Do You Believe in the Trust Fund?

Jacob Sullum | December 20, 2004

A story about Social Security reform in Friday's New York Times implicitly buys into the idea that there's no need to worry until the nonexistent "trust fund" runs out:

Some opponents of Mr. Bush's approach, mostly liberals who want to preserve the current Social Security program, said in interviews that the administration was exaggerating the scale of the problem to create an air of crisis that justified radical but unnecessary changes like creating private investment accounts.

Noting that Social Security can pay full benefits for at least 38 years, Mark Weisbrot, co-director of the Center on Economic Policy Research, a liberal research group, said the system's financial condition now was no worse than it has been at most points in the last few decades.

"This whole idea that Social Security needs to be fixed is false," Mr. Weisbrot said.

I don't hold the Times responsible for Weisbrot's opinion. But by accepting as a fact to be "noted" the claim that "Social Security can pay full benefits for at least 38 years," the story overlooks the crucial point that Social Security benefits are expected to start exceeding payroll taxes 24 years sooner than that. Taxpayers will have to make up the difference one way or another, since there's nothing but government IOUs in the "trust fund."

Comments

|12.20.04 @ 11:26AM|#

O Jacob

Don't worry, be happy.

|12.20.04 @ 11:31AM|#

Even at the Acadamy Awards show, they bring in a couple of suits--accountants--to read their spiel.
Shouldn't the US do something similar before resuming the silliness of this SS debate?

|12.20.04 @ 11:31AM|#

You should visit some of the lefty blogs. Matt Yglesias has entry after entry about how the Democrat message should be a loud and clear 'there is no crisis'.

The ironic reasoning is that DEMOCRATS believe that economic growth will make the social security defecit irrelevant! They take the SSA to task for being too pessimistic in their growth projections. I don't know whether to laugh or cry ...

|12.20.04 @ 11:32AM|#

All of these projections are based on extremely pessimistic projections about productivity increases and immigration levels. If productivity grows at anything close to the last 50 years, problem solved.

Oddly enough, the Social Security abolitionists predict that producitivity growth will be much lower than historic averages, but that the stock market will continue to rise in line with historic averages. That's a pretty neat trick.

|12.20.04 @ 11:36AM|#

"The ironic reasoning is that DEMOCRATS believe that economic growth will make the social security defecit irrelevant!"

Well, it worked with the federal deficit in the 1990s - economic growth, and a modicum of fiscal sanity.

It's too bad conservatives have so little confidence in American capitalism as an engine of growth and progress.

|12.20.04 @ 11:41AM|#

Jason Ligon,
Democrats believe in "trickle down," and Dubya don't?

gaius marius|12.20.04 @ 11:43AM|#

If productivity grows at anything close to the last 50 years, problem solved.

again, mr joe, the problem isn't with SSA -- i agree that we can plug as much general fund revenue as we might need into it to cover shortfalls.

the problem is much larger: the government's (and society's) overall fiscal health. we are running dangerous and unsustainable deficit and debt levels which require that we cut outlays and raise taxes. this administration has done the *opposite* of both -- and the deficit is projected to continue to get worse, productivity be damned.

you may argue that SSA doesn't need to be cut -- but, if you say that, you must also say that defense needs to be cut or that taxes need to be raised or that we need to start printing dollars willy-nilly.

Warren|12.20.04 @ 11:49AM|#

joe,
I'm surprised that you would defend a reverse Robin Hood scheme that robs from the working poor and gives to the middle class. How much you benefit from SS depends on how long you live. As we all know life expectancy is highly correlated to affluence (single-payer-health-care does not change that!). Every time a low-income worker dies young, the rest of us reap the fruits of his contributions. Poor people would be much better served with private accounts that they owned and could leave to their heirs.

gaius marius|12.20.04 @ 11:49AM|#

Well, it worked with the federal deficit in the 1990s - economic growth, and a modicum of fiscal sanity.

mr joe, if you believe that the 1990s represented "fiscal sanity", there's probably no convincing you of anything i'm saying.

the gov't benefitted throughout by capital gains taxes on a massive and irresponsible leveraging-up of america that has continued to this day. the eventual necessary deleveraging of the american economy is the sword of damocles that hangs over us. if we don't acknowledge that and start planning for it -- individually and collectively -- we're in very serious trouble.

|12.20.04 @ 11:50AM|#

"since there's nothing but government IOUs in the "trust fund." "

Yeah.

I remember thinking about that fact back when a bunch of congressment were grandstanding about corporate accounting scandals at some hearings on the subject.

Any company that tried to to do what the government has done with the "trust fund" would have been prosecuted by the Securities and Exchange Commission.

Let them cast the beam out of their own eye befre they get sactimonious about the speck in someone elses. The magnitude of fraud in the SS "trust fund" dwarfs anything done at Enron or Worldcom, etc.

|12.20.04 @ 11:53AM|#

As if a fully solvent trust fund would make the issue of SSA reform go away? The federal government has written a mandate that you and I *must* save. It's both unconstitutional and silly.

|12.20.04 @ 11:54AM|#

I have a good song that describes Joe's current situation:

Shattered Dreams by Johnny Hates Jazz

So much for your promises
They died the day you let me go
Caught up in a web of lies
But it was just too late to know

I thought it was you
Who would stand by my side

And now you�ve given me, given me
Nothing but shattered dreams, shattered dreams
Feel like I could run away, run away
From this empty heart

You said you�d die for me

Woke up to reality
And found the future not so bright
I dreamt the impossible
That maybe things could work out right

I thought it was you
Who would do me no wrong

(chorus)

From this empty heart

I thought it was you who you�d die for love

(chorus)

Oh no no no - you said you�d die for me
Oh oh, oh oh, die for me
So much for your promises

|12.20.04 @ 11:58AM|#

Uh, Gil, the government never claimed there were assets in the trust fund, beyond the Treasury Bonds.

The need to make shit up to defend this proposal is indicative of the low level of support it can gain on the merits.

gaius, absent Bush's tax cuts, the federal deficit vanishes in a few years. Let me rephrase that - if tax levels were at the level they were at during the longest period of peacetime economic growth in our nation's history, there would be no fiscal problem.

Warren, the problem of shorter lifespans for poorer workers would be made considerably worse by leaving them without a guaranteed retirement check. Though I do support rejiggering the payroll tax rate and cutoff to make the taxes less regressive, and to solve the small fiscal gap that remains when you use responsible assumptions about productivity.

|12.20.04 @ 12:04PM|#

"Uh, Gil, the government never claimed there were assets in the trust fund, beyond the Treasury Bonds."

That't the fraud, you economic dimwit - Treasury bond's aren't "assets" in the federal government's hands. NO IOU in the hands of it's maker is an "asset".

It doesn't count as an "asset" any more than if you took a slip of paoer and wrote an IOU to yourself.

|12.20.04 @ 12:06PM|#

Actually, Warren, to nitpick for a moment, when a low-income worker (or any other worker, for that matter) dies young, nobody reaps the benefits of those contributions at that point. The benefits were already reaped: Given to current retirees as soon as the payroll taxes were paid.

All it really means is that there's one less person to provide benefits for.

Now, I'd like to muse on something:

Suppose that everybody starts investing more in the stock market. Whether it's done via some "partial privatization" plan heavily regulated by the gov't, or via greater participation in the current 401k system, or via the old fashioned way of people simply buying stocks, let's say that more people start investing in equities. And let's say that the investors have at least some reasonable amount of flexibility to buy and sell (so that the markets can operate efficiently).

The hope is that this way people's earnings will accumulate enough interest to finance their retirement (and, depending on what is done with Medicare, perhaps some of their health expenses as well). The motivation (at least in the eyes of many people) is that with an aging population there's simply no way to pay for it all from contributions by current workers.

(And joe, no matter how you slice it, the ratio of workers to retirees is shrinking, and that's a problem. The problem may be "solved" by higher taxes, but that creates another problem with regard to the standard of living for young workers and their kids. One need not subscribe to libertoid dogma to see the problem there.)

Anyway, with all that background, here's my question:

With an aging population, will American businesses be able to provide enough return on investment to provide for so many retirements? That's an awful lot of people to provide for, and with more investors simple supply and demand says that investments will deliver the same return for a higher price. (The same absolute return measured in constant dollars, not the same percentage return. If the percentage return were the same then the price would be irrelevant for this analysis.)

Also, aging populations can drag down productivity.

So I wonder whether the market can provide for an aging population. Likewise, I wonder whether a politically feasible social security system can provide for an aging population.

At the risk of sounding like Gaius Marius and predicting doom and gloom, I suspect that there may be no solution to the problem of an aging population. At the end of the day, their needs must be provided for by working people. Either those working people have to pay enough taxes to keep the elderly afloat, or they have to work hard to generate enough shareholder value.

Am I missing something?

|12.20.04 @ 12:07PM|#

So basically, you've all got nothing to back up your chicken little assertions of impending fiscal doom, besides references to Ponzi Schemes are low-quality New Romantic songs.

Does anyone else suspect that Bush is getting his fiscal projections from the same people who analyzed Iraq's WMD capacity?

I can respect Gil and GH for being forthright about the debate, even as I disagree with them. They don't think the government should collect taxes and redistribute them in order to provide a safety net, and they want to eliminate a program that does this.

What I cannot respect is the flapping about, and insisting that Saddam Hussein can bankrupt the Social Security Program in 45 minutes, or whatever the hell today's bogus sound byte is.

|12.20.04 @ 12:08PM|#

To say that the Treasury Bonds held by the ss fund don't represent an obligation to pay is to say that no Treasuries held by anyone represent an obligation to pay. That, to put it mildly, is not the assumption that the world markets are currently working under.

|12.20.04 @ 12:11PM|#

BTW, I just want to say that if we absolutely must implement Bush's plan (which, in my understanding, amounts to diverting some of your payroll taxes into instruments similar to 401k plans while keeping guaranteed benefits in place), then a hike in the payroll taxes will be necessary to keep it afloat. You can't divert money away from paying today's benefits and still keep today's benefits in place. It would make more sense (from a numbers standpoint, not necessarily a libertoid morality standpoint) to temporarily increase the payroll taxes to offset the diversion of funds, and then start reducing the payroll taxes again as people who invested under the Bush plan start retiring and cashing in their investments.

|12.20.04 @ 12:14PM|#

Ponzi schemes are sustainable? Why aren't they legal then?

gaius marius|12.20.04 @ 12:14PM|#

gaius, absent Bush's tax cuts, the federal deficit vanishes in a few years. Let me rephrase that - if tax levels were at the level they were at during the longest period of peacetime economic growth in our nation's history, there would be no fiscal problem.

do you, mr joe, seriously mean to imply that if we go back to the old tax rate that we will resume the 1990s? i submit that you massively underestimate the size of the problem -- not SSA, but american finances public and private.

the united states is responsible for some three and a half times its gdp in explicit debt instruments. america is in debt territory never seen by any major civilized nation.

and worse, there are some $160 trillion in derivative instruments which we don't really know much about -- except that a cascading counterparty crisis could lock up the markets.

this is the core issue america has to deal with -- certainly the most important global economic issue of the next decade. the boom of the 1990s represented just not normal economic growth, mr joe, but eye-popping borrowing in the private sector that continues to accumulate under greenspan's 2000-2003 enabling interest rate management.

however that indebtedness is dealt with -- a prolonged period of paydown and american underperformance, or a spectacular global financial crisis -- it is what not only what social security but we all will be forced to deal with.

|12.20.04 @ 12:14PM|#

"Treasury bond's aren't "assets" in the federal government's hands"

Really? You're saying the Federal Government is going to default on its bonds?

You really think that's going to happen? And to think, I accused you of being a chicken little.

thoreau, "And joe, no matter how you slice it, the ratio of workers to retirees is shrinking, and that's a problem." Aw, shucks! If only each worker was creating more wealth than workers did in the past!

|12.20.04 @ 12:16PM|#

~I pull my shirt off and pray ... sacred and bound to suffer this heat wave ... we're coming up on re-inaugeration day~

Many apologies to Arcadia. :)

|12.20.04 @ 12:18PM|#

C,

Thanks for making that key point that the fear-mongers conveniently hide. A $20 bill doesn't have any "real" value either if you follow the logic of the Bush whores promoting corporatization of S.S.

But from a libetarian perspective, I think the problem is that dismantling an unquestionably efficient SS system is going to result in much more gov't bureaucracy to create an additional "safety net" for those who end up blowing their funds on bad investments. Whether you like the idea or not, it will happen.

gaius marius|12.20.04 @ 12:18PM|#

So basically, you've all got nothing to back up your chicken little assertions of impending fiscal doom

i wish it were apocalyptic fantasy like the global warmers are fond of, joe, but it isn't. the debt is already there. wise old heads like templeton are predicting the very worst imaginable.

|12.20.04 @ 12:19PM|#

phocion, invoking your magic words doesn't actually add anything to the conversation.

Ooh, "Ponzi Scheme." I guess productivity really WILL be half the historic average. Thanks for straightening me out.

|12.20.04 @ 12:21PM|#

Actually, Kevin Drum of *Wahington Monthly* did answer the "the trust fund isn't real" argument:

***
REAL MONEY....One of the most common conservative critiques of Social Security is that the Social Security trust fund is a myth. Since it consists solely of treasury bonds, it's nothing more than a promise from one branch of the government to another. It's not real money, it's just an IOU.

But that's a serious misunderstanding of what money is. It's a promise. After all, you don't think those dollar bills in your wallet or the bits and bytes in your bank account have any real value, do you? In fact, their only value is that they're a promise: a promise that you can exchange them at some future time for concrete goods and services. When people no longer believe in that promise (think Weimar Germany), money no longer has any value.

The trust fund works the same way: it's a promise to the taxpayers who filled it up that at some later date it can be used to buy goods and services. The mechanism for honoring this promise � that is, ensuring that at some point in the future the original investors get the goods and services they were promised � is to collect taxes and turn the resulting revenue over to retirees. This promise can no more be broken than the promise that the United States government accepts dollar bills as legal tender.

Still not convinced? Try this instead: how about if we sell off the current contents of the trust fund to outside investors? They think it's real, and they'd be happy to buy those bonds � in an orderly way, of course. After that was done and the money was reinvested, the trust fund would be full of stocks and corporate bonds � and voila, suddenly everyone would magically agree that it's real money.

So yes, the trust fund is real. It's a promise from the United States government backed up by its taxing authority, just like real money, and it's accepted by outside investors, just like real money. How much more real can it get?

|12.20.04 @ 12:22PM|#

joe,

I would just perfer it if the government would stop stealing from me. I'd much rather invest that money in the far more profitable mechanisms available to me as an individual.

gaius marius|12.20.04 @ 12:23PM|#

Really? You're saying the Federal Government is going to default on its bonds?

for foreign holders, joe, they already are. it isn't default per se, but inflation is a sort of partial default that can send non-dollar holders fleeing. the complicity with the weak dollar is an effort by the american government to pay back its borrowing from foreign creditors in less valuable currency.

the us govt will always be albe to pay back the dollar value of the bonds because it borrows in its own currency. whether those dollars will be worth anythign is a differnet -- and fundamental -- question.

|12.20.04 @ 12:24PM|#

gaius, don't you think the horrific calamity that awaits is going to have some sort of impact on the stock market? You know, like low growth reducing returns, at the same time that higher bond rates are going to make stocks less attractive, further reducing returns?

Even under the fantasy/horror scenario the privatizers try to spin, their proposed solution would only make the problem they claim to want to solve - lack of security for retirees - worse.

BTW, saying the government is going to honor its T-Bills is NOT dishonest. Saying producitivity is going to plummet, the deficity is going to explode, but the Stock Market will deliver strong growth - THAT'S dishonest.

|12.20.04 @ 12:25PM|#

It is simply amazing compartmentalization on the part of the donkeys. All we ever hear from them is that an account deficit can only be cured by a tax hike. Counting on growth to get you out of a deficit is at best wishful thinking and more commonly Republican lies to bolster their case for tax cuts.

What is sitting in the trust fund is debt, nothing but debt. It is exactly the same as the debt we incur as a result of increasing spending on tanks or highways or midnight basketball. We all know that GWB has the worst economic record in presidential history because he is fiscally irresponsible, just ask Kevin Drum, or Paul Krugman, or Brad DeLong, or Atrios, or Yglesias.

The reality based community has obsessed about the foolishness of stimulating investment as a way to erode deficits for the entirety of the Bush presidency. "What kind of moron says that defecits don't matter?" Indeed.

Don't get me wrong, the irony of the Bush camp making the argument that issuing bonds forever to fund this program is unsustainable is not lost on me.

Economic growth doesn't address the basic problem of pay as you go to any great extent - that the program is subject to certain unavoidable demographic strains. The tax base is not going to increase enough in the most outlandish growth predictions to offset the fact that there will be an ever increasing supply of beneficiaries and an ever decreasing supply of wage earners relative to the population. The amount of cash coming into the plan will be coming from fewer people. Remember that benefits are indexed relative to earning power of the recent retiree, so that any increase in the growth of incomes of FICA payors will be offset by an increase in the benefits of boomer benefits. Once you start tapping those bonds, those same small number of wage earners will be paying the interest on them. Oh, and lets not forget the free prescription drugs. And Medicare. And Medicaid.

|12.20.04 @ 12:25PM|#

David T.,

Its far more like a debtor-creditor relationship (like one has with a checking account) or an annuity than a trust fund.

|12.20.04 @ 12:25PM|#

"To say that the Treasury Bonds held by the ss fund don't represent an obligation to pay is to say that no Treasuries held by anyone represent an obligation to pay. That, to put it mildly, is not the assumption that the world markets are currently working under."

Uh No it's not saying that at all.

If you hold a $50,000 bond issued by General Motors, that is an asset to you and a liabilty to General Motors. An asset to you because an unrelated party has an obligation to pay you something. A liabilty to General Motors for the same reason.

If you wanted to use that $50 K to buy a new car, you could sell or cash in that bond to get the money to do so. You would not have to borrow $50 K from the bank or go out and do $50 K worth of work to earn the money.

However, if instead of a GM bond for $50 K, all you had was an $50 K IOU you had written to yourself, you WOULD have to go out and borrow more mony from someone else or do something to earn it.

It works the same with the feds. They have written themselves an IOU and the only way they can "cash" it to pay SS benefits is to raise general taxes, cut general spending or borrow more money from the general public.

That's why it's not an asset in their hands.
That's basic economics, which apparantly some people aronnd here either aren't up to speed on or are being deliberatly obtuse about (like Joe).

gaius marius|12.20.04 @ 12:28PM|#

It's a promise from the United States government backed up by its taxing authority, just like real money, and it's accepted by outside investors, just like real money. How much more real can it get?

mr t, i submit that mr drum is wrong -- not in his description of the mechanism, which is spot on, but in implying that the value of the promises about the value of the dollar are immutable.

governments have frequently destroyed themselves on irresponsible management of fiat currency before -- indeed, weimar or john law's mississippi scheme. and that is exactly what the united states is endeavoring to do today. they are making american dollars and debt so ubiquitous that they are increasingly valueless.

|12.20.04 @ 12:30PM|#

Aw, shucks! If only each worker was creating more wealth than workers did in the past!

Very true. But I suspect that most retirees won't be content to judge their living conditions relative to past living standards. They'll want to judge their living standards relative to those of the workers. It's frequently said that social problems are created by inequality, and I doubt that the elderly will settle for inequality: "You've got the same level of material comfort as a retiree of the 1930's when Social Security began, what do you have to complain about?"

Besides, medical costs are currently outstripping inflation. I realize that the trend can't continue forever, but it can continue for a while, and it can get a lot worse before it stops. Even though medical costs might not be considered part of social security for administrative purposes, medical costs are clearly part of the cost of providing for the elderly, and in the end it will either have to be provided for via investments or taxes. And I already outlined above my concerns about each method.

I hate to sound as gloomy as gaius marius, but I suspect that no matter how we deal with this issue it will be painful.

|12.20.04 @ 12:33PM|#

Gary, I respectfully disagree with your value statement about the legitimacy of a government-operated safety net. I believe it is both moral, and wise. This is the real debate that's going on.

Except, only one side is willing to be forthright about that debate. The other side needs to assert that, this isn't an ideological initiatives, just a response to the pressing, immediate threat posed by Iraq's advanced uranium enrichment program. Or something equally dire.

|12.20.04 @ 12:33PM|#

"So yes, the trust fund is real. It's a promise from the United States government backed up by its taxing authority, just like real money, and it's accepted by outside investors, just like real money. How much more real can it get?"

The issue is not whether the trust fund is 'real', but whether its holdings can by any reasonable person be charaterized as a 'secure investment'. It is real ... real debt. If GM issues bonds to the public, it is raising money by borrowing with a promise to pay back with interest. The buying public has an investment and GM has a debt. If GM issues bonds to itself, what has been accomplished? The same people who buy the bonds will have to pay themselves interest. If GM attempted to characterize the self borrowing as 'invested cash' on their balance sheet, the US Government would clamp them all in irons for fraudulent representation of financials.

The same people who pay FICA will be the people who pay the interest on the debt in the trust fund. It is a shell game.

|12.20.04 @ 12:34PM|#

"BTW, saying the government is going to honor its T-Bills is NOT dishonest"

Joe is trying to pull a slick Willie.
What is dishonest is claiming the T-Bills in the trust fund is an ASSET in the hands of the govt.

The only way it can liqiduate those bonds without cutting some other unrelated govt spending is to raise general taxes or issue omre debt to the general public.

So all those projections about the SS program not needing any additional finacial fixes until the "trust fund" is used up are totally bogus. Tne fix by necessity have to be handled when it first tries to tap into the fund.

|12.20.04 @ 12:35PM|#

Wow, odd that Gilbert and I both picked on GM ...

|12.20.04 @ 12:35PM|#

joe,

Its your side of the political spectrum who brought us the Soviet Gulag, Pol Pot's genocide, Mao's cultural revolution, etc.; so what you consider "moral" is of no importance to me.

gaius marius|12.20.04 @ 12:36PM|#

BTW, saying the government is going to honor its T-Bills is NOT dishonest. Saying producitivity is going to plummet, the deficity is going to explode, but the Stock Market will deliver strong growth - THAT'S dishonest.

i agree joe -- i strongly oppose dubya's scheme for a lot of reasons, and i fully expect to see nasdaq 500 in the coming years.

but that does NOT mean SSA is fine. SSA is awful because american finances are awful. we could take steps to rectify that by cutting back SSA implicit outlays (and a lot of their things) and raising taxes. but the truth is we're in such a terrible spot right now -- because the debt problem is even more private than public -- that i don't see a way out.

the gov't, for its part, will probably choose (is choosing, in fact) to try to inflate away the foreign-held debt -- the best awful choice -- much that will mean crushing interest rates and probably repeated depressive episodes.

|12.20.04 @ 12:43PM|#

"Except, only one side is willing to be forthright about that debate"

It's not a either/or case. Whether one does or does not believe in the ideological validity of an income redistribution scheme like social security is totally separate from the basic economic fact that the SS trust fund does not contain anything that could legitimately called an "asset" in the hands of the government.

|12.20.04 @ 12:45PM|#

thoreau,

"Very true. But I suspect that most retirees won't be content to judge their living conditions relative to past living standards."

This is why the government fills in the amount on the Social Security checks, rather than allowing the recpients to fill it in themselves.

Several decades from now, when we are in a position to accurately predict whether there is going to be a shortfall in payroll tax receipts' ability to cover Social Security expenditures, we can adjust to any shortfalls by increasing taxes slightly (I'd go with a hike in the cutoff), reducing benefits slightly (I'd go with a means test), or taking on debt for a few years. Similarly, if our projected military spending outstrips its share of income tax receipts because of some temporary phenomenon that necessitates high spending levels for a given amount of time, we can increase taxes, cut military spending, or run deficits.

Gilbert's complaining that we don't have money in the bank right now to pay for Social Security checks that will be cut in 2051. So what?

|12.20.04 @ 12:47PM|#

Gilbert Martin,

In Chile they have a "funded" pension system; its largely privatized and is solvent (despite Pinochet's cronyist efforts to ruin it).

|12.20.04 @ 12:50PM|#

"Its your side of the political spectrum who brought us the Soviet Gulag, Pol Pot's genocide, Mao's cultural revolution, etc.; so what you consider "moral" is of no importance to me."

Fuck you very much, Gary.

Remember kids, this isn't about ideology, and no one has any agenda that makes the invention of a crisis useful.

|12.20.04 @ 12:54PM|#

joe,

The truth hurts, huh? :) The left is well known for its disasters (moral or otherwise) throughout the 20th century.

|12.20.04 @ 12:54PM|#

Gil, why are you so intent on hammering home the point that the T Bills will have to be redeemed with future revenues? Everybody already knows that. The issue on the table is whether the government will have the resources to do so.

Making sure they do is a very achievable goal. Some fiscal responsibility starting now would help, to make sure we have the room to take on some additional debt for a few years, and to make sure we don't have long-term deficit issues slowing down economic growth.

|12.20.04 @ 12:55PM|#

"Gilbert's complaining that we don't have money in the bank right now to pay for Social Security checks that will be cut in 2051. So what?"

LOL

I'm not complaining about anything. I'm pointing out the indisputable economic fact that the trust fund actually has no "assets" in it and that the government is engaging in a financial fraud by pretending otherwise. If the government is doing something that it would prosecute General Motors for doing if they did it, then it's just as much a fraud when the government does it - execpt on a massively larger scale of course.

|12.20.04 @ 12:56PM|#

Stop changing the subject, Gary Troll. I am not letting you derail the argument will Godwin violations, just because you can't win and want to distract people.

|12.20.04 @ 1:00PM|#

Again Gil, so what? The T Bills will have to be redeemed with future revenue. Basset hounds got long ears. So what?

|12.20.04 @ 1:00PM|#

joe,

Godwin's law refers to fascism. :)

And you're the one who brought up the so-called vaunted moral traits of the left. I merely corrected your view. In a court of law we call that "opening the door." :)

And there is nothing trollish in stating that the left is responsible for the things I described supra.

|12.20.04 @ 1:04PM|#

Gary, why don't you just yell "Hey, look over there!" and be done with it.

|12.20.04 @ 1:04PM|#

joe-

The reason that Godwin applies to H----r (I refuse to type the full name myself, lest I invoke Godwin) rather than Stalin is because it usually takes a certain amount of time for H----r references to be made on libertarian forums, while references to Communism are frequently found in the first post of a thread on a libertarian forum ;->

|12.20.04 @ 1:08PM|#

joe,

Anyway, I didn't change the subject, you did; don't open the door if you don't what's inside the door inspected. :)

|12.20.04 @ 1:08PM|#

"Gil, why are you so intent on hammering home the point that the T Bills will have to be redeemed with future revenues? Everybody already knows that."

Really?

Tell that to the ones doing the social security "studies" who claim that that SS is fiscally sound until the "trust fund" is used up - rather than at the point that the govt first starts trying to tap into it.

|12.20.04 @ 1:10PM|#

Let's leave aside questions about investments for a moment. We'll stipulate that you only invest in government securities.

Which is the more desirable state of affairs? Ownership of your retirement fund (transferable to heirs), or no ownership beyond a promise by 535 Congress-critters not to change the rules?

I don't think all "social contracts" are immoral, but I do think that the current contract is. The only "realistic" way to fulfill the contract as it stands now is to massively increase immigration. I'll leave the question of the justice/injustice of importing workers to support the retirements of white baby-boomers as an excercise for the student.

digamma|12.20.04 @ 1:11PM|#

If this program has any degree of freedom in choosing one's investments, it must also allow for one to lose one's retirement in bad investments. No?

Some people can be expected to invest poorly, and end up 65 years old and penniless. No?

Despite what policies you or I would implement were we in charge, the government should be expected to bow to popular pressure, and take care of those seniors. No?

I say scrap social security as it exists now, and start a new means-tested Welfare For Old Farts program out of general revenues. None of this convoluted forced saving crap. It'd be simpler and more honest.

|12.20.04 @ 1:15PM|#

the best way out of this, of course, is not just massively increased immigration, but massively increased illegal immigration. Illegals pay into, but don't collect from, social security.

|12.20.04 @ 1:15PM|#

"T Bills will have to be redeemed with future revenues? Everybody already knows that."

I call bullshit. Most people know that when you own a government security, you can raise cash by walking into your brokerage and selling it. The accounting fiction continues to spellbind many. If they had a vault filled with T-bills they'd be set for life, and they don't see that it doesn't work the same way for the federal government.

|12.20.04 @ 1:16PM|#

digamma

"I say scrap social security as it exists now, and start a new means-tested Welfare For Old Farts program out of general revenues."

That's the ticket.

|12.20.04 @ 1:16PM|#

Hey, let me throw a little monkey wrench into this debate.

The solvency projections are based on current demographic estimates. Let's imagine if sometime in the next 10-40 years one of the following were to happen:

Someone creates a cure for cancer or heart disease.

Rates for smoking or other self-destructive behavior sharply decline.

The steady progress of modern medicine raises life expectency by 5-10 years.

This is the real achiles heal in the system. The feds can bury their heads in the sand as long as insolvency, no matter how certian or severe, is a generation or two away. How will they handle it if the date moves to within a couple of election cycles?

fyodor|12.20.04 @ 1:17PM|#

joe,

You seem to be conflating the privitization and shortfall issues. True, Bush may be doing that too to sell his plan, but I think most here understand that whatever the merits or lack thereof of Bush's "privitization" plan (and I use quotes with reason), it would not address the SS revenue shortfall, basically because a transfer is a transfer is a transfer. If anyone here thinks otherwise, perhaps they should say so.

|12.20.04 @ 1:20PM|#

I agree with digimamma - trash the regressive payroll tax, fund the damn thing out of general revenues, make the Republicans argue against Pappy's monthy check every budget cycle.

|12.20.04 @ 1:25PM|#

Eryk, medical advances don't just extend people's infirmity, they also extend people's productive lives.

There are an awful lot of people receiving Social Security disability payments.

fyodor, I'M not conflating those two issues; I'm pointing out that the dissolvers are conflating the issues, because they know they can't win on the merits.

gaius marius|12.20.04 @ 1:27PM|#

Which is the more desirable state of affairs? Ownership of your retirement fund (transferable to heirs), or no ownership beyond a promise by 535 Congress-critters not to change the rules?

ah, my nemesis. :)

fwiw, mr sulla, the point i would try to make is that, from where we are, there are likely no "desirable" states of affairs. we have lived well beyond our means for too long for this all to continue.

joe is trying to make choices to ensure a continued entitlement at something like current levels:

Making sure they do is a very achievable goal. Some fiscal responsibility starting now would help, to make sure we have the room to take on some additional debt for a few years, and to make sure we don't have long-term deficit issues slowing down economic growth.

i do not think this a realistic goal, because -- while joe seems to believe a bit of responsibility would amend the problems -- i think the scale of the problems we face is far larger than that. i think the promises we've made far exceed our ability to deliver, and we should be honest -- not only about payroll taxes, but the dollar and mortgage debt and credit cards and consumer culture, et al -- and start taking back the promises.

in this way, the bush privatization is really worse still, as it would lock in some trillions of gov't promises (which are transient by nature) as real debt immediately. that event could well be the volkswagon that breaks the camel's back.

fyodor|12.20.04 @ 1:36PM|#

fyodor, I'M not conflating those two issues; I'm pointing out that the dissolvers are conflating the issues

The Dissolvers, great band, too bad their breakup was inevitable....

Are you sure those aren't just the dissolvers in your head? I haven't noticed anyone here saying that Bush's plan will help solve the revenue shortfall, and I've noticed on previous threads various folks (including myself) specfically saying it wouldn't.

|12.20.04 @ 1:41PM|#

I have one question for the pro-social security posters here. I do fine financially, and expect to do better in the future. I am saving for my retirement. My future husband and I have both parents and elderly relatives, and we will never allow them to go without if they are unable to provide for themselves. We will take care of my family, using the money we earn and save. Why is it moral for the government to confiscate that money from us to pay for Social Security? All they're doing is chipping away at our ability to provide for people I take full responsibility for. Why should our ability to shoulder that responsibility be damaged by the government because other people don't bother to save for their own retirement or view their elderly family members as a responsibility to be dumped on someone else?

digamma|12.20.04 @ 1:49PM|#

Why is it moral for the government to confiscate that money from us to pay for Social Security? All they're doing is chipping away at our ability to provide for people I take full responsibility for.

Maybe it's moral, maybe it isn't. Deep in my cold libertarian heart, I suspect it isn't. But here on planet earth, the government DOES confiscate money from you to pay for a whole pile of programs. So the real debate is over the methods of confiscation, and the identities of the programs.

|12.20.04 @ 1:58PM|#

"Maybe it's moral, maybe it isn't"

There's no maybe about it - it isn't.

Particularly since it's also uncostitutional and politicians, judges and other government officials have a moral duty (and some even have to swear an oath) to uphold the Constitution.

|12.20.04 @ 2:03PM|#

We've established that SSI is immoral.

|12.20.04 @ 2:08PM|#

LisaMarie: It's great that you are taking care of your parents and other relatives. However it is generally accepted that the Government has the responsibility to take care those who have no children to take care of them. Also it has the responsibility to take care of people who are disabled. It would be nice if we could just depend on communities, i.e. charities and faith based groups like G.W. Bush advocates, to do this but we can't as many communities do not have the resources to do so.

|12.20.04 @ 2:08PM|#

joe:

"I agree with digimamma - trash the regressive payroll tax, fund the damn thing out of general revenues, make the Republicans argue against Pappy's monthy check every budget cycle."

Holy crap, I think we agree. A redistributive program to fight actual old people poverty is, in a representative democracy with an aging populaiton, impossible to avoid. The program should be welfare. The 'retirement age' currently referred to in the program should be changed, per Arnold Kling's suggestion, to "The Age of Dependency". The means test should not be providing for 'retirement in dignity', it should be keep old people from being dead. Comfort and dignity is what you get if you save your own money. If society demands any level of support above the Purina for dinner plan, it should be in the form of forced savings. At any level above subsistence, there must be an incentive not to force the funding of my comfort on someone else.

|12.20.04 @ 2:14PM|#

"However it is generally accepted that the Government has the responsibility to take care those who have no children to take care of them."

"Generally accepted" by who?

It certainly wasn't "generally accepted" by the founding fathers, since they made no provision in the Constitution to delegate any power to the federal government to do so.

|12.20.04 @ 2:15PM|#

If I recall correctly, the bonds held by Social Security in the trust are not the same as other t-bonds, in that they are never available for sale to the public.

All future benefits must be paid by future taxes, so the trust fund represents past taxes received spent on non-SS expenses, leaving behind the SS bonds as evidence. Otherwise there would be a pile of cash sitting in the piggy bank.

|12.20.04 @ 2:18PM|#

It's not just the "trust fund" and the date that it is projected to be empty that is a useless fiction, the idea that the crisis begins only the day payments exceed payroll taxes is equally misleading.

As social security payments increase with the retirement of the boomers, the deficit increases in size--regardless of whether the SS payouts are somewhat smaller or somewhat larger than the SS taxes.

So comparing social security payments to FICA payroll taxes is close to irrelevant. The question of real interest is can the government afford to pay for everything (SS payments included) with its revenues (SS taxes included).

|12.20.04 @ 2:33PM|#

"If I recall correctly, the bonds held by Social Security in the trust are not the same as other t-bonds, in that they are never available for sale to the public."

That is correct. There are a "special" class of non-negotiable treasury securities.

"All future benefits must be paid by future taxes, so the trust fund represents past taxes received spent on non-SS expenses, leaving behind the SS bonds as evidence. Otherwise there would be a pile of cash sitting in the piggy bank."

Also correct. It really doesn't matter what type of treasury securities are setting in the trust fund. ANY IOU in the hands of it's maker does not represent anything of value.

|12.20.04 @ 2:40PM|#

joe,

Gary, I respectfully disagree with your value statement about the legitimacy of a government-operated safety net. I believe it is both moral, and wise. This is the real debate that's going on.

Social Security is not a "safety net." A safety net is what you use to break your fall when you've already done everything else you can to avoid hitting the ground. Social security is a boondoggle that has convinced millions of Americans of certain generations that they don't need to save up for their retirement; that it'll all be taken care of later, so they might as well spend all they make as soon as they get it.

A safety net would be a program that bailed out people whose retirement savings were lost through outright fraud and that provide just barely enough to live on.

Kevin Carson|12.20.04 @ 2:52PM|#

Gilbert Martin,

The IOUs in the SS trust fund are there because we (wage earners) have been paying a much higher payroll tax over the past 20 years--and we've been paying this massively regressive tax on the assurance that it would guarantee us normal retirement benefits. And the sole function of this operating surplus over the past 20 years has been to cover tax cuts to the top brackets and understate the overall budget deficit. In other words, as Sandwichman says at Max Sawicky's blog, it's a thinly disguised poll tax to offset income tax cuts to Bill Gates and Alice Walton.

The foulness of the corruption becomes especially rank when you take into account that many of the people crying doom to cut benefits (especially the pigfucker Alan Greenspan) are the very same ones who hiked our SS payroll tax 20 years ago.

|12.20.04 @ 3:02PM|#

No, Gary, we have established no such thing. You asserted it, on the basis that American liberals are "on the same side" as Pol Pot. I'm pretty sure your poli sci prof won't give you the gold star for that.

"Social security is a boondoggle that has convinced millions of Americans of certain generations that they don't need to save up for their retirement" That's odd. I was sure there were $billions in private pensions, IRAs, 401ks, and other accounts. I must have made some sort of mistake.

JL, I'd set the bar a lot higher the Purina Dinner, but I wouldn't shed any tears over some means testing.

|12.20.04 @ 3:06PM|#

"And the sole function of this operating surplus over the past 20 years has been to cover tax cuts to the top brackets and understate the overall budget deficit. In other words, as Sandwichman says at Max Sawicky's blog, it's a thinly disguised poll tax to offset income tax cuts to Bill Gates and Alice Walton."

Well it's an assumption on your part that the SS trust fund money was used to cover tax cuts.

I could just as easily say that it was used to enable the govt to continue spending money like a drunken sailor on all sorts of things that were never any business of government at all in the first place.

Deficits are a function of the net difference between tax receipts and government spending. The idea tha deficits are due to to little of the former rather than too much of the latter is ideologically based opinion - not an empirical fact.

The top 50% of income earners are still paying 96% of the federal income taxes - even after the tax cuts. In fact, despite all the squawking by the liberals about "tax cuts for the rich", the progressivity of the tax system actually increased slightly after the tax cuts instead of being flattened out.

|12.20.04 @ 3:09PM|#

"Social security is a boondoggle that has convinced millions of Americans of certain generations that they don't need to save up for their retirement" That's odd. I was sure there were $billions in private pensions, IRAs, 401ks, and other accounts. I must have made some sort of mistake.

joe,

I think your mistake is in missing the "certain generations" part of my post. Interestingly enough, those generations are the ones that enjoyed the SS benefits in its early days. Also, why do you think there are "$billions" in private retirement investments? Could it be because smart people have no faith that Social Security is going to hold up for them?

btw, what do you have to say about your mischaracterization of Social Security as a "safety net?" That is a typically disingenuous attempt to reclassify any government-funded social program as being there simply to help the poor and downtrodden, and how could you ever suggest it be cut? Think of all those people you would leave out in the cold!

|12.20.04 @ 3:16PM|#

"Could it be because smart people have no faith that Social Security is going to hold up for them?"

Given the millions of Americans who collect both Social Security and other retirement funds, and the fact that people save more for their retirement than before SS was invented, I'm going with "NO."

"how could you ever suggest it be cut? Think of all those people you would leave out in the cold!"

If you cut it from the top, from people who have good incomes without the SS check, you don't leave anyone out in the cold.

|12.20.04 @ 3:17PM|#

"being there simply to help the poor and downtrodden, "

Don't forget "the children".

You need to throw in a "we must do it for the children", too.

LOL

|12.20.04 @ 3:18PM|#

83 comments and counting, no one's willing to back up chicken little's assumptions that productivity will grow at half the rate of the last 50 years? No one?

|12.20.04 @ 3:20PM|#

I'm all for turning SS into Old Fart Welfare. However, all of these reaching-across-the-aisle gestures among some of us libertoids (digamma, myself) and our lefty interlocuters (joe) ignores one crucial thing: Most lefties don't want old-people welfare because it would erode their political base. A few months ago, Yglesias had a shoe-peeing moment on his blog when contemplating the political ramifications of having a lot less people dependent on the benevolent Federal Gummint for a monthly check in the event that Social Security were to become a means-tested program.

|12.20.04 @ 3:25PM|#

That would depend on the level of means testing, now wouldn't it?

|12.20.04 @ 3:25PM|#

86 posts and counting and Joe still hasn't admitted the SS "trust fund" - the actual supposed subject of this thread - doesn't contain anything that could legitimately be called an asset.

|12.20.04 @ 3:31PM|#

Yes, it would, joe.

Given that retirees are one of the wealthiest demographic groups, how long do you think the swindle will last once people realize that
(1) the vast majority of elderly people aren't in danger of eating Meow Mix for dinner;
and
(2) one can earn better returns for retirement savings investing in things other than politicians' promises?

digamma|12.20.04 @ 3:31PM|#

I'm only "reaching across the aisle" in the sense that I think Bush and Friends want to do something horribly stupid and are using (at best) half-truths to make the case, which puts me on the Democrats' side of this particular debate.

|12.20.04 @ 3:33PM|#

Gil writes, "Joe still hasn't admitted the SS "trust fund" - the actual supposed subject of this thread - doesn't contain anything that could legitimately be called an asset."

You mean like when I wrote, "...we don't have money in the bank right now to pay for Social Security checks that will be cut in 2051."

or when I wrote, "Again Gil, so what? The T Bills will have to be redeemed with future revenue."

Or when I compared the Trust Fund to a list of future spending proposals to be funded with future revenues?

I "admitted" - actually, I never challenged - that fact repeatedly, Gilbert, explained why that isn't remarkable, and why it doesn't indicate that there is a fiscal problem with the program. I'm not inside your head, making convenient arguments. I'm actually writing comments, and posting them on this board. When you ignore that I keep saying "X," and accuse me of refusing to say "X," it doesn't do much for your credibility.

Tim Higgins|12.20.04 @ 3:37PM|#

"Eryk, medical advances don't just extend people's infirmity, they also extend people's productive lives."

Joe, do you support pushing back the SS retirement age, so that SS can realize the benefits of these extended productive lives which are supposed to offset the effects of increased longevity?

|12.20.04 @ 3:39PM|#

At the risk of sounding like Gaius Marius and predicting doom and gloom, I suspect that there may be no solution to the problem of an aging population. At the end of the day, their needs must be provided for by working people. Either those working people have to pay enough taxes to keep the elderly afloat, or they have to work hard to generate enough shareholder value.

Well, I'd say that with some sort of "privatization" scheme, to allow people to invest at least some of their money in the stock market and/or other financial markets, the companies that are going to have to pay the workers that will have to support the retirees will at least have some capital to invest. With money going into the stock market, productivity will rise at a faster rate than if the same money were just sucked off to pay present retirees. That's the real problem with present Social Security, in my opinion. It's simply a transfer payment. With retirement money invested in the stock market, at least the payments are for allowing the invested money to do something; isn't that what dividends are all about?

Perhaps, with productivity growth, the present system of Social Security payments will be viable for a long time to come, with adjustments to the tax rate, the income cutoff, and payments to beneficiaries. Maybe it will never become a problem. But with a privatized system, we will be better off. The retirees will be able to live off of the returns from investments that allow the younger people to have even higher productivity than they would have otherwise. The standard of living for both worker and retiree will be higher than it would be under a pay-as-you-go system. Isn't that worth working for? What's your response to that, joe? (Not mocking; I'm geniuinely curious.)

|12.20.04 @ 3:45PM|#

Krybo, most people want the retirement guarantee to settle out well north of Meow Mix.

Will higher rewards goes higher risks. If you maximize one, you minimize the other. By providing a no-risk, low payout program, Social Security encourages people to invest in higher risk/return programs (those who can afford to so invest, anyway).

|12.20.04 @ 3:45PM|#

There are too many Americans with a vested interest in the current system for it to change now. It will take a financial crisis of epic proportions to force anything like means-testing into the equation. As long as older Americans can put the wood to younger working Americans, the system will wheeze along. And someday, years from now, the wheels will fall off the wagon.

The solution? Stash a large amount of money away for a comfortable retirement in some other country... and read about generational war at a comfortable distance.

|12.20.04 @ 3:45PM|#

This is why the government fills in the amount on the Social Security checks, rather than allowing the recpients to fill it in themselves.

I've got to call bullshit on this one, joe. Many of your arguments are true if you make certain assumptions, ones not shared by most libertarians, but this is just silly. Retirees are the most politically active group out there on average; they have the most money, and the greatest amount of free time. And their ranks are only going to grow as time goes on. In twenty years they're going to be even more powerful than they are now, and I think that AARP is probably already the most powerful political group in the country. You don't think that they're going to be able to just vote themselves largess out of the treasury? Any politician that proposes cuts to Social Security is already in trouble; what will it be like in the future? Retirees will gladly help themselves to larger and larger chunks of GDP, and probably most people won't even realize that they're lowering the standard of living for all those people out there who they're taxing to death. It's "free money," after all.

|12.20.04 @ 3:49PM|#

"Could it be because smart people have no faith that Social Security is going to hold up for them?"

Given the millions of Americans who collect both Social Security and other retirement funds, and the fact that people save more for their retirement than before SS was invented, I'm going with "NO."

Why, joe? Doesn't that fact reinforce the notion that people are uncomfortable with relying on Social Security? Believe me, I saw what my maternal grandparents' lifestyle was like, living on only SS checks. Compared to my paternal grandmother, whose income was derived from 1 rental property income, and smart investment in the stock market, it was pretty uninspiring.



If you cut it from the top, from people who have good incomes without the SS check, you don't leave anyone out in the cold.

What about all those people the money was stolen from in the first place? I suppose just because they have "enough," determined by some bureaucrat, they have no claim to the fruits of their lifelong labor? That's the real root of the issue.

|12.20.04 @ 3:51PM|#

Tim, maybe. It's certainly something to look at. If such a thing were done, I would want to include a waiver provision for younger old people who genuinely need to retire. Someone who dug coal from age 17 to age 65 is ready to retire, even if the life extending wonder drug was invented when he turned 64.

grylliade, it sounds expensive. The "today" money people would be investing, to be paid out when they retire, is money that cannot be used to cover today's retirees - the ones who didn't have the option of setting aside their payroll deductions to accumulate interest for 30 years. Also, your plan would produce higher payouts ON AVERAGE, but there would still be some set of workers who would get less, if they are investing individually. Finally, Social Security's admin costs are tiny, compared to privately-managed retirement accounts. This is a downward pull on the accounts' value, making the % who would be better off even smaller.

|12.20.04 @ 3:58PM|#

"I "admitted" - actually, I never challenged - that fact repeatedly, Gilbert, explained why that isn't remarkable, and why it doesn't indicate that there is a fiscal problem with the program."



Very cute Joe.

What you didn't do was admit it. Instead you tried to be cute by asking if I thought the govt was going to default on it bonds, etc.

You also failed to acknowledge the fraudulent misprepresentation by the government in claiming the trust fund has any assets at all. That certainly is something that is "remarkable".

Hypocrite that you are, if General Motors had been caught carrying IOU's that it had written to itself on it published balance sheet as an "asset" the Securites & Exchange Commission would come down on them like a ton of bricks for financial fraud - and you would be lauding it for doing so.

But when the govt does the same thing related to one of your sacred-cow New Deal programs, well then, you just try to spin all around the salient point.

LOL

Oh and BTW, it DOES indicate there is a fiscal problem with the program - otherwise they wouldn't keep trying to pretend the trust fund has anything of value in it.

|12.20.04 @ 4:02PM|#

"Doesn't that fact reinforce the notion that people are uncomfortable with relying on Social Security?"

No, it demonstrates that people save above and beyond Social Security, even when they know it will be there.

"What about all those people the money was stolen from in the first place?" If it's stolen, no one has any claim on it, since the title to solen loot can never become clean. If they can't prove that each dollar was a dollar collected from them, they have no claim.

But, let's move beyond the silly, overwrought language, and address the real question: yes, I believe Congress has the power to base Social Security payment levels on the need of the recipient.

grylliade, the popularity of Social Security among all age groups makes its continued, long term existence a top priority for politicians. The old people you imbue with such power won't even be around in 40 years when the mythical fiscal collapse is alleged to occur, yet the possibility of such a thing is enough to make securing the program that far into the future an important issue on the national political scene. I think you misdiagnose the situation when you assume that the AARP is only interested in protecting the interest of its current membership. They want lots of 30 year olds to join up in 30 years, so they have an interest in protecting Social Security for them, too.

|12.20.04 @ 4:04PM|#

I'm done with your semantic games, Gil. If "we don't have money in the bank" doesn't meet your standards to "there is no asset," then you're just playing word games.

|12.20.04 @ 4:06PM|#

"grylliade, the popularity of Social Security among all age groups makes its continued, long term existence a top priority for politicians."

You have no proof that it IS popular among all age groups.

Most younger people beleive they have a greater chance of seeing a UFO than they do of actually collecting on social security.

|12.20.04 @ 4:09PM|#

"I'm done with your semantic games, Gil. If "we don't have money in the bank" doesn't meet your standards to "there is no asset," then you're just playing word games."

You're the one playing word games, Joe.

Let me hear you specifically admit the government is guilty of financially fraudument misrepresentation in claiming the SS trust fund has any assets.

|12.20.04 @ 4:14PM|#

They aren't, Gil. They report that there are certificates that will be repaid with future revenues. That's not fraud, it's truthful information.

"Most younger people beleive they have a greater chance of seeing a UFO than they do of actually collecting on social security."

I don't know about "most," but yes, there is a significant number of people who have been taken in by the chicken littles.

|12.20.04 @ 4:16PM|#

"83 comments and counting, no one's willing to back up chicken little's assumptions that productivity will grow at half the rate of the last 50 years? No one?"

Since there are no takers, joe, why don't you fill us in on the reasons why future gains in productivity will closely match the historical? The phrase "past performance is no guarantee of future returns" keeps popping in to my head for some reason.

|12.20.04 @ 4:24PM|#

"They aren't, Gil. They report that there are certificates that will be repaid with future revenues. That's not fraud, it's truthful information."

Really?

I take it then you would have no objections if all the public corporations out there were allowed to change their financial reporting practices to be allowed to create and classify IOU's they've written to themselves as "assets" on their balance sheets.

Afer all, if it's not fraud for the government to do it, it's not fraud for anybody else to do it either.

LOL

|12.20.04 @ 4:24PM|#

Joe,

I'm with DB, why are you so desperate to hold on to this monstrosity at the expense of individuals' freedom to decide what to do with their own money? I believe that Mr. Gunnels was being everything but troll-ish in responding to the morality issue in such a pointed manner. Perhaps he just cut to the chase.

|12.20.04 @ 4:25PM|#

db, there's no free lunch. If you reap the rewards of higher average returns, you pay a price in risk. Some % of the public would end up in a snowbank, and a large majority of our society find that outcome unacceptable. Also, the transition from pay as you go to invest for your own retirement is estimated at $2 trillion. Solve these problems, we can talk about investing for retirement as a replacement for Social Security.

It's obvious that you really want your opposition to be motivated by hatred of the well off. I'm sure you could find such a person to argue with if you looked hard enough. But it ain't me, babe. All else being equal, the rich getting richer is a good thing - they hire more people to work at their factories and wash their pets. If there was some way to provide economic security for all without taxing the rich, I'd be all over that action.

|12.20.04 @ 4:27PM|#

grylliade, it sounds expensive. The "today" money people would be investing, to be paid out when they retire, is money that cannot be used to cover today's retirees - the ones who didn't have the option of setting aside their payroll deductions to accumulate interest for 30 years.

It probably will be expensive. But starting something like this now will be less expensive than starting it in twenty years, and overall will lead to greater prosperity for more people. If we'd done it twenty-five years ago when Social Security privatization first began to be bandied about, we'd be even better off. And why is it OK to raise taxes at some unspecified time in the future than to raise them now to pay for a program that has such high benefits?

Also, your plan would produce higher payouts ON AVERAGE, but there would still be some set of workers who would get less, if they are investing individually.

Yeah, that's the rub. However, if 10 % of the people will be worse off under privatized investing, 40 % the same, and 50 % better off, than it's definitely worth doing. It all depends on what you think the respective percentages will be. You're also not focusing on the nearly 100 % of present workers at any point in the future who would be better off under this system.

(As an aside, if you think that on average people will be better off, isn't that a net benefit? All social programs entail some pain; it's a question of maximizing the benefits and minimizing the costs, not eliminating them.)

Finally, Social Security's admin costs are tiny, compared to privately-managed retirement accounts. This is a downward pull on the accounts' value, making the % who would be better off even smaller.

The administration costs are higher because the administrators are actually doing something with the privatized money. You could just about run Social Security with a computer; bring tax money in, pay said money out. With an invested account, you have to make choices about which stocks to invest in, keep track of what's going on in the market, etc. The higher costs are necessarily entailed by the nature of the benefits. If the admin costs are (say) 2 % of the amount invested, but the net benefit is 3 % over Social Security, isn't that worth doing? Again, it depends on where you think the numbers go. I don't have enough information at my fingers to pronounce definitively, but as a first approximation I'd say that a privatized system would be a net benefit.

|12.20.04 @ 4:29PM|#

What perpetuates social security is not only the convenience of taking money from others, it is the sense of entitlement. I have heard many retirees speak of social security as "getting back" the money they paid. Every generation will screw the younger generation until, as noted, the wheels fall off.

The problem is not that most people "hate" social security. The problem is the math. What social security is right now cannot be maintained indefinitely because the number, age and lifespan of retirees will exceed the funding provided by workers at the current rate of taxation. Sooner or later, social security will get "fixed" either through reduced benefits, higher taxes or some combination thereof.

Of course, it's politically easier just to form a committee to make recommendations that everyone ignores. The sad part is the longer America waits to address the problem, the greater the pain when "the math" forces a solution.

A retirement property in a comfortable country and a decent investment portfolio... such is the only solution.

|12.20.04 @ 4:33PM|#

"Since there are no takers, joe, why don't you fill us in on the reasons why future gains in productivity will closely match the historical?"

Since productivity increases (in the long term, not "we fired half the workforce last week, and our clients haven't cancelled their contracts yet") result primarily from advancements in technology...

...and since the rate of technological advance is increasing (not just the level of technology, but the actual rate at which that level increases)...

...then it can be concluded that the rate of productivity increase will likely be higher in the future than in the past, and will almost certainly not be lower.

Anyone gotta problem wit dat?

|12.20.04 @ 4:35PM|#

Little Known Factoid about Social Security:

The retiree : worker ratio = The ratio of people who have a strong opinion about SS reform to those that know what the fuck they're talking about.

That said, I suspect the retiree population bulge is going to be a problem no matter what. It's not just social security, and it's not just the United States.

Bush's plan of "a little privatizing" may be like a little education (i.e. worse than none).

|12.20.04 @ 4:38PM|#

Gil,

"I take it then you would have no objections if all the public corporations out there were allowed to change their financial reporting practices to be allowed to create and classify IOU's they've written to themselves as "assets" on their balance sheets."

Sure, as long as they also count the outstanding IOUs as deficits on those same sheets, it's all good. The problem you're referring to is that they have been allowed to count them as assets on one sheet without reporting the deficit, and as outstanding debts on the other sheet, without reporting the asset.

Your "LOL"s are starting to take on a certain "Right guys? Guys? Aw, c'mon, guys!" quality.

|12.20.04 @ 4:40PM|#

The retiree : worker ratio = The ratio of people who have a strong opinion about SS reform to those that know what the fuck they're talking about.

Are you trying to imply something? I only have a little education, so I'm not sure what you're saying ;->

Bush's plan of "a little privatizing" may be like a little education (i.e. worse than none).

That's a very real and scary possibility.

gaius marius|12.20.04 @ 4:44PM|#

83 comments and counting, no one's willing to back up chicken little's assumptions that productivity will grow at half the rate of the last 50 years? No one?

i'd agree that we will probably continue to get more out of less, though maybe not at the recent blistering pace.

but one also has to note that recent productivity gains are the result of capital deepening, and it's important to understand that investment booms end.

Though capital-deepening productivity change may seem desirable, it is important to understand what it means in the long run. As a nation's share of income devoted to capital increases, its capital per worker rises, and there is capital-deepening productivity change. But as long as the nation does not indefinitely squeeze the share of output devoted to consumption, and what nation can, eventually capital's income share will stabilize at some higher level. Capital per worker will, too, and the capital-deepening term will then no longer contribute to increases in the rate of productivity change. Under most circumstances the nation will still be better off because the level of income per capita will be growing along a higher path, but rates of productivity change will no longer be increasing. Paul Krugman (2000) attributes some of Asia's recent economic difficulties to the fact that their earlier rates of productivity change were predominantly due to capital deepening and could not be sustained.

the united states is at the end of a massive period of investment/malinvestment -- of which increased borrowing is a major facilitator -- coming out of which it is unlikely to see capital deepening of this type for a long time. as such, productivity growth is likely to level.

and to the extent that multifactor productivity grows -- well, it did healthily in the great depression. as field notes, "the Depression years were, in the aggregate, the most technologically progressive of any comparable period in U. S. economic history."

as can be inferred from gramlich's speech, the loss of capital deepening as a productivity growth factor will mean that many of the negative forces that productivity growth counters will be stronger going forward.

|12.20.04 @ 4:44PM|#

wellfellow, it's all about the security. If it ain't Social, it ain't Security.

grylliade, "And why is it OK to raise taxes at some unspecified time in the future than to raise them now to pay for a program that has such high benefits?" I think it would be ok to raise taxes now, but I'm not sure it's absolutely necessary.

"However, if 10 % of the people will be worse off under privatized investing, 40 % the same, and 50 % better off, than it's definitely worth doing. It all depends on what you think the respective percentages will be." This is where the values argument comes in. No, I don't believe that would be an acceptable deal. I don't think letting one more old lady live out her days in a shitty basement eating cat food is worth 10 retirees with an extra grand in the bank. I don't think it is worth 100, or 1000, or a million. Well, maybe a million, but you get my point. Please note, this has nothing to do with being unhappy with those other retirees having more money.

You might be right about the admin costs; I was just pointing out that they are a variable to work into the equation.

gaius marius|12.20.04 @ 4:46PM|#

...then it can be concluded that the rate of productivity increase will likely be higher in the future than in the past, and will almost certainly not be lower.

in other words, this is a wrongheaded conclusion.

gaius marius|12.20.04 @ 4:46PM|#

...then it can be concluded that the rate of productivity increase will likely be higher in the future than in the past, and will almost certainly not be lower.

in other words, this is a wrongheaded conclusion.

|12.20.04 @ 4:47PM|#

Are you trying to imply something?

I was counting myself firmly in the former category. As such I have no idea who belongs in the later, but I'm quite certain they're few and far between.

|12.20.04 @ 4:48PM|#

gaius, THAT'S what I come here for. Lemme get back to you.

|12.20.04 @ 4:53PM|#

"Since productivity increases.. result primarily from advancements in technology."

Hmmm. A plausible line of reasoning, but is it really this simple? I don't know...

The ability of SS to pay retirees the benefits that they so richly deserve is limited by the ability of workers to supply all of the necessary goods and services. joe thinks that productivity will take care of it, and I think that's unlikely (while admitting I don't have enough information to be sure). If I'm right and joe's wrong, benefits will be cut or taxes will rise. But taxes can only rise so high before you create a productivity problem, i.e. workers substitute untaxed leisure time for highly taxed income.

Currently, I'm pinning my retirement hopes on the perfection of fusion power and nanotechnology.

|12.20.04 @ 4:58PM|#

"Sure, as long as they also count the outstanding IOUs as deficits on those same sheets, it's all good. The problem you're referring to is that they have been allowed to count them as assets on one sheet without reporting the deficit, and as outstanding debts on the other sheet, without reporting the asset."

Well now if there is an asset balance that is offset by a liablity balance, then by definiton there is nothing there since they cancel each other out within the federal government which is all one entity.

And if there's nothing there, then the govt cannot legitimately use the phony balance in the "trust fund" in their projections of SS financial solvency.

|12.20.04 @ 4:59PM|#

sulla, there's also immigration. The gloom and doom estimates also lowball the number of immigrants who will be paying payroll taxes. Cripes, the cleaning crews at Wal-Mart could keep the damn thing solvent for a decade!

I say we let as many of the little taco munching bastids in as we can fit, send them to really good schools so they'll have really high incomes, and tell Lonewacko to get in the back of the bus.

|12.20.04 @ 5:03PM|#

"Sure, as long as they also count the outstanding IOUs as deficits on those same sheets, it's all good. The problem you're referring to is that they have been allowed to count them as assets on one sheet without reporting the deficit, and as outstanding debts on the other sheet, without reporting the asset."

I can't imagine why anybody would play such an elaborate shell game. Except maybe to bamboozle the rubes.

|12.20.04 @ 5:08PM|#

"joe thinks that productivity will take care of it"

If Joe was an economics expert, he'd be getting paid to prognosticate it. He ain't.

Neither techology or anything else is a guarantee of productivity increases. Overinvestment in the wrong technology can decrease productivity, increase investment losses and increase unemployment. Just ask all the investors in the telecom stocks that wasted billions in overcapacity in fiber optics a few years back.

Then there is the international competetion factor. A lot of productivity increases are achieved by outsourcing work to other countries. Also other countries like China and India are going to become increasingly competitive at even the more value added type work that is still being done over here. If their productivity ramps up ahead of ours and stays there, then they will continue gaining market share of the world's and US business vs busineses maintaining US based operations. Highest productivity is what will count - not merely slightly higher productivity.

|12.20.04 @ 5:10PM|#

In the future, can we get more immigrants from Brazil? The chicks down there are smokin'!

|12.20.04 @ 5:11PM|#

"I say we let as many of the little taco munching bastids in as we can fit, send them to really good schools so they'll have really high incomes, and tell Lonewacko to get in the back of the bus."

Okay, THAT was funny.

Too bad you don't appreciate the seriousness of having powerful Mexican politicians discussing the immigration and trade policies of the US. It is a short step from there to a Mexican takeover of Washington, you know ... ;)

|12.20.04 @ 5:19PM|#

I can't get over the surreality of it all. Donkey joe takes the role of Stephen Moore arguing against libertarians who are suddenly skeptical of economic growth.

The only other bit about growth is that investment stimulates it, and there isn't any investment going on in all of social security right now. The problem is similar to the family trying to decide if they should pay off their house before investing for their retirement. In reality, the time value of investment is so high that it almost always makes sense to carry some debt.

Also, as I mentioned waaaay up there, the growth issue doesn't address the core demographic one since benefits go up with growth, too.

|12.20.04 @ 5:33PM|#

While I am as keen on increasing productivity as the next fellow, I feel compelled to make a few observations. An increase in technology and wealth has put America in this position by greatly extending the human lifespan. Life expectancy in the U.S. has grown from less than 48 years in 1900 to over 77 years today. On average, people live much longer beyond retirement age now then when social security was developed. Life extending and sustaining technology is more powerful and more expensive, ergo the looming shortfall in medicare. The standard of living (and rate of expectation) has increased in the past century. In short, the U.S. will have more older people living longer, consuming increasingly expensive medical technology and expecting a higher quality of life in the future. I wish I could be so sanguine as to think higher productivity will cure all ills.

|12.20.04 @ 5:44PM|#

"Life extending and sustaining technology is more powerful and more expensive, ergo the looming shortfall in medicare."

Indeed.

That is another huge hole above and beyond the retirement benefit unfunded liabilty issue that we haven't mentioned in here at all.

|12.20.04 @ 6:10PM|#

Life expectancy in the U.S. has grown from less than 48 years in 1900 to over 77 years today.

Does anybody know whether that change includes reduced infant mortality? Infant mortality's contribution to the figures is largely irrelevant to Social Security, because infants have neither paid into the system nor will they collect from it.

The most appropriate life expectancies, from the standpoint of analyzing social security, are

1) The life expectancy of somebody who has just started paying SS taxes. That helps us gauge the relative amount of time spent paying into and taking out of the system.
2) The life expectancy of a person who has made it to retirement age. (This will obviously be longer than the life expectancy of somebody who has just started paying in, because it isn't influenced by people who died before they could start collecting benefits.)

I'd be curious to find out how much those figures have changed since the 1930's. I always hear that the life expectancy in the 1930's was 65 years, but I don't know if that includes out infant mortality or not.

|12.20.04 @ 6:11PM|#

The fact is that in the early years Social Security taxes produced such great surpluses that it was a great cash cow for FDR to milk for all his other spending schemes. It is when one understands this that one can appreciate that it was designed as a revenue producing tool in the first place. The designers simply never anticipated the demographic shifts that would occur. They figured most people would kick off before they collected too much lucre.

The joke is that someone created a politicized welfare and taxation scheme and now that the chickens are coming home to roost everybody's pointing fingers at everybody else screaming "Stop politicizing Social Security!"

fyodor|12.20.04 @ 6:24PM|#

The designers simply never anticipated the demographic shifts that would occur.

They may not have even bothered to consider what might occur long after they were out of office.

MP|12.20.04 @ 6:28PM|#

As soon as one accepts that the Trust Fund does not represent assets, then you need to also throw out the year 2051 as being the time when we have to start finding the $$$ to pay for SS. As a link in the original post states, the year is actually closer to 2018.

And I don't buy into the notion that the American people see SS as welfare for old farts. The public has been sold on SS as a forced savings account with a guaranteed return. That is the big lie. If the government changed their tune and started calling SS welfare (i.e. being honest with the American people...as if that'll ever happen), I bet people would be calling for an end to SS in its present form as fast as you can say Welfare Reform.

And the fact that ONLY a .5% of GDP increase in taxes (according to Krugman) is what is required to save SS is the most morally offensive thing I think I've ever heard him say.

|12.20.04 @ 6:28PM|#

I don't think letting one more old lady live out her days in a shitty basement eating cat food is worth 10 retirees with an extra grand in the bank. I don't think it is worth 100, or 1000, or a million. Well, maybe a million, but you get my point. Please note, this has nothing to do with being unhappy with those other retirees having more money.

Well, I don't think that "less well off than under the current system" equates to "living in a shitty basement eating cat food." Social Security isn't just above poverty level for most people, unless they've spent their entire lives working minimum wage jobs. And that's the very section of the population that I think would be better off under privatized retirement.

Note too that this isn't an entirely free-market approach that I'm thinking of. That's not going to be politically acceptable, even if it might provide the best results overall. The idea is something like Chile's, where there are a certain number of government-approved accounts that have to meet a minimum standard level of performance. Badly performing accounts are eliminated and the assets transferred to better performing accounts. More than likely you'll still have some sort of old-age welfare, as mentioned above. I think that private welfare will generally solve problems better than government welfare, but that's another discussion. In this case, the most politically feasible path would be private accounts financed by what would have formerly been payroll taxes, with payroll taxes still maintained to finance the current system until there are no more retirees alive to collect under the current system. Establish a certain minimum level of income that's acceptable, allow only cost of living adjustments to that level (though how that would be enforced I don't know), and if your retirement income would be less than that level allow government payments to make up the difference. This would maximize benefits, minimize costs, and mainly put everything right out front for everyone to see. It's no longer a Ponzi scheme, but rather current generations investing in the mechanisms that will support them when they can no longer work.

A side benefit would be more people having a stake in ownership of capital. Marx had some valid criticisms on that point. If ownership of corporations were more widespread, more people would be interested in making sure they did well. The feeling wouldn't be that a few fat cats were benefitting at the expense of everyone when corporations did well, but rather that such improvements benefit everyone. That's a good thing to work towards, too. The more I've looked at privatization, the more I think that there are a great many benefits that aren't immediately obvious.

|12.20.04 @ 7:01PM|#

thoreau,

I remember reading a book several years ago that mentioned that even in the 18th century that if you made it to 18, you had a better than 50% chance of making it to 65. The average life span of somewhere in the 40's was due in large part to the higher infant and child mortality amounts. I wouldn't be at all surprised to find similar numbers for any stone age or hunter/gatherer tribes today.

This idea that, "parents shouldn't bury their children," seems to me to be a (late) twentieth century notion. Not that I object to it, because if I had been born fifty years before I actually was, I almost certainly would have died in toddlerhood because I had a serious case of pneumonia when I was two.

I think many of the current nanotechnology researchers today will point out that our current average life expectancy is due primarily to cutting down early lifetime mortality. Granted, what they say could very well be wrong, but I really don't have the interest or time to actually look up those figures myself.

|12.20.04 @ 7:01PM|#

What joe and the others who believe in the fantasy bonds that currently make up the trust fund don't realize is that those are special issue bonds, created solely for the purpose of populating the "trust fund."

The government could cancel those bonds without affecting any of its other obligations. The bond market probably wouldn't even belch. Those bonds are non-transferable and have no market value. Which is to say, they have no value whatsoever.

joe and the rest don't quite grasp that Social Security is a pure transfer program. Every nickel collected in FICA is spent the year it is collected. Some is spent on Social Security, and the rest is spent through the general fund. The "bonds" held in the trust fund are no more than a record of how much FICA tax has been spent through the general fund.

Later, when payroll FICA taxes can no longer pay all the benefits, money will have to be diverted from the general fund to cover the shortfall. As general fund money is spent on Social Security benefits, the "bonds" in the "trust fund" will be retired.

In no way do those bonds function as an asset. They are a placeholder on the government's internal books, and nothing more.

|12.20.04 @ 7:13PM|#

Shawn-

That makes sense. I remember a historian friend of mine telling me that the average life expectancy for people who make it to puberty actually hasn't change nearly as drastically as the overall life expectancy. It seems plausible to me.

But I would like to see those historical figures broken down for men and women, as death during childbirth used to be a lot more common than it is today.

|12.20.04 @ 8:04PM|#

If the Soc Sec trust fund didn't hold those government IOUs, they would have been sold to somebody else. When the bonds need to cashed in, the government can roll over the debt like it does with most maturing bonds.

As for the individual giving himself an IOU, he must have taken money from himself in the first place. When it comes time to pay himself back, he'll have to borrow from someone else to do so. The one option that the individual does'nt have is to use taxe revenue to pay off the debt.

|12.20.04 @ 8:11PM|#

Gilbert's complaining that we don't have money in the bank right now to pay for Social Security checks that will be cut in 2051. So what?

I would agree, but we also don't have money in the bank to pay for Social Security checks cut in 2005...

|12.20.04 @ 8:17PM|#

I'm trying to get my mind around the presence of Treasury bonds in the SS "trust fund" (or whatever term you prefer).

Somebody correct me if I'm wrong here:

At some point in time the gov't collected more in payroll taxes than it paid out in SS benefits. So it put some of the extra payroll taxes toward spending that would normally come out of general revenues.

But for whatever reason, instead of just saying that payroll taxes were used for something other than SS, the gov't accountants decided to say that the SS administrators bought Treasury bonds.

Which means that at some point in the future, when those bonds mature the gov't will cover them out of the other taxes that it collects. Or, if it can't pay off those bonds then it will just borrow the money from somewhere else. But one way or another, at some point the general revenues (i.e. money not collected from payroll taxes) are supposed to be used to pay some money to the SS administration.

This doesn't seem like a big deal to me one way or the other. The gov't routinely pays off bonds by issuing new bonds. It will just sell some bonds to somebody else and transfer some money from the general revenues to Social Security.

All that it really seems to do is illustrate that payroll taxes, although allegedly in a "lockbox" and only used for SS payments, are in reality just one more tax, and if the gov't collects more than it needs for the stated purpose of the tax then it diverts that money (via an accounting trick) into other spending programs. And if the gov't doesn't collect enough in payroll taxes, it will "collect" on the bonds that it issued itself, which is just a fancy way of saying that money raised by income taxes or other taxes will be used to pay for Social Security.

There are many reasons to dislike SS (I swear, I'm not using the initials to make any Godwinesque allusions), but it seems like everybody is making too big a deal about those bonds. I had always figured that SS taxes were just one more tax, and that the whole thing was really a "pay as you go" system. The bonds are just a convenient way to obscure that fact from those who want to pretend otherwise. It doesn't change the basic fact that the number of retirees is growing, but neither does it confer some extra instability to the system. It's just a pay-as-you-go system with rising obligations. Which is what we've known all along.

So what's the big deal?

|12.20.04 @ 8:20PM|#

Oh, to be clear, I see a lot of problems with issuing new bonds to cover old bonds (interest grows exponentially, you know). But that's a problem with deficit spending regardless of what it goes toward. Social Security is pay-as-you-go, just like the rest of the gov't. They may say that one particular tax is devoted to SS, but in reality the money goes elsewhere when there's a surplus and comes from elsewhere when payroll taxes can't cover it (i.e. they "cash in" the bonds).

So what's the big deal? The fundamental problem here is a rising number of retirees, and yet everybody is focusing on some bonds that exist largely for semantic reasons.

MP|12.20.04 @ 8:31PM|#

The big deal is that SS boosters fall back on the "Trust Fund" to claim that SS is solvent well into the middle of the century. Since in fact the "Trust Fund" contains no underlying assets, it means that the actual date where SS can no longer cover expenses based on the FICA tax is far sooner, likely as early as 2018. At that point, in order to cover burgeoning SS entitlements, the government will either have to make cuts to the program or raise taxes to cover the costs or issue more debt to cover the cost. This time, however, the SS debt would now become a further drag on the budget. Furthermore, from that point forward, the obligations will continue to grow with the increasing number of elderly, which will further exacerbate the discrepancy.

|12.20.04 @ 9:09PM|#

Payroll taxes were deliberately set higher than necessary for pay-as-you-go in order to accumulate a surplus for future retirees. The government could have held the cash, but that would have been foolish. Investment in the market was not permitted.

The trust fund is part of the contract between those who paid in and those who will collect. Some of them are the same people.

|12.20.04 @ 9:51PM|#

thoreau-

The average life expectancy for a white male who was a member of the workforce in 1935 was approximately 60 years. For women it was around 63 and a half. Then as now the life expectancy of blacks was quite a bit lower. So, even excepting the gains made by lowering the infant mortality rate, the increase in life expectancy is still considerable. And while medical science certainly helps, it probably doesn't hurt that fewer and fewer people are doing physically taxing jobs like coal mining or heavy manufacturing.

|12.20.04 @ 10:45PM|#

Joe,

At the risk of offending (which is not my intention), I'd like to hear more about your Commun-o-Capitalist ideas of 'It's okay for people to get rich, so long as everyone has a minimum standard of living'. It reminds me of something out of an Orwell novel, "All are created equal, but some are more equal than others".

You don't want grandma living in a basement and sharing the dog dish, so what is an acceptable standard of living? How many square feet? How much per month for food and other items?

Does Malibu grandma get to stay (thus incurring a much higher monthly payout, based on higher per square foot apartment rents), or will she be forced to move out where Middle-America grandma lives, with it's lower rates?

How about other welfare recipients? Should the govt. force them to move to a lower cost area in order to be fiscally responsive to the taxpayers? Why? Why not?

Thanks for your time,

WSDave

|12.20.04 @ 11:38PM|#

I just skimmed this thread so I may have missed something, but the discussion of extended lifespan seems to be all along the lines of, "It'll make the SS situation worse, because you'll have all these old geezers hanging around collecting benefits for an extra couple of benefits." What about the possibility that further lifespan extensions will make oldsters able to (and want to) continue working productively later in life? What would be the effect on SS if people lived to 100 but didn't retire until 85 or 90?

|12.20.04 @ 11:39PM|#

Aargh! "extra couple of benefits" should be "extra couple of decades"

|12.20.04 @ 11:47PM|#

What about the possibility that further lifespan extensions will make oldsters able to (and want to) continue working productively later in life? What would be the effect on SS if people lived to 100 but didn't retire until 85 or 90?

Good question. The thing is, there's evidence from Europe, where many people enjoy a lower retirement age than in the US, that people tend to retire as soon as they can even if they have productive years ahead of them. Or at least that's what is periodically reported in the Economist.

Of course, maybe the US is sufficiently different culturally that longer-lived Americans will work longer as life expectancy continues to grow. (Or, perhaps more to the point, a statistically significant number will choose to do so.) But I'm not holding my breath.

|12.21.04 @ 12:01AM|#

thoreau,

I agree. Who wouldn't "retire" tomorrow if they won the lotto? Why go on "working" if you can play instead (some my still "work" for the fun of it, but if it's fun, is it still work?).

WSDave

|12.21.04 @ 9:54AM|#

The trust fund is part of the contract between those who paid in and those who will collect.

First the mythical trust fund, now the mythical social contract. It is impossible to have a serious discussion around here on Social Security reform, because half the people posting are hallucinating.

|12.21.04 @ 10:00AM|#

"Overinvestment in the wrong technology can decrease productivity, increase investment losses and increase unemployment. Just ask all the investors in the telecom stocks that wasted billions in overcapacity in fiber optics a few years back."

And yet, even with all that investment in dark fiber, productivity continued to skyrocket throughout the period. That sort of thing tends to happen when investment is spread out over a broad populace.

|12.21.04 @ 10:10AM|#

Um, RC? Everything you lectured me about in your 7:01 post, I stated myself in previous posts.

The lack of an existing asset? Check. The fact that Social Security if funded with current revenues? Check. I don't know who you're arguing with, but it's not me.

|12.21.04 @ 10:22AM|#

"And yet, even with all that investment in dark fiber, productivity continued to skyrocket throughout the period. That sort of thing tends to happen when investment is spread out over a broad populace."

Not the productivity of those companies or that industry. The overall national productivity rate was (and is) not created by any one industry or technology.

In fact a lot of company's productivity increases are due to moving production offshore - outsourcing.

|12.21.04 @ 10:42AM|#

So, to summarize joe's position:

1. There are no assets in the trust fund.
2. Social security is funded with current FICA revenue.
3. When the workforce/retiree ratio sinks below a certain point, FICA can no longer cover payouts. The extra money will have to come from spending cuts or higher taxes on the smaller workforce.
4. So what?

I agree with 1-3; the problem is 4.

|12.21.04 @ 10:59AM|#

Joe's position is that he want's the suckers paying into the system to keep on believing in it long enough for him to get paid from it.

The White Anglo Saxon Protesta|12.21.04 @ 11:39AM|#

Whenever I get into a Soc. Sec. discussion, I see my four year old niece and three year old nephew. I'm 43 now. Having no chillin's of my own, demographically speaking and granting that the system undergoes no radical change in the next 20-25 years, my Soc.Sec. benefits will be paid by these two kiddos all by themselves at the very time they will be trying to raise families of their own. It makes me sick to my stomach.

A 40-1 ratio of workers to recipients in decades past was what sold the program and allowed it to grow. I don't see FDR as being so stupid that he didn't anticipate that the high end of that ratio was going to retire someday.

In other words, the bastard did this to us on purpose.

|12.21.04 @ 12:38PM|#

"In other words, the bastard did this to us on purpose."

It got him re-elected, that's all that was important.

|12.21.04 @ 3:55PM|#

Interesting how joe's productivty claims come from private industry; perhaps joe would like to provide historical productivity figures of public industries. In pure numbers, a business taxed at 33% is two-thirds private and one-third public. Increase the taxes and you are increasing the "publicness" of the business.

The logical conclusion of joe's arguments is that everything is OK because a 55-year old who is technologically downsized out of a job (all in the name of productivity) can always go pick tomatoes or get a job in some municipal planning department.