The Social Security hustlers like to make wild predictions that life expectancy will grow in the future at a rapid rate and that our children and grandchildren will be living up to 10 years longer than we do. As we’ve seen, when you’re talking about life expectancy after age 65, gains since Social Security was originally designed are only five years—and those gains are largely among the well-off.
The truth is that there’s not much reason to think that giant increases in life expectancy are going to happen for the vast majority of people – even the more affluent.
A report in the Washington Post shows that contrary to popular belief, we’ve actually seen average life expectancy among all Americans take a small dip in recent years:
Those born in 2008 can only expect to live to be 77.8 years old, down from 77.9 years for those born in 2007, according to an annual preliminary analysis of data conducted by the National Center for Health Statistics.
Yes, there have been steady increases since 1975, but it’s also true that there were drops between 1992 and 1993 (75.8 to 75.5) and between 2004 and 2005 (77.5 to 77.4). Federal budget projections assume Baby Boomers will live much longer than their parents, thanks to new drugs, improved medical care and so on. But not so fast. Factors including obesity, cancer, increased cardiovascular problems, and even higher rates of suicide, could slow or actually reverse the longevity trend.
Justin Denny of Rice University warns that it would be a mistake to base projections in longevity gains of the current century based on the last one. Unfortunately, that’s just what the trustees who estimate the future solvency of the U.S. Social Security retirement program have been doing.
In conclusion: cutting Social Security by raising the retirement age is nothing but a trick meant to fool us into thinking that there’s something wrong with a program that keeps millions of American retirees out of poverty. To even consider such a scheme in a time of widespread suffering is one of the most shameful outcomes of the Great Recession. Social Security is efficient, well-managed, and is not undergoing any crisis.
You will be hearing lots of convincing-sounding rhetoric on this topic in upcoming weeks –often from Democrats – including the notion that we should be means-testing Social Security for longevity among high-income earners. That plan plays into the mythology that the program is somehow broken and needs to be "fixed." It also plays into the game of fiscal conservatives who know full well that means testing will diminish support, which is why they have been ardently pushing it for 50 years. It's yet another red herring. Social Security is not contributing to the deficit, and if — and that's a big if — a tweak is needed down the road, we can easily accomplish that by raising the cap on payroll taxes, which stands just above $100K. In reality, there is absolutely no sound justification for doing anything now. The bottom line is that raising the retirement age and making changes based on longevity does not pass the test of morality, logic, or sound economics.
Listening to Erskine Bowles spout this lie last year at Columbia B-School, sickened me. Now, a year later, I’ve signed the Petition Opposing Co-Chairman of the Catfood Commission …
First they came for the Social Security and I said nothing….They will be coming after 401k’s too
Private Savings Accounts May Be “On the Table” in Fiscal Cliff Talks
As part of the Administration’s continuing drive to redistribute wealth, the National Seniors Council believes that tax-deferred contributions to retirement plans like 401(k)s and IRAs may very well be on the table in bipartisan budget negotiations going on right now between Congress and the White House.
Republicans About To Fall For A World Class Social Security Bait-And-Switch Con
Brilliant, the “people are living longer” trope works because its also a fable, a kind of “urban myth” that gets repeated over and over. Telling it makes people feel smarter,like the one about how “people were shorter long ago”…thats true and its not true. Bad nutrition and irregular meals inhibited human growth in 1150 CE, for example, but those who had reliable access to abundant fresh food – the rural aristrocracy and the more successful peasant farmers – grew to what we call normal European human size. There are many recorded instances of Greeks and Eygyptians in antiquity living to 75 yrs and longer.Socrates was 70 years old when he defended himself in court from the capital charge made against him, and quite healthy and lucid (if rather depressed) on the day of his judicial assasination.
Of course he was depressed–he was going to miss those free meals in the Prytaneum.
One of my father’s retirement projects was a genealogy. He was surprised to find that pretty much all of his ancestors in the 18th century lived into their 80s and 90s. Interestingly, the lifespan of his ancestors fell in the 19th century. So long lives among people who survived childhood diseases wasn’t uncommon centuries ago (and my ancestors weren’t affluent, but his side of the family farmed and fished in Maine. Might have been a physically active life plus good diet).
So it’s not so much that people are living longer per se, it’s just that less people are dying at a young age due to medical advancements, healthier living styles, etc. This seems like one of those cases where you’d want to evaluate median life expectancy rather than the mean.
As Rotter says, this trope about life expectancy being so low in the old days is false but well-established due to the convenient omission of accounting for child mortality.
But, like most of the fudged numbers we live by, it makes us feel superior to everyone who’s ever lived before us or doesn’t live in our fabulous, “greatest country in the history of the world.”
An aside, why do even our intelligent Presidents–when we’re intelligent enough ourselves to elect one–feel it’s necessary to utter such bombast? Wouldn’t “greatest country on earth,” even if it’s almost equally falsifiable, be an adequately jingoistic lie?
You omitted the fact that payroll taxes will be insufficient to meet Social Security payments in three to five years. The Social Security trustfund consists of IOU’s from one part of the government to another. Of course this would defeat your meme that Social Security is fiscally sound, which it is not.
There are only two ways to close the gap, raise taxes or reduce benefits. Benefit reductions come in a few flavors; one way is to reduce benefits outright, another is to stop indexing benefits to inflation, another is to raise the retirement age, another is to means test benefits or to require a spend down of other assets until the proposed beneficiary meets a spcific threshold somewhat like the medicaid spend down requirements.
I am in favor of all of the above. Sorry there is no other way around it.
Actually there is a way around it – clean up the defense budget and eliminate about half of the unnecessary spending on armaments that even the armed forces do not want. That get’s the job done.
How you deal with the weeping and gnashing of teeth on the part of defense lobbyists and sold-out congress-critters is a separate problem.
I don’t think this is the case. Mandatory spending (OASDI+medi & other programs) and interest costs exceed tax revenue in this fiscal year and in years to come.
Please eliminate all other discretionary funding, including all of military spending, and you’ll find that tax revenue still does not fund all mandated spending.
Please do raise taxes on income, capital gains, and increase payroll taxes. It still will not be enough, given the trends in spending, cost increases, loss of purchasing power, etc.
It follows with the same basic tenet about insurance; insurance must have growth and a certain rate of return on invested premiums in order to exist. When the rate of return is essentially zero, insurance ceases to function unless it becomes a ponzi scheme.
Then the last suckers to invest get shafted. Guess who is in that class right now? Anyone under thirty at this point.
All this so that my parents who told me point blank that they had paid into SS all their lives could damn well get it back out. I didn’t want to tell my mom that she would be paid far more than she paid in. I do happen to love her, and since she paid for the mandatory insurance then she should receive it.
But that does not make it less of a ponzi.
ohh for God’s sake -bring on that Tobin tax; a few mills for every Wall Street trade. Its about time computer technology that brought us bundled millions of homes and fraud against ‘the people’ all over the world was made to pay back in the form of taxing those trades -$trillions in computerized trades for $trillions of mills -whatever that amounts to -and slow down computerized trading by BANKSTERS at the same time.
And while I’m at it, Greece better get prepared for multinationals buying up islands for development in one big deal -they make the money with a fat digital finger in one swoop any time you’re looking the other way -this war, that war -this sex -that sex.
Don’t underestimate how swiftly that deal can happen. If Merkel could mention the word ‘war’ against Greece at the beginning of this EURO crap, buying up those islands for development is a cinch -Public/Private -the new meme for STEALING from ‘the people’ more -endlessly -until the BANKSTERS and JUDGES are stopped in their tracks.
you are wrong. worse, you have framed the problem in a way that you cannot solve it.
there will be no “last generation” unless you let the bad guys steal it from you. which they will do by feeding you the lies you show you believe. your argument from private “finance” is completely inappropriate to Social Security which works by a different principle.
in the very long run the cost of Social Security, paid for by the people who get the benefits, could go as high as 16% of payroll. This is not a huge amount of money to put aside for your living expenses for the last twenty or more years of your life. especially since the workers paying that much will be earning more than twice what workers today earn (in real dollars), so they will in fact have more than twice as much money in their pockets AFTER paying that “tax” (really it’s a savings and insurance contribution: you get it back, with interest.)
SS works great as long as the current payroll taxes and the income taxes on benefits exceeds the payouts. Unfortunately, this has not occurred since 2010, and is not expected to occur, resulting in trust fund “exhaustion.” The interest you refer to is not interst in the typical sense, which is pre-paid, intact, and ready to be liquidated wothout the use of new general revenues. Rather, the interst and the principal of the trust fund is not pre-paid, intact, and ready to be liquidated. That is why the $2.7 trillion in the trust fund is known as intragovernmental debt, not intragovernmental equity. From a cash flow perspective, the trust fund is exhausted today, for the same process at liquidation to make up for the shortfall is used to redeem Treasuries for the shortfalls since 2010: new general revenues are needed, the same way we pay for all pay-as-you-go expenses, even expenses from a “trust fund” that has a “reserve.” The accounting result is an immediate budget expense, causing an increase in the deficit.
Your mom getting Social Security is helping you. You would probably have to earn the money to help support her (yes in addition to yourself, any dependents etc.) if she didn’t get that check. You wouldn’t let her starve on the streets would you? No you’d probably work to support yet another person if you had to. Aren’t you glad you don’t?
We owe ourselves money. Why is that “unsound”? Are you the kind of guy who moves small change from the left side of your pants to the right to avoid losing your balance?
Creating new money is only for emergencies, like if financiers lost their bets and need a bailout so they can buy that third vacation home.
“we” do not owe “ourselves” money.
there are 300 million of us. some of us owe some others of us some money.
this is normal finance. you have been fooled by the masters of deception who told you a paradox knowing you would swallow it whole. there is absolutely no mystery to how “we” will pay back the Trust Fund, or continue to pay.. pay as you go… for our own benefits.
try to get this straight: “we” are not a funny looking guy in a striped suit furiously borrowing from one pocket to pay the iou’s he stuffed in another pocket. that is a cartoon intended to fool the foolish.
Sucking off the governments teet are you?
The question arises why the government had to borrow from the SS trust fund in the first place. I submit it was done as a backdoor tax cur to the very wealthy. And now that the bill is coming due they would rather just rob us outright in the guise of “saving SS for future generations.” Riiight. Any increase in the retirement age and any cuts by way of chained CPI are theft, plain and simple. My father was already robbed, he passed away at age 62 not having collected a penny of what he paid into the system. Lynn Parramore has it right, with the coming age of austerity life expectancy will only fall for the regular working stiffs, and that’s the poit behind this “reform”: have people pay into the system and drop dead before they can collect. No thanks.
OIFVet: “The question arises why the government had to borrow from the SS trust fund in the first place. I submit it was done as a backdoor tax cur to the very wealthy.”
Think about insurance. Did we think that the insurance funds would remain uninvested? Now, since they are people’s retirement money, it makes sense to invest them conservatively, in no risk bonds. What better than US Treasuries? (Besides, as far as investing in, say, the stock market goes, we do not want the gov’t picking winners and losers, do we?) It is not that the gov’t had to borrow from the SS trust fund, because the gov’t does not need to borrow at all. After all, the gov’t is the ultimate source of the US dollar. The gov’t borrowed from the trust fund to give it a secure income. :)
Min, I understand the concept of insurance and investing the surplus in safe treasuries. However, the point is that, by purposefully reducing revenue and balooning the deficit, Republicans and certain factions of the Democratic party set up SS to be a scapegoat and a prime target for cuts. Its called “starving the beast.” Krugman: “The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait-and-switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.” (http://www.nytimes.com/2010/02/22/opinion/22krugman.html).
Granted, Krugman is a homer for the democrats and neglects to mention their complicity in creating the current situation and trying to exploit it to reach the “grand bargain”, but his point is valid. And what better target than SS, a program the republicans have been trying to kill since its creation? So, raise the retirement age and lower the COLA by using chained CPI to calculate it, and soon enough you have reduced the amount of benefits paid out by $2.5 trillion. So, explain to me how is that not a stealthy tax cut for the rich and for the corporations?
“However, the point is that, by purposefully reducing revenue and balooning the deficit, Republicans and certain factions of the Democratic party set up SS to be a scapegoat and a prime target for cuts. Its called “starving the beast.”
Yes. I have been talking against Starve the Beast for years. Starve the Beast works at the Federal level only if the Dems go along. Unfortunately, the President has drunk the Kool-Aid. Back in ’09 he said on C-SPAN that the gov’t has run out of money. It is urgent to get the Dems to call the Reps bluff. A filibuster may be necessary.
The fact is, that for whatever reason, the entire trust fund has been loaned to the Treasury over the years to pay for current expenses. That is why the $2.7 trillion in the trust fund is called intragovernmental debt, not intragovernmental equity.
You claim the money was invested in Treasuries. What money? The excess FICA taxes were loaned to the Treasury, and the interest credited to the fund was done with extra debt, with no immediate budget impact.
The point is that the trust fund is due that money back from the Treasury. Doing so will cause huge deficits, for redeeming every dollar of the trust fund requires new general revenues, the same way we pay for all pay-as-you-go expenses.
There does seem to be a difference of opinion as to whether there is 2.7 trillion in the trust fund or not – thought i heard Bernie Sanders say the other day it was there – look, as long as the Gov’t keep crediting folks’ accounts with the amounts – for all intents and purposes, it’s there … We just have to insist it does …
Don Levit is a long time troll from the Angry Bear SS thread. He won’t be convinced there is anything in the trust fund unleass someone shows him a stack of dollar bills stacked to the moon and back.
Surprisingly, he doesn’t look for a stack of dollars bills to Jupiter and back to convince himself that treasury bond investors are really there.
HT – thanx for the info ….
There was no ‘loan’ of funds from the Social Security Trust Fund to the Government. That is a fiction created by people who don’t understand or want you to be fooled into believing the money isn’t there.
“The short version is that the bonds in the Social Security trust fund are obligations of the federal government’s general fund, the budget outside Social Security. They have the same status as U.S. bonds owned by Japanese pension funds and the government of China. The general fund is legally obliged to pay the interest and principal on those bonds, and Social Security is legally obliged to pay full benefits as long as there is money in the trust fund.”
Social Security Zombie Lie #Elebenty Billion…
Please note that as a sovereign currency, the U.S. cannot default on it’s debts. Don’t believe me? Even Alan Greenspan and Ben Bernanke say so…
Maude, this is all true but does truth really matter in DC and in the boardroom? SS will take the blame because there are $2.5 trillion available for upward redistribution by “reforming” SS. Therefore we’ve recently had Rubin and Blankfein concern trolling in the lamestream media, with a Third Way pseudo poll to back them up and give the Obamacrats cover as they stuff the grand theft bargain down our throats.
“You omitted the fact that payroll taxes will be insufficient to meet Social Security payments in three to five years.”
Because the income cap on taxes has been deliberately not kept pace with inflation. Reagan’s double-talk “bracket creep.” Currently, it’s $110k. To bring it to the same level as, say, the early 70’s, it should be around $250k. I don’t think a few points off that $140k is going to be missed.
Interestingly, Barry the Candidate knew this in 2008. Barry the President has let it slip his mind.
“The Social Security trustfund consists of IOU’s from one part of the government to another. Of course this would defeat your meme that Social Security is fiscally sound, which it is not.”
Fiscally sound means having assets sufficient to cover expenses. IOU’s from one part of the government should be pretty sound assets. The rest of the world thinks so from the demand for Treasuries.
If you’re saying the government should default on Social Security, that’s not a fiscal decision but a political/social/class decision. It’s putting bankers and foreign investors ahead of the American people. It’s aggrandizing the Fed and the Chinese, giving them priority over the taxpaying citizens of the US. It’s keeping up the MIC and letting the people of this land fail. There’s no financial reason to do so.
“There are only two ways to close the gap, raise taxes or reduce benefits. Benefit reductions come in a few flavors; one way is to reduce benefits outright, another is to stop indexing benefits to inflation, another is to raise the retirement age, another is to means test benefits or to require a spend down of other assets until the proposed beneficiary meets a spcific threshold somewhat like the medicaid spend down requirements.”
Yes, if done with ritual, jargon, math, legalese, and suits, it’s all okay. Those who point out keeping money paid from those who were promised it is an act of theft are just not sophisticated or educated. Morality, practicality, and keeping one’s word is not part of the elite worldview.
David Stockman woke up and figured out that cutting government revenues was just a pretext to attacking government. I wonder why no one else can.
“I am in favor of all of the above. Sorry there is no other way around it.”
Aha! TINA! There Is No Alternative! Yes! The right wing bully barks! And you can even get elite ‘liberals’ to nod their heads.
Originally pensions were making care of the old and infirm a part of every family’s budget, not just the families affected. This is still a valid approach. The only thing to go around is a smoke screen, and I think we’d be better off just walking though.
Actually, this is a reply to Maude who believes the Treasury did not borrow from the trust fund to pay for current expenses.
From a paper entitled “Social Security Policy Options,” published by the CBO:
Page 3 “The cash generated by a surplus in any year is turned over to the Treasury in exchange for special Treasury securities. The Treasury uses the cash to finance the government’s ongoing activities. If the trust funds’ cash receipts are less than their outlays, the Treasuru securities they hold are redeemed for cash as needed. The Treasury obtains that cash from other revenues or by borrowing from the public.”
“Any increase in revenues credited to the trust funds or decrease in outlays from the funds makes available additional cash that can be used to finance other government activities without requiring new government borrowing from the public; the trust fund surplises that were generated in previous years have been used in that way. Similarly any increase in outlays or decrease in revenues for the OASDI trust funds in some future year will represent a draw on the government’s cash in that year.”
“IOUs from one part of the government should be pretty sound assets. The rest of the world thinks so from the demand for Treasuries.”
All Treasuries are not created equal. Some Treasduries have a much stronger commitment to repay from the federal government than others.
The Treasuries you referred to are part of our debt held by the public. This is considered an “Explicit Liability,” the strongest of 4 levels of commitments to repay.
The Treasuries in the SS trust fund are considered Implicit Promises, the lowest of 4 levels of commitments to repay. Maybe if The SS Treasuries were considered Explicit Liabilities, the excess payroill taxes would never have been loaned to the Treasury in the first place, thus keeping the trust fund intact for future generations.
See a paper entitled “Federal Debt, Answers to Frequently Asked Questions, An Update,” published by the GAO:
You need to reread your own source, including footnotes. The implicit debt cited is for unfunded liabilities “net of trust funds”, over a 75 year period, not the SS trust fund. That can found in the first category, under the “explicit” category. The link was from 2003. Our total national debt, which typically is reported including intragovernmental debt, did not even yet exceed $6-7 billion (1st category) at that time. Do the math.
The bonds in the SS trust fund are guaranteed by the full faith and credit of the US government, the same as US Treasury bonds sold to China, and individual investors. A conscious decision to default on those bonds specifically would be required. However, like bonds held by federal and veteran pensions, the bonds may not be sold on the open market, for what should be obvious reasons.
Here are the words from the report regarding Implicit Promises. It includes the trust fund, because it is the source of future Social Security payments.
“Exposures implied by current policies or the public’s expectations about the role of government – Debt held by government accounts, future Social Security benefit payments, Future Medicare Part A benefir payments, future Medicare Part B benefit payments, future Medicare Part D benefit payments.”
Again, the part you cite sbove is footnoted, and reads:
cFigures for Social Security and Medicare are net of debt held by the trust funds ($1,531 billion for Social Security, $256 billion for Medicare Part A, and $24 billion for Medicare Part B) and represent net present value estimates over a 75-year period. Over an infinite horizon, the estimate would be $10.4 trillion for Social Security, $21.8 trillion for Medicare Part A, $23.2 trillion for Medicare Part B, and $16.5 trillion for Medicare Part D.
This is another one of Don’s favorite pieces of “evidence”. A couple of years ago at Angry Bear we got a statement from the SS Admin, which is a department within the Treasury, that SS special treasuries are not legally subordinated to publically traded treasuries in any way and are just as good.
He likes to cite this GAO report, and we know what sorts of individuals we’ve had populating the GAO. It’s our favorite philanthropists – David Walker and Muppet Master. Go figure.
Peter G. Peterson Foundation
In 2008, Walker was personally recruited by Peter G. Peterson, co-founder of the Blackstone Group, and former Secretary of Commerce under Richard Nixon, to lead his new foundation. The Foundation distributed the documentary film, I.O.U.S.A., which follows Walker and Robert Bixby, director of the Concord Coalition, around the nation, as they engage Americans in town-hall style meetings, along with luminaries such as Warren Buffett, Alan Greenspan, Paul Volcker and Robert Rubin.
Peterson was cited by the New York Times as one of the foremost “philanthropists whose foundations are spending increasing amounts and raising their voices to influence public policy.” In philanthropy, Walker has advocated a more action-based approach to the traditional foundation: “I do believe, however, that foundations have been very cautious and somewhat conservative about whether and to what extent they want to get involved in advocacy.” David Walker stepped down as President and CEO of the Peter G. Peterson Foundation on October 15, 2010 to establish his own venture, the Comeback America Initiative
I suspect the SS whackers weren’t so sure that the payroll tax would be “insufficient” enough to provoke the necessary amount of hysteria – so just to adjust the scales in their favor – Voila! the payroll tax cut …
Ostensibly it was to “put more money into people’s pockets”, but there were other ways to do that – this method, and i have said this from the get go, was directly aimed at whacking SS – if we can’t overtly beat it to death, we’ll starve it ….
Reducing the payroll tax causes the trust fund to be depleted sooner.
Really? Isn’t the amount of the tax cut put into the trust fund, anyway? Otherwise the payroll tax cut makes little sense.
The Treasury has been borrowing to make up the difference, and adding it to the trust fund.
The problem with this is it provides fodder to those that want to attack SS as welfare, but in the meantime it gives money to consumers to spend on, well stuff…which is good for GDP, or corporations, or Keynesianism, or MMTers, or something….
But more burgers and shoes, anyway…..
I’ve heard that the reduction in FICA revenue is being made up by Treasury, but it has never been made clear to me. The estimated trust fund depletion date was recently revised downward by the SS Administration, so I assumed it was because of the payroll tax cut — not to mention the Great Recession.
Lots of things don’t make sense, eh? An unnecessary Grand Bargain doesn’t make sense.
I never understood why they picked on the payroll tax, instead of adjusting the income tax rate, for example. It seemed to me to be a frontal assault on Social Security.
My view is that Social Security is working fine, so don’t mess with it.
So, if the Treasury has been “borrowing” to make up the difference, then the Treasury, or whoever the Treasury has “borrowed” from, has to be paid back, right? From where?
FDR was no dummy – he set this up to be self paying or self sustaining precisely so this nonsense wouldn’t happen – so that it wouldn’t be subject to Congress decision to, or not, appropriate funds ….
Sure is, with general revenues. The same way we have redeemed Treasury interest since 2010, to make up for the cash shortfall. This is an immediate budget expense, and adds to the deficit.
DL – so the answer is to return it to the completely self funding mechanism which it was conceived and designed to be and that can be done fairly easily ….
The author was rebbutting the projection you claim was omitted. The fact that the “trust fund” is owed intergovernmentally doesn’t imply that the program to which funds are owed is unsound. If anything, the fact that the revenue stream intended to fund SS has been diverted to other programs tends to imply that the rest of the budget is “fiscally unsound”.
Economies are productive based on the quantity and efficiency of energy and raw material inputs. Sound budgetary and tax policies have little to do with purely fiscal considerations.
What a wanker. A lying weasel wanker.
Ah, but a wanker on the side of rich, important people.
In 1954, Ronald Reagan was the MC for a trained chimpanzee act at the Last Frontier hotel and casino in Las Vegas. Then he started giving after dinner speeches praising corporations and condemning labor. In the next 25 years, he got a cushy TV spot, became governor of California, and backed into the presidency. All on big money.
Usually, the rich just use and throw away those who act on their behalf. But everyone once in a while, there’s some crumbs of reward.
You said, ” The Social Security trustfund consists of IOU’s from one part of the government to another.”
Well…the Greenspan Commission in 1981 recognized that there would be this large number of post-WWII baby boomers retiring about now. The proposed an increase in the SS tax to set up a trust fund for this purpose. The Social Security Reform Act of 1983 accomplished this.
What would one want the trust fund to do with the money they’re putting away? Bales of $100 bills moldering away in a warehouse? Index funds? Or what is generally recognized as the safest investment in the world, U.S. treasury bonds? Interest paying treasuries. That’s what they did.
Now the time is approaching to redeem these bonds and pay off the baby boomer retirees as the system planned for in ’81. It’ll take either more borrowing, or more tax money, or cuts to handle this. Tightening the screws on present and future retirees is the way the owners of our country want to go.
Umm.. it isn’t there. It was long since spent on other things.
These days when Social Security make their payments they hand the treasury one of their trust funds bonds and the treasury borrows the money net of payroll taxes for the month from (mostly the Fed these days?)
Not good or bad. It just is.
it’s not “not there.” money the government needs to pay its bills comes from taxes.
the united states is not broke. it may need to raise taxes for a while to pay its bills. or it could borrow more and hope a rising economy outpaces the debt… this is the usual way it works, not a mystery or a crime, or even very dangerous.
except when the government is in the hands of maniacs and imbeciles who think tax cuts solve all problems.
It is not our problem to decide how to invest the trust fund monies. It is in the law: they are to be invested in Treasuries. But, what is invested? The entire trust fund dollars were loaned to the Treasury. There was nothing left to invest.
I do not think FDR envisioned the excess FICA dollars being looted by the Treasury to pay for current expenses. In fact, the excess dollars were to be invested in special Treasuries, to be reserved exclusively for SS benefits. Obviously, since 1983 this was not done.
The result: from a cash flow perspective, the trust fund is empty, today, for every dollar redeemed requires new general revenues, an immediate budget expense, which adds to the deficit.
“Obviously, since 1983 this was not done” – Really? and why the hell not? If so, sounds like its time to sue the Trustees for failing their fiduciary responsibility to the fund beneficiaries …
try not to take levitt too seriously. he is a bit addled.
buying treasuries IS investing the trust fund. Levitt seems to think there is a way the money could be left on the shelf and still earn interest… or do anything useful. which is the same thing… while waiting to be repaid.
there is nothing unusual or shady about the way the Trust Fund is being handled. Some argue it would have been safer if invested in something the Congress could not default on. but congress won’t default. they have more clever ways to destroy social security. but lying about the Trust Fund helps them panic the people into doing nothing while they cut benefits or raise the retirement age.
The trust fund did not have any dollars to put away. They were loaned to the Treasury to pay for current expemss, and lower the deficits. From a cash flow perspective, the trust fund is empty today. That’s why the $2.7 trillion is called intragovernmental debt, not intragovernmental equity.
Are you completely dense? They took the surplus funds and bought special Treasury bonds. Congress then absconded with the extra cash sitting idle at Treasury from the bond purchases, rather than leaving dollar bills sitting on the floor of a vault at Fort Knox. Comprenez-vous?
No, the money was first borrowed from the trust fund to pay for current expenses to lower the budget defiucits, and the bonds were issued as collateral representing a promise by the Treasury to repay the loans.
BTW, the money we owe to China, cash received from selling them Treasuries…… it’s all gone, too. Spent by Congress. I suppose that means we must default on those bonds, too. In fact, we must default on all obligations as the government has no actual cash funds, it has spent everything it has ever borrowed. Or so YOUR bizarre logic would seem to imply.
Denying the trust fund would, besides being immoral and callous, be outright theft. There is no other way to describe it. The selfishness and greed of conservatives is stunning.
Your statements indicate the inability of the government to save a store of wealth for the future. It is a great way to pay for current expenses. This is why I am encouraging some system to “wall off” Congress’ ability to take excess payroll taxes (if they ever reoccur) to pay for current expenses. FDR expected these monies to go for SS beneficiaries, so general revenues would not be needed.
Some form of privatization is needed to keep Coingress’ temptations to use the trust fund money as general revenues. I am not supporting Wall Street as the forum to accomplish this important objective. I have all my investments out of the stock market, directly.
Jardinero1:”The Social Security trustfund consists of IOU’s from one part of the government to another”
Take your little meme and shove it up your voluminous ass.
By law the SS surplus has to be 100% loaned back to the USG and special treasuries were created for the sole purpose of accounting for that transaction as funds were collected and were assigned the market interest rate of the day. These treasuries can only be redeemed directly when mature with the treasury, because that is all that would be necessary and there would be no reason to sell them early in a secondary treasury market.
It is no different than a pension fund, many of which have charters saying they must be at least 50% invested in treasuries for low portfolio risk reasons.
We built up a fund in excess of $2.5 trillion. It’s a-holes like you trying to convince people the $2.5 trillion isn’t there, so the USG can renege on the debt and spend freely elsewhere. Like pay off Chinese treasuries or continue the never ending war in the Middle East or build more defense systems or bail out the financial system every few years.
what is getting clear is that for the first time in 50 years the Defense Budget is on the chopping block in a major way – people dont believe in the military option any more
the potential risks are cheaper than the exposure to SS and Medicare – let the twin towers fall again – its cheaper to build then the military and CIA at $1 trillion a year
stop murdering people around the world and they wont react
..here’s what’s wrong with your theory-it isn’t “social security”, “medicare”, immigrants, unions, teachers or their retirements, government workers, food stamps or unemployment for poor, that destroyed U.S. $6.5 trillion per year economy for over 5 years already, on the way to 10-20 more…it was Wall $treet banks…your tripe is intended to provide obvious “cover” for those very fraudsters…documented here:
Robert Johnson, Director of Financial Reform for the Roosevelt Institute, submitted his testimony in early October to the Committee on Financial Services as part of the hearing on reform of the over-the-counter derivatives market. Johnson’s hard-hitting analysis of the potentially catastrophic faults in our financial system runs counter to a troubling trend of failing to address risk that has plagued the Committee’s.
Johnson has grave concerns about loophole-riddled bill currently under review, describing it to me in a recent conversation as “Swiss Cheese.” In his view, regulation of the “reckless” OTC derivatives market is crucial as its impact is so broad, forming “the very fabric of our financial system.”
“There has been a disturbing trend of attempts to silence voices like Johnson’s. His original in-person testimony before the Committee was shut down after an outrageous five minutes by Melissa Bean, while industry players spoke at length. Johnson was forced to submit his full testimony in written form, but my attempts to have it published on the House website were met with a number of implausible excuses by staffers. Ken Silverstein reported the story of what appeared to be deliberate suppression on the Harper’s Magazine website. Finally, amid a growing storm of outrage, the House added the testimony to its website.”
(please learn to follow the $$$$…there is only one place this much $$$$ leads..
and it’s NOT “government”…
A sovereign government does not have affordability problems: it can afford to pay for any program that it wants to fund including Social Security.
A bit disappointed I had to scroll down this far to find the correct response to the “social security solvency” nonsense.
Even U.S. sovereignty is subject to the natural laws of economics. Every financial decision has an upside and a downside. You are seeing only the upside.
That’s why we have 2 eyes.
You understand, don’t you, that the trust fund was established in 1983 in order to prefund the boomers’ retirement and that it was envisioned to be drawn down as those boomers retire?
It was prefunded so that when–in the 3 to 5 years that you state–incoming payroll taxes are insufficient to pay outgoing ss checks there would be no need for a massive payroll tax increase on those still working.
It is working exactly as planned.
And what would you have had the ss trustees do with the excess money accumulated for the past 30 yrs, invest it in the stock market? put it in a matress? What, exactly?
“There are only two ways to close the gap, raise taxes or reduce benefits…. Sorry there is no other way around it.”
You are being dishonest.
FICA revenues indeed been flowing to the general coffers. This means that general revenues need to be increased, or that general services need to be cut. Social Security has never posed any fiscal threat and is on the table because that is what pleases powerful interests.
actually you are completely wrong as well as wrong headed. SS payroll taxes including those already paid currently earning interest will be enough to pay for SS benefits until about 2033.
but what is more important, by raising the payroll tax an amount equivalent to eighty cents per week per year until 2033 or so, Social Security will be “solvent” forever.
i wish there was a way to educate you, but it’s not possible in a short comment, and for most people it’s not possible in any amount of time.
The interest is provided by issuing additional debt, with no immediate budget impact. The impact is felt years later, when the Treasuries are redeemed. The interest is not what we think of as a pre-funded, intact investment set aside to pay for future benfits.
In a paper entitled “Funds From Dedicated Collections: Amending Statement of Federal Financial Accounting Standards 27, Identifying and Reporting Earmarked Funds; Statement of Federal Financial Accounting Standards 43,” published by the FASAB, the accounting advisor for the federal government:
Pages 31-32 “Note on investments
27. Investments in Treasury securities for funds from dedicated collections should be accompanied by a note that explains the following issues:
1. The U.S. Treasury does not set aside assets to pay future expenditures associated with funds from dedicated collections. Instead, the cash generated from such funds is used by the U.S. Treasury for general government purposes.
2. Treasury securities are issued to the fund as evidence of dedicated collections and provide the fund with the authority to draw upon the U.S. Treasury for future authorized expenditures.
3.Treasury securities are issued to the fund from dedicated collections are an asset of the fund and a liability of the U.S. Treasury, so they are eliminated in consolidation for the U.S. government-wide financial statements.
4. When the fund from dedicated collections redeems its Treasury securities to make expenditures, the U.S. Treasury will finance those expenditures in the same manner that it finances all other expenditures.”
“The Social Security trust fund consists of IOU’s from one part of the government to another.”
This another of the big lies told. We are to believe that all of the U.S. bonds and T-bills that the rich have put their savings into are all inviolable as to principle and interest, but the SS bonds are just IOUs that can be ripped up at any time. Sorry, either all the debt of the U.S government is sound or none of it is. Another bull shit argument.
Yea, if someone wants *that* kind of jubilee (default on all government debt), well it might break the existing social structure, but at least that has upsides as well as downsides. Another day, another case of one rule applies to the rich another to everyone else, has no upsides at all.
Read the above as though you were raising cattle, rather than human beings. Do you see the problem?
I don’t care if you think I’m going to live 5 years longer or 5 years less. Just leave me alone. It’s not your f***ing problem.
A free society does not mean it is necessarily optimal by *your* definition.
Why not, then, act on your deepest beliefs and move to Somalia? End your free ride on a functioning government here, and become a technical there! Win win all roumd, I’d say.
I see a problem thinking about and treating human beings as if they were cattle. Mostly as in them today, us tomorrow.
One of the problems with your analogy — there are many — is that no one cares whether cows have jobs. For human beings living in a capitalist nation, however, jobs are important. Young people, for instance, are suffering because they are graduating with significant college debt and scarce job prospects; to the point where household formation in the U.S. is collapsing. The effect of curtailing the social safety net will be to force older Americans to work ever longer. IOW: instead of retiring, elderly Americans will keep their jobs, which means ever fewer jobs for young people trying to enter the work force. It is difficult to see how that benefits anyone, let alone the society at-large.
Wouldn’t a privatized social security system be better?
If a person dies just before they become eligible to receive social security benefits, their estate would seemingly be deprived of all of their life-long payroll contributions.
That’s unfair imo, especially given that manual-labor workers would prolly die at a younger age than the paper-entrepreneurs, Robert Reich’s “symbol analysts.”
That’s why it’s called “insurance”. If you pay for fire insurance, you also get nothing if your house does not burn down.
Privatizing SS = Wall Street taking more fees and preying on unsophisticated investors. And also being exposed to more risk. Look at all the people who did what investment theory says they should do who took 40%ish losses in 2008. If you were retired, you spent a much higher of your depleted principal than you anticipated. So even with the recovery of the markets, having to spend more principal in a down market left people worse off. And many panicked and sold after the losses occurred.
Plus in other respects SS is a superior deal, see: http://news.firedoglake.com/2012/10/24/social-security-a-far-better-deal-for-workers-than-modern-retirement-plans/
Thanx for that, Yves
From the link – “…you can argue how they would manage retirement without the safety net program. But you cannot argue that they could get a better, safer return on investment.”
That is the bottom line – SS is a promise we have made to each other through the generations; WS promises us – nothing
It was not “a promise ‘we’ made to each other.”
It was/is a bureaucratic government secured component of the compensation packages of certain workers, who made a living being employed by others.
It was designed to reinforce certain kinds of behavior, namely, working for a large corporation during the industrial era when they were still looking for employees.
Meanwhile, its beneficiaries have been congratulating themselves for not being on welfare and demeaning the losers.
For the record, I’m not in favor of eliminating, cutting or (especially) privatizing social security.
But I’m not going to lie about it either.
Sorry, JT, you can be as cynical as you like, but as far as i am concerned – it is an inter-generational agreement – a program set up by my parent’s generation, in such a way that it could/would continue operating for generations and I am determined to “hand it down” as a legacy to the next generation as it was handed down to me – it’s one of the few decent things we could pass down to our kids, for Pete’s sake – we’ve screwed up so much else …
haha, AS IF social security did more to enforce people working for an employer than the U.S. healthcare system! Yea, sure if you own your own business you might be double taxed for SS, do you think this compares to what you’ll pay for healthcare being outside the employer paid healthcare system?
Originally, Social Security made care of the elderly and infirm a budget item for all the families in the nation, not just those affected.
Think of term life insurance instead of whole life. I’ve had both, and whole life was never that good an investment. These days, I’m not sure whole life is even for sale.
As far as a privatized account, the fees would eat up any gain and most of the capital. The word ‘churn’ doesn’t even begin to cover it. Think of the average 401(k) and shudder.
Lets not forget that survviving spouses do collect a portion of the dead spouse’s SS benefits.
Definitely consider that which you said. Your favourite reason appeared to be on the web the easiest thing to be aware of. I say to you, I definitely get irked even as other people consider issues that they just do not understand about. You managed to hit the nail upon the top as well as defined out the entire thing with no need side effect , other people could take a signal. Will probably be back to get more. Thank you
Thanks for the posting, nicely done!
I had to laugh at some of the questions and positions from early comments. I suggest folks spend some time at AngryBearBlog in the archives about SS. They have answered and argued all the positions that will be expressed re this posting, IMO.
The fog of propaganda is amazing and SS is today’s prime target.
“Nacht und Nebel” (“Night and Fog”)
The code name stemmed from Germany’s most acclaimed poet and playwright, Johann Wolfgang von Goethe (1749-1832), who used the phrase to describe clandestine actions often concealed by fog and the darkness of night.
Here’s a link to the Angry Bear Social Security archive. Too good to pick and choose, really ;-)
Thank you for this link Lambert.
There is no doubt that, if the current income inequality continues or worsens and if workplaces are steadily degraded due to pro-GOP policies that the US life expectancy – already lower than most developed countries – will scale down to developing country levels over time. The GOP hate Social Security. Always have from the beginning. This has to be the absolute firewall.
It’s all OK. When we don’t have enough new workers entering the work force to pay for retirees, we’ll just take the money out of the lockbox to pay benefits.
Wow, an Al Gore slam. Party like it’s 2000….
The ‘not enough workers’ meme is a distraction.
It doesn’t matter if fifty workers or thirty or ten workers are supporting one pensioner. It’s a question of how much they make.
Much has been said about rising productivity of the individual worker. Shall we ignore the greater value per worker, or simply look the other way while the the elites harvest it?
And if it’s a snark and you neglected the /sarc, while I agree the elected sock puppets would rather give the money to their employers rather than their voters, that’s what the fight’s about. Line up with and for the commoners.
Well, but they’ve been successfully harvesting the rest of our employment compensation packages–why wouldn’t they harvest SS too?
>Much has been said about rising productivity of the individual worker. Shall we ignore the
>greater value per worker, or simply look the other way while the the elites harvest it?
I keep banging on about this. The increase in productivity more than makes up for the increased number of retirees.
But here’s another one: since the Treasury has been harvesting the takings from Social Security, they have also been keeping up with issuing IOUs, to the tune of about $2.5 trillion to date, no? Well when the current outgoings start to exceed the current takings, Social Security can start in on liquidating some of the investment in Treasuries, no? The $2.5 trillion should last a goodly long while before SS is actually, really in trouble. It is Congress’s responsibility to make good on the Treasuries liquidated by SS. By for example increasing the general taxation rate in a progressive way. Let us make it abundantly clear that a mega-slice of the actual debt is owed to Social Security, or should one say, to We the Workers.
Don’t ever forget or let them forget, that SS only has the appearance of insolvency if that $2.5 trillion is ritually ignored.
The Social Security surplus has grown, it now stands at $2.7 TRILLION. We keep living longer and the surplus keeps growing. I am not hearing any ticking time bomb of doom, just a growing pot of money. Hence, it could not contribute to our current deficit, having a surplus and the surplus keeps growing. No actuarial eschaton here.
It’s amazing isn’t it? For at least the past 3 to 5 years, I’ve heard the prediction that the outflow from the ss fund would soon overtake the inflow.
It was envisioned when the trust fund was overfunded beginning in the mid-80s that would happen at some point–it was supposed to happen, but any reason given this lousy economy with fewer workers paying in that it still is increasing?
If outflow is greater than inflow, that’s by design — to pay for the Boomers who, I might add, paid for* not only a portion of their parents retirements but their own, under the deal Reagan and O’Neill cut.
NOTE * If one assumes that taxes fund spending.
Considering how little of a problem Social Security really is to the budget, and the amount of attention it gets from so-called reformers, aka deficit hawks, and it really makes you wonder what goes through peoples’ minds.
This idea that the Social Security money that was collected from people and put into US bonds, backed by the full faith and credit of the US government, is no longer there is laughable. What makes you think you can selectively default on sovereign debt like this, and essentially confiscate, through default, the savings of your own people for their old age.
I don’t know. What makes them think they can fire their employees on Friday afternoon, give them a big pay cut over the weekend, and hire them back come Monday morning?
Because we permit it.
Precisely! And sadly, this last election is proof that apparently we keep on intending to do it …
Gotta laugh at this – ” …has grown into such a massive whale of a lie that liberals frequently subscribe to it.”
So liberals don’t subscribe to little lies – only the really BIG ones ….
It isn’t just that it is a big lie. It is persistent propaganda. According to the propaganda, Social Security has been on its last legs for 35 years or so. That’s how long the propaganda has been going on. And the media have gone along, either spreading the propaganda or not confronting it. Why, I saw on TV just today that exit polls showed that something like 80% of people who voted for Obama think that Social Security needs fixing (!). No reporter or commentator contested that idea. People have been hearing the Social Security is in trouble for so long, with nobody saying nay, that they believe the lie.
Well, yeah, us little folks who may not know better have been flummoxed a lot – but those folks in Congress and the Exec. branch who know or damn well should know how the system is set up, know or should know that this is a whopper – yet they “subscribe” – what does that tell you …
and “they” intend to further (yet again) monopolize that very “media” conglomerate:
FCC Set to Ease Media Consolidation Rules
“The Federal Communications Commission appears poised to push through relaxed media consolidation rules that a federal appeals court has previously overturned. A statement from FCC chair Julius Genachowski has called for a vote to “streamline and modernize media ownership rules, including eliminating outdated prohibitions on newspaper-radio and TV-radio cross-ownership.” The move appears to be an effort to restore provisions struck down last year that made it easier for a company to own a newspaper and a broadcast outlet in a single market. In a statement, the media reform group Free Press criticized the new effort, saying: “The FCC’s headlong rush to push through these policies behind closed doors shows a blatant disregard for its own public interest mandate and the court’s clear instructions.”
…”think” radio…the number of lush limbaugh stations expanding, while Norman Goldman contracts to irrelevance…
Well, anything that is on the teevee should be taken with a grain of salt. I can’t remember the last time a great disturbance in the force managed to penetrate the bubble of Beltway conventional wisdom. The poll you are thinking of is not a poll in the scientific sense. Firedoglake: “Apparently when all the non-partisan public polling shows your position is unpopular, what you do is commission your own poll based on some highly deceptive questions. Third Way, the Wall Street-funded think tank, has released a poll of “Obama voters” which they are claiming shows support for a grand bargain. If you look at the actually survey questions, however, it is clear they don’t pass the laugh test.” http://fdlaction.firedoglake.com/2012/11/20/the-third-ways-highly-deceptive-polling-on-social-security-and-medicare/
So here we have the “progressive” Third Way using leading questions to create a “poll” whose results could then be used to shill for the Pete Petersons of the world. The fact is even the majority of republican voters do not want to have their benefits cut, the only ones who want to do so are Wall streeters and their political flunkies and media shills.
“Fiscally sound means having assets sufficient to cover expenses. IOU’s from one part of the government should be pretty sound assets. The rest of the world thinks so from the demand for Treasuries.”
The ROW’s appetite for U.S. Sovereign debt is in secular decline. That’s what QE is, in large part, designed to address. It operates thusly: The Fed exchanges cash for trash (at par) with commercial banks who then deploy the cash into Treasury debt which A.) keeps the commercial banks on life support and B.) makes up for the chronic shortfall (aka the deficit) that Uncle Sugar is now faced with. It is why QE will be here right until the system experiences the great reset. The support for U.S. Sovereign debt is waning badly, and is now made up of a hodge podge of small nations that are going to wise up in due course.
Please tell me more about the secular decline of US government debt. Last time I checked foreigners were buying the stuff like it was going… but please continue about this decline.
I agree with Aquifer.
” …has grown into such a massive whale of a lie that liberals frequently subscribe to it.”
It was actually Hitler in Mein Kampf who pointed out that if you are going to lie, lie big. People will question small lies because small lies fall within their personal experience and so be more easily seen for what they are. A big lie isn’t tied to personal experience and so can’t be challenged by it.
Parramore conveys the impression that liberals are being taken in by this “whale of a lie”, but I would say rather that they are in on it and promoting it. I think we need to look at Republicans and Democrats, conservatives and liberals not in terms of greater and lesser evils, but as complementary evils. Do this, and you see how, under their superficial conflicts, they work together to effect an anti-99% agenda. You see how the ratchet effect really operates. Don’t do this, and you are left with incoherence, supposedly smarter Democrats and liberals somehow always getting snookered by “stupider” and often in the minority conservatives.
“Complementary evils.” Well said.
* * *
“And would you like a complimentary evil with that?” Oopsie….
Her choice of words was telling – she didn’t say, “fooled by”, or even “overpowered by” but “subscribed to”; yup, just like their General, the Commander-in-Chief and his troops are “All In”
My impression of Alternet is that it is more an overtly pro Dem site – but methinks as their cognitive dissonance grows, the more intelligent folks like Parramore will exhibit more and more of these “Freudian” slips …
…there are several more “wrinkles” to Hitler propaganda-pick an event in history, begin all scapegoating from that point (forget entirely what led up to)
and rationalize retribution…for the “better good of the all”…in other words, historical revisionism…fundamentalists hate historical documentation:
“William Blum has written a book whose subject should be of interest to all Americans who believe in freedom. Well-informed readers may already be familiar with the basic idea. In brief, the U.S. Government during the latter half of the twentieth century waged numerous secret little wars, of one kind or another, against foreign governments and groups of which it did not approve. The avowed purpose was usually to contain a perceived communist menace. In actuality, what might be called communist means were employed to achieve this end. These means involved spying, wiretapping, propaganda at home and abroad; the rigging of or interfering with elections; the granting of monetary and military aid to dictatorships and violent opposition groups; the training of same in methods of subversion, torture and terror. All this and more was done without Congressional approval or oversight. The American people were lied to by government officials to keep it that way. A complaisant media helped it happen.”
“All my life, when someone happened to criticize the American military interventions abroad, I heard my American friends justify them as “humanitarian missions” designed to help out the oppressed and promote the noble causes of democracy and human rights. I knew this to be grossly untrue, but lacked the specific arguments to counter these claims. Not anymore. Blum’s book is singular in the sense that it’s the first book I’ve seen that brought together all the historical evidence of American injustice abroad from WWII till the mid-nineties into one volume. I would also like to emphasize that, unlike many other authors on both sides of the barricades, Blum almost never indulges in idle accusatory speculation. Every fact stated in the book is backed by rock-hard documentation, and every conjecture is a legitimate extrapolation from these facts. Now some readers have criticized the book for “not exposing the crimes of the Soviet Union and China”, but they forget that this is a book on the US, not the Soviet bloc; in truth, Blum is in no way condoning Moscow’s actions around the world either. Moreover, if one compares the number of books exposing Russia and China with the number of books exposing the US, it would be fair even if a thousand books like this were written. And shame on those who say that the American foreign policy abroad has changed for the better in the nineties.”
If you look at this from a resource point of view, forget the payroll tax, insurance, and the surpluses. Social Security represents a social commitment to an intergenerational transfer of resources from younger to older Americans. This transfer is being distorted by the much greater, and socially unjustified, transfer of resources from all Americans to the 1%. The payroll tax and the rest are just accounting fictions which tend more to obscure than elucidate the underlying reality.
Might i suggest however, that the instantiation of that commitment, the proof of the pudding, if you will, lies in “putting our money” where our promises are – so, in that sense, the discussion about the payroll tax, or its equivalent, and our insistence that it be invested and used precisely for that purpose and naught else is a discussion about how firm, in fact, that commitment is …
Money has largely been divorced from its social purpose. It is now treated like some elemental matter of the universe rather than a medium through which resources are distributed in a society to the ends that society proposes. One of the reasons I prefer a resource approach is that a societal resource has its social purpose front and center at every step in its distribution and use. It also doesn’t have all the baggage that money does. A fair distribution of resources in a society is uncontroversial whereas a fair distribution of money is considered dangerous and heretical. That the two are functionally equivalent but the reactions to them are so disparate indicates how indoctrinated we are on the subject of money. It’s why I think it is better to steer clear of it. Money has been too propagandized. For me, it is more important to lay out the concepts. The money is just about the bookkeeping.
…necessary to do as William K Black-Michael Hudson do, and not conflate “free market (should regulate itself)” with “financial sector”=Wall $treet…two entirely separate entities..Wall $treet generated 19% of U.S. economy, 2000-but by 2007, 41%…look no further to see where economy vanished to…and it’s even easier (thanks to Yves Smith) to follow the $$$$…(“ECONned”)
When we talk about society’s resources, they only are resources in so far as they have a social purpose. Money is a medium for the distribution of resources. As such, it serves social purposes but it is not a resource and has no social purpose of its own. Money for money’s sake is an empty concept. All of this precedes ideas like “free markets” and “financial sector”.
I think the common pleb does understand at some level that we live in a resource limited world and this thing called “money” does in some way act as a accounting mechanism that determines how these limited resources (or call it wealth) get allocated.
I think they also understand that creating unlimited money won’t create unlimited resources, and if you get out on a street corner and start preaching that if everyone would just work for “attaboys” then the Resource God will smile on us and shower us with food and comforts, you won’t get many signing up for your cause.
So it really is a fight for fair accounting for the distribution of limited resources.
Resources aren’t just things like iron and corn. They are people, their knowledge, and skills. We have the societal resources for a just and equitable society. But we can not achieve this with so many of society’s resources tied up in the hands of a wasteful and unproductive few.
I use the broad definition here, which includes everything from loin cloths to indoor plumbing to being able to travel faster and farther than a speeding cheetah to flying faster and higher than the biggest bird out there.
@Hugh… The shadow financial sector is nothing more than, one huge – electrons of price – accelerator. It serves no social purpose, other than to froth up these electrons – of price – too a froth, that, then can be skimmed.
Skippy… the problem now is… how, what, and where do they convert that price to “value or quality”. Its all becoming an mental / optical illusion… Security of – ones person – is last on the list… can you smell the[ir fear?
I agree that the important issue is resources – the market may “allocate” them well, but says nothing about how well they are distributed – it should be our job, acting through our chosen agents to do that – but there must be a mechanism/medium for this distribution and right now that “mechanism”, whether we like it or not, is “money” and the amount we are willing to spend and where and how we chose to spend it is a measure of what we value – where your heart is, there also will your treasure be …
Granted, we need a better mechanism, but until one is developed and itself fairly distributed, we need to work with what we’ve “got”, ISTM …
“Money has largely been divorced from its social purpose. It is now treated like some elemental matter of the universe rather than a medium through which resources are distributed in a society to the ends that society proposes.”
Yes a thousand times. We have taken a system of finance, which is designed to be a useful mechanism for fostering trade, and elevated it to the status of holy grail. We now consider economic actors who do nothing but extract wealth essential to our economic well-being. What does one call those who live off parasites?
Ok privatizers, explain to me how it is that simply changing to a privatized system will make our retirements more secure ?
Putting 7-8% of my income to an account labeled “SSTF” or one labeled “Morgan Stanley” does not give me any more future security. The only question is what goods and services are being produced when I wish to start spending my retirement money. Privatizing does not insure improved future production of goods and services but it does insure that many will be left with nothing for retirement, which means as a business owner fewer future customers
The difficulty of reducing this subject to a few simple talking points is why this SS and MC will eventually be eliminated. American voters are far to simplistic and distracted to pay attention to any of the above, something the austerity boys have long realized and already capitalized on. Not to mention that most of the young have already been convinced that they’re gonna be out in the cold anyway, so they’re all for cutting it now, regardless of consequences. Once again the egg-head dems and faux “liberals” have talked themselves into a corner, and the far more dim-witted but realistic conservatives are going to have their way with them – AGAIN! We can argue the fairness of this til the cows come home, but one need look no further than the two-faced sellout we just installed in the White House for his second term(!) to understand which way the wind blows. Cat food. It’s what’s for dinner.
These concepts should not be too difficult to grasp but look at how people view marginal tax rates in this country! How many people think all their income is taxed at the top rate that they’re in? Really, how hard would it be to correct this belief? I don’t believe the knowledge is lacking by those that could do something, just the will.
Social security is for the most part a federally-backed pension fund for all non-federally employed Americans. So to be fair and equatable, if cuts are made to Social Security, then cuts should ALSO be made to all other federally-backed pension funds, including the ones for military employees. But because federal workers wield a disproportionate amount of power in Washington, and because politicians don’t want to be accused of being unpatriotic for making cuts to military pension funds, my guess is, despite it being blatantly unfair and grossly inequitable, that all pension funds for military as well as civilian workers will remain out of harm’s way when it comes to getting the axe.
When they say that SS will be ‘fixed’, remember what it means when dogs and cats are ‘fixed’.
Excellent article, will copy to my email list and print out for computerless people. There is one point not mentioined:
“Survivors of net immigration…100,000” what a joke.
I live on Sacramento Street next to a special low income apartment complex. Almost all of the people in it are Soviet “religious refugees” that were given refugee status. Many third world people also qualify as refugees. They too qualify for the federal largesse.
After having conversations with some of these folks I have come to learn they are ALL receiving SSI or Supplemental Security Income, paid by Social Security. They never put one penny into the program and are on it for life. In addition they get housing assistance payments (free rent) and food stamps. There is no means testing, often their children are property owners and appear to be wealthy at least based on the new luxury cars, and and clothing seen around here when they show up.
Working Class Americans are sick of watching this kind of thing. Everybody should be treated equally, you get out of it what you put into it.
SSI is NOT Social Security. not paid for by Social Security.
SSI is a welfare program, administered by Social Security but paid for out of general taxes.
The government may decide that it is in our interests to provide welfare for some people. that’s a political and moral question.
Social Security is NOT welfare. Workers pay in advance for their own benefits, earning interest via pay as you go with wage indexing. It is not a political or moral question, it is simple prudence. It is the only way ordinary workers have to guarantee their money against inflation or bad days on the market.
the twelve (or six) percent of your income you pay into SS is a hedge against dire poverty in old age. You have plenty of money left after paying your SS “tax” to invest or spend as you please. that SS is there just in case. and it’s the best deal workers have ever had.
Eliminate Medicare and Medicare -> People die earlier -> Social Security “problem” solved!
I can remember when the “demographic bulge” was discussed to death in 1984. SSI rates were jacked way up (under Reagan!) to fund SS far into the future. Has math changed since then?
That was the Greenspan Commission to fix SS (under Reagan), no less. The math hasn’t changed – Boomers still croak about the same time as the Trust fund, but thieves got more sophisticated.
Then under Bush I (read my lips – no new taxes), they jacked up medicare big time, at least on my paycheck deduction.
BTW: If we destroy the US economy for any other reasons, your 401K goes poof too.
Social Security is too important to be entrusted to elected politicians. It should be managed by a committee of professional actuaries, economists, and demographers. Besides being technically renowned they should not be politically affilliated. Their job (and it’s really not that hard) would be to make periodic and gradual adjustments in benefits, retirement ages, cost-of-living adjustments and contribution rates so that there is never a crisis.
“Their job (and it’s really not that hard) would be to make periodic and gradual adjustments in benefits, retirement ages, cost-of-living adjustments and contribution rates so that there is never a crisis.”
Nope – those decisions shouldn’t be left to technocrats – that’s what is happening now – the pols are hiding behind what the “techs” are telling them. These are social decisions – what benefits we wish to supply, when and for whom – and then decide we WILL pay for them ….
I agree on the life expectancy issue.
Additionally a reasonable person would think that 6 percent of your own income + 6 percent matching for your employer would be sufficient to cover retirement costs. After all every personal financial advisor says if you start early you only need to save and invest 10% a year to live off your own money in retirement.
The only thing here is SS is not directly invested and earning a direct return growing your principle, like individual savings for retirement do. Instead the 12% per year effectively sits at its nominal uninvested rate correct? So it isn’t even keeping up with inflation let alone growing your principle.
So instead the way to “fix” social security is:
#1 keep it from being the congressional slush fund
#2 Turn it into the world’s largest PUBLICLY managed sovereign wealth fund intent on earning a return on the principal, while being broadly diversified. From buying stocks and bonds of all types, natural resources at home and abroad, to acting as a bank funding public and private infrastructure projects and unincorporated businesses.
It’s really half of what the democrats want and half of what the republicans want which means it will never happen.
Tim:Instead the 12% per year effectively sits at its nominal uninvested rate correct?
Nope. The treasury creates “special tresuries” to account for the money borrowed from the fund and they look at what interest rates are on the then current longer maturity publically traded treasury bonds and say that’s the going rate for AAA USG money and assign that rate of return to that batch of special treasuries.
At Angry Bear we looked at a long list of these special treasury bonds – it is published info – and just eyeballing it, it look like they might average out to be a 4.5% interest rate.
your social security payment earns interest
the mechanism is pay as you go with wage indexing. that means you get paid back in dollars that reflect not only inflation but the average growth in the economy since you paid the tax.
because it is insurance, you get even more “interest” if you happen to reach old age without having made enough money to otherwise retire on. by my calculations low income earners get about 10% real return on their “investmetn” middle earners get about 5% and high earners get about 2%.
people who do the calculation differently get somewhat different results. but i think they overlook some of the complicating factors. but in the final analysis, what is important is that you get “enough” to survive on. guaranteed. if you want more (and you do) you have the private markets and take your chances. most people will do better than SS. but not so much better that they would be wise to do without SS… insurance against if all else fails. as it often does.
Why not means-test Social Security, though? Even if there isn’t a solvency issue. We want to raise income taxes on the richest folks, right? Why not target payments to those who are going to depend on them?
Probably should. We could also raise the cap on withholding – presently around $100K, I beleive.
Advocates haven’t pushed for this because they feared this would antagonize the wealthy and higher income people.
But it sounds to me like the gloves are off, and maybe we need to start swinging.
not a good idea.
means testing is ugly and expensive. there is a reason i call it quarterly visits to the government proctologist to examine you for hidden assets.
people would game the system. and “the rich” would demand that benefits kept being cut and the “means test” more strict.
you would simply be turing it into welfare as we knew it.
“gloves are off” is a good way to get yourself killed in a bar fight. don’t be suckered by a zeal to stick it to the rich. they are bigger than you. and meaner.
Hey Dale. Glad you showed up to talk SS around here.
True about the means testing. But I CAN beat the crap out of any rich guy I see in a bar…but I just remembered they always travel with these goons that look like they’re straight out of the Godfather. Not good. Then there’s always the squirrelly looking lawyer dude. Thx for reminding me.
In other words decide to NOT pay certain people the SS retirement payments they have spent a working lifetime paying for because somebody-or-other decides they have too much “means” to deserve to get what they have already paid for? People who suspect they can be accused of having too much “means” will naturally wonder why they should be extorted of all that FICA taxmoney for NOTHing and they will
become a lobby to be legislatively excused from having to pay any FICA taxes for something they have been warned in advance that they will be cheated out of after paying all those FICA taxes. It will turn SS into a welfare program and destroy any social consensus for having SS . . . which is why rich upper class people suggest “means testing” for Social Security. They get to to strike the pose of “concerned civic-mindedness” by supporting a concept designed to destroy SS by destroying consensus and trust in SS.
At the pragmatic level, I reject means testing because I know very well that means testing means that if I have a house and a car when I retire, the means testers will tell me that a house AND a car is too much means to need Social Security. I know very well they will tell me to sell the house and live in the car, and after I have spent all the money I made selling the house, THEN I can get Social Security.
That is what “means testing” is all about, and I reject it. Should Bill Gates get Social Security? Well, did he pay the FICA tax? Then yes, Bill Gates should get all the Social Security he paid for with his FICA taxes. I’m not falling for that little “does Bill Gates really need Social Security?” trick.
SS is already means tested. It’s means tested when you pay in, and benefits are capped. It’s also means tested when you receive benefits because with higher incomes it becomes taxable income.
Means testing can be very problematic. It’s cumbersome and the clever can find ways around it, so any means testing formula would be more complicated than it’s probably worth.
It’s also possible that savers would be penalized; they are already if their investment income puts them into higher brackets.
The universality of SS is what has made it fair and stable. Making it more complicated serves no purpose. The only additional means test I can think of that would work is uncapping the maximum amount of wages on which FICA tax is due. When we were working, we felt that we were making enough at that level that it wouldn’t have hurt us if the cap were removed. That’s not a bad tradeoff for a minimum income in one’s frail years.
Here’s a darker reason not to allow Social Security to privatize, over on FireDogLake:
Cut the Fed Stimulus Welfare for Wall St. Then see how they Feel about S.S.
Before Al got off on warming planets, he was building “lock boxes” for SS.
We should indeed take the $100,000 cap off and see how things turn out.
that’s another not good idea.
try to stick it to the rich, the rich will stick it to you.
is it worth the risk to save eighty cents per week?
that’s how much it would cost you to “save” Social Security at the present retirement age and present replacement rate.
raising the cap simply turns SS into welfare as we knew it. and we know how that turned out.
Fine. We’ll start demanding these overpaid CEOs make a lot less. How’s that?
Yes, Americans hate welfare. Turn SS into welfare by any means (although taxation is the better means) and well what are the chances you can undo vast amounts of propaganda to hate welfare. You can’t, you will just lose SS. You know the fable about a dog and his bone, looking into the water right?
Whether or not people are living longer, are they working longer?
After leaving a 20 year career and into my 5th decade I searched for work for months at a time, over the years till I qualified for pension income, unable to get even interviews, much less a job equivalent to the one I’d been edged out of. If I had not had my tiny pension and a small government supplement by age 55, I would have lost the house and ended up living on public assistance, despite being well educated and reasonably healthy. I ended up with a 12 hour a week job in retail, which plumped up my $17k pension income by maybe three thousand a year till the store laid me off earlier this summer.
In a world where capable people’s skill and effort are simply not of interest to the corporations guarding the toll bridge to decent incomes, what does it mean to be a citizen?
Noni Mausa: What does it mean to be a citizen?
It’s an “Exit, Voice, and Loyalty” issue. Have you considered expatriation?
The article is excellent. And most of the comments are more intelligent than i am used to seeing on the net.
But everyone overlooks the critical point: Workers pay for their own Social Security. lt does not matter if they are going to live longer, or “have hard physical jobs.”
After forty years most people are sick of working for the boss. They may want to start a business of their own, using their retirement as a back up. Or them may want to write a book, or visit the grandkids, or just go fishing. Since they paid for it themselves who are “we” to decide that they can’t retire.
BUT if they are going to live longer they will need to pay… save… a little more to cover the cost of living more years. According to current projections… the same ones that produce the “8.6 Trillion Dollar Unfunded Deficit!”… the “little more” would be about eighty cents per week more each year for about the next twenty years while wages will be going up over eight dollars per week each year.
At the end of the day workers will have more than twice as much real dollars AFTER paying for their retirement.. a retirement that will last about 30% longer and receive benefits also worth twice as much as todays.
This is just math. But it’s honest math, and so the journalists don’t want to hear about it. The idea that they might do the math themselves is laughable.
I could show you, but would you listen? would you understand? would you DO anything about it?
“If they are going to live longer they will need to pay…”
If you believe that taxes “fund” spending, yes. (An assumption that “just math” always hides.)
Nah maybe just assuming it’s a lot easier to convince the masses to save the Social Security program based on “just math”, than based on obscure economic theory, which almost noone understands.
The President says that Social Security MUST be left alone.
Oh wait, that was Pres Eisenhower – who wrote to his brother the extreme political and soical importance ofunemployment and social security, and how the population of the USA also understood the importance of these programs, and wouldn’t allow for any changes that would impair the programs.
Ike was right. So was FDR (“we put those taxes in there so no damn politician can take it away from them.”)
What FDR and Ike didn’t reckon with was the persistence of the damn politicians and the bad memories of the people.
Pete Peterson seems to have bought a controlling interest in our government and our “high end news sources.” You can buy some high quality expensive expert non partisan liars for a billion dollars.