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Tim Cavanaugh | January 17, 2005

Social Security isn't really headed for a crisis, writes Jonathan Rauch, but it's still worth reforming for more important reasons.

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Kevin Carson|1.17.05 @ 4:33PM|#

Of course, any attempt to reduce benefits under the current program run up against the fact that we've been paying significantly higher payroll taxes for the past 20 years based on the promise of Greenspan et al that they would guarantee the solvency of the program. It's not the fault of us people coughing up the higher payroll tax that the surplus has been used to bankroll a general budget deficit (especially tax cuts to the plutes).

|1.17.05 @ 4:35PM|#

What Rauch misses in his "either way, it's wash" assessment of the proposed Social Security Remake is that allow collectively the total dollar picture might change little, individuals stand the very real risk of either big wins or losses.

Big wins are appealing, but big losses will drive some old age pensioners and survivors into poverty. The government will then have to bail them out. So the government gets all the downside and none of the upside.

It seems to me that those who want to invest in the market can do so now. There's no reason for the government to change what has been a successful program, ideology notwithstanding.

|1.17.05 @ 4:46PM|#

We're free to invest in the market if we have anything left.

It it like someone taking the only ball in town and saying to those who remain, "you're free to play if you want to."

|1.17.05 @ 4:54PM|#

REM

Its The End Of The World As We Know It (And I Feel Fine)

That�s great, it starts with an earthquake, birds and
Snakes, an aeroplane and lenny bruce is not afraid
Eye of a hurricane, listen to yourself churn - world
Serves it�s own needs, dummy serve your own needs. feed
It off an aux speak, grunt, no, strength, ladder
Start to clatter with fear fight down height. wire
In a fire, representing seven games, a government
For hire and a combat site. left of west and coming in
A hurry with the furies breathing down your neck. team
By team reporters baffled, trumped, tethered cropped
Look at that low playing! fine, then. uh oh,
Overflow, population, common food, but it�ll do. save
Yourself, serve yourself. world serves it�s own needs,
Listen to your heart bleed dummy with the rapture and
The revered and the right, right. you vitriolic,
Patriotic, slam, fight, bright light, feeling pretty
Psyched

It�s the end of the world as we know it
It�s the end of the world as we know it
It�s the end of the world as we know it and I feel fine

Six o�clock - tv hour. don�t get caught in foreign
Towers. slash and burn, return, listen to yourself
Churn. locking in, uniforming, book burning, blood
Letting. every motive escalate. automotive incinerate
Light a candle, light a votive. step down, step down
Watch your heel crush, crushed, uh-oh, this means no
Fear cavalier. renegade steer clear! a tournament,
Tournament, a tournament of lies. offer me solutions,
Offer me alternatives and I decline

(chorus)
It�s the end of the world as we know it (it�s time I had some time alone)
It�s the end of the world as we know it (it�s time I had some time alone)
It�s the end of the world as we know it and I feel fine (it�s time I had some time alone)

I feel fine

(repeat chorus)

The other night I dreamt of knives, continental
Drift divide. mountains sit in a line, leonard
Bernstein. leonid brezhnev, lenny bruce and lester
Bangs. birthday party, cheesecake, jelly bean, boom! you
Symbiotic, patriotic, slam book neck, right? right

(repeat chorus)

It�s the end of the world as we know it
It�s the end of the world as we know it
It�s the end of the world as we know it and I feel fine (it�s time I had some time alone)

(repeat chorus 2x)

Fine
It�s the end of the world as we know it (it�s time I had some time alone)

|1.17.05 @ 5:09PM|#

"The government will then have to bail them out. So the government gets all the downside and none of the upside."

They won't have to bail them out with as much money as they spend now. What's wrong with putting those few who end up destitute on subsistence welfare like anyone else who is destitute? The cost is minimal compared to a program like SS.

The real core reason for supporting the SS status quo is paternalism, pure and simple. God forbid that individuals be given the freedom to live with their mistakes.

jb

|1.17.05 @ 5:38PM|#

The real reasons for supporting social security are that: a) it works, and b) there's no alternative that's been presented in any detail that works better.

God forbid that we embrace the concept of shared responsibilty and mutual support; every man for himself is so much more civilized.

|1.17.05 @ 5:57PM|#

It's not the fault of us people coughing up the higher payroll tax that the surplus has been used to bankroll a general budget deficit

That's the way SS has always operated. The Greenspan payroll tax increases were needed because of the changed demographics and the 70s benefit increases, not to mention the pressures Medicare put on the system. But the SS tax has always been a sort of stealth revenue generator, a tax disguised as an pension contribution. The taxation is made palatable with the promise of future benefits.

The point about SS is not that it's insolvent, it's that it's dishonest.

They won't have to bail them out with as much money as they spend now. What's wrong with putting those few who end up destitute on subsistence welfare like anyone else who is destitute? The cost is minimal compared to a program like SS.

You have nailed it. However that would require a level of honesty that neither politicians nor a large segment of the public is capable of.

One of the problems of SS is that we pay benefits to millionaires so that Aunt Myrtle (who needs the money to survive) can pretend she's not on welfare. And to fund it we levy a regressive tax*.

*Not that I'm for progressive taxes it's just that I find it inexcusable that the regressive payroll tax is levied disproportionately on young (generally poorer) workers to pay benefits to old (generally wealthier) retirees.

b) there's no alternative that's been presented in any detail that works better.

Actually a means tested income supplement for retirees paid out of general revenues has been demonstrated to be far more cost effective than the SS scam. It has the further benefit of better meeting "the concept of shared responsibilty and mutual support".

|1.17.05 @ 7:47PM|#

Tim,

The real reason for getting rid of social security is that people are not identical cardboard cutouts. They need flexibility to save for retirement in a way that's best for them. I can think of a host of situations where the government's 12% "savings" scheme would not be optimal, or even close to optimal.

For example, it is retarded to force 16-25 year olds to "save" 12% towards retirement at a time in their lives when they are borrowing money to fund things like education and small business investment. After they have invested in their productivity and increased their earnings from these investments, then it is time to start saving.

Another scenario: suppose someone has an emergency come up and they need some liquidity. A private savings account would allow them to sell assets to meet urgent needs. Under the new SS, he probably won't be allowed to and under the old SS he didn't own any assets and so he wouldn't be able to.

Personally, I would support a move to make social security a fall back system for the poor over the current monstrosity that hinders people's ability to financially plan their lives.

Ultimately, I would abolish the entire system. But I'm one of those crazies who believes in humanity's ability to solve its problems without a wise and benevolent dictator.

|1.17.05 @ 8:12PM|#

Jacob:

Isn't the whole point of Social Security that it isn't about me saving for my future but rather me providing for anothers disadvantaged present?

I know that if my mother were to be wanting today, I would gladly contribute some of my income to help her. The fact that my mother might not have worked hard enough or saved as much as she could wouldn't change that. If my nephews and nieces were left without their father, I would help support them. The fact that my brother wasted his money on some get rich scheme wouldn't change that. Why should it be any different when it comes to my willingness to help your mother or your children?

Besides, no-one is saying that people can't save their own money. Social Security just says that there is a societal need that is at least as great as the individual need.

I happen to think, as an aside, that the time to save is when someone is 18-25, given the power of compound interest. Our problem in America isn't too little income, it's too much consumption and, therefore, too little savings.

I'm not against means testing for benefits, and I support raising the Income Cap subject to the Social Security tax. I'm also ok with raising the age at which benefits pay out.

Insurance works I think, because of shared burden and shared risk, universal insurance shares the burdens and risks most effectively.

|1.17.05 @ 9:07PM|#

I just love how people like tim use so many pretty words and concepts to justify armed robbery. Hey tim, I have a negative net worth and most SS recipients have accumulated wealth--do you think it's right to steal from the poor to give to the rich?

Here are the facts:
1) I do not want social security.
2) I do not want to pay social security taxes.
3) If I don't pay social security taxes, people from a big gang (the govt.) will come to my apartment with guns and take me away.

If bleeding-heart liberals like you want to help poor old people, then do it YOURSELF! Why do you have to steal from others? Use all the nice words and moral reasoning you like, but you and all others like you are nothing but thugs. It is not moral to coercively force others to contribute to your desired charity. It's tyranny of the majority, which is something the founding fathers were tying to avoid (until evil people in 1913 decided to return partial slavery to the Constitution in the form of income tax slavery).

|1.17.05 @ 9:27PM|#

Hey Bill:

I don't want to have good roads, or a common defense, or an education system or an adequate police force!

But those black booted thugs held a gun to my head when I elected my government. I am but a helpless gog in this dastardly wheel of democracy. Woe is me.

|1.17.05 @ 10:39PM|#

What an interesting analysis.

Jonathan Rauch:

"Social Security as Social Engineering"

But privatization should be seen as Social DEengineering because it allows more individual autonomy from the government coercion.

The real fiscal crisis is not that Social Security will be technically insolvent in a few years, it's that the whole U.S. government is genuinely insolvent right now.

But Social Security going insolvent will make it even worse, and it will get worse at a rate driven by being on the wrong side of a daunting demographic power curve.

Indeed, Social Security's difficulties pale next to those of Medicare, which is headed for a real crisis.

That's cold comfort if there ever was. But, the economic arguments still obtain to make less onerous, or abolish SS.

It (the White House memo) stressed moving "away from dependency on government and toward giving greater power and responsibility to individuals."

Well, I've gotta give credit where it's due. Kudos to Bush on this one. Gosh, that seems weird to say. But, why doesn't Bush go public with this compelling moral case?

|1.17.05 @ 11:02PM|#

I don't want to have good roads, or a common defense, or an education system or an adequate police force!.

Funny, I didn't know that roads, education, and police require a federal government...
Comparing SS to a common defense is ridiculous. Defending the populace from foreign invaders is necessary for individual freedom; and this benefits all Americans (as well as much of the world). SS is a transfer of wealth from the young (and often poor) to the old (and often wealthy). It is in no way necessary. Because the wealth of those over 65 has grown so much, SS is not so much poverty insurance as inheritance insurance. Many Americans live for decades on SS and Medicare and then leave big money to their heirs. I will recieve no inheritance do to the circumstances of my family. Why should I subsidize the inheritance of others?

But those black booted thugs held a gun to my head when I elected my government. I am but a helpless gog in this dastardly wheel of democracy. Woe is me.

That's the difference. You probably vote for Democrats and/or Republicans who destroy my liberty. I vote for those that would let me be free. Once again, why can't all you just give your own money? Why hold a gun to my head? (By the way, I do give money to charity. I do not give money to people with plenty of it, which is what SS (and the fed. govt., in general) does every single day.)

|1.18.05 @ 1:10AM|#

Tim,

If my mother were in need in her old age, you bet I would do everything I could to help her. If your mother were in need, I would consider helping her depending on my own circumstances and how severe her situation was. Helping MY mother is a duty. Helping YOUR mother is charity.

Right now, I am subsisting on less than $10,000 a year, much of it debt, I don't have a lot to spare to contribute to your mother, not to mention everybody else's mothers.

Also, right now is not the time for me to experience "the miracle of compound interest". I need consumption dammit. I need school books, food, car repair, and gasoline. If I were to start saving for my own retirement or contributing to charitable causes, I might do it in five years when hopefully I'll be making a six (or seven or eight) figure income.

Forcing college students that wait tables on the weekends and the holidays to "save" for old age or help the "disadvantaged" or whatever else you want to call it is retarded. We can't afford it. But changing your one-rule-fits-all federal bureaucracy would take years and millions of dollars. I don't have millions of dollars. I have next week's grocery bill. And I sure as hell wished I had my 12% SS taxes back from my last pay check.

|1.18.05 @ 3:31AM|#

Tim, your concerns are valid. It's just that you've fallen for the specious yet convenient false dichotomy offered by most social security apologists, namely that EITHER we must have social security OR there's no social insurance for destitute elderly.

That is simply false. Once you and others hopefully realize that Social Security is not the only way to handle starving old poeple, maybe you can see past your natural aversion to the extreme vocal libertarian types and see that Social Security really is a terrible program, both morally and practically. Also, it in no way falls under Social Contract theory like your examples of roads and military do.

jb

|1.18.05 @ 8:51AM|#

Hoping to get this thread back on topic...

Two major points missed on Social Security privatization. First, if one were to invest their private account in long term government bonds � the same thing the Social Security Administration invests the current surplus in � the investor's return would be about twice what Social Security returns. Look at it another way: Social Security treats its recipients like mutual fund holders, but with a 50% expense ratio. So private investors can double the yield without taking any risk.

The second point is that the Social Security crisis is a microcosm of the larger demographic issue. What happens to Social Security will happen to the larger stock market, too. A hugh segment of the population will go from net contributors to net withdrawers. This net withdrawal will be continual over a twenty year period, as the baby boomers move through their seventies and eighties. Sure, the economy will do great handling their consumption, but that big shift from savings to consumption will depress stocks. Why should we assume the stock market can handle this shift any better than the FICA system?

I fear government wants to privatize precisely because it doesn't want to be holding the bag when payout time comes due.

|1.18.05 @ 9:00AM|#

I guess there's a third thing not often mentioned. Social Security operates as an estate tax on the poor. The estate tax rate here is close to 100%.

Taking 12.4% of wages off the top, most poor can't afford other investments, and in retirement rely on Social Security for most of their support. When they die, there is a $200 death benefit, and their monthly FICA income stops.

Now layer on that the poor also have shorter live expectancies, and may have skipped college and started paying in to the system earlier. Envision the scenario where a guy finishes high school, goes right to work, and pays FICA from age 18 until he dies at age 64. He doesn't live to collect a return on his payments. With privatized accounts, there would be some corpus to pass to his children. Social Security leaves him without any asset to pass down. Social Security operates as a 100% estate tax on the poor.

digamma|1.18.05 @ 9:36AM|#

WMD's : Iraq War :: Insolvency : Social Security Reform

Sure, there might be other reasons to support them, but that doesn't make the supporters any less dishonest.

gaius marius|1.18.05 @ 10:52AM|#

God forbid that we embrace the concept of shared responsibilty and mutual support; every man for himself is so much more civilized.

mr tim, thank you. i agree with absolutely everything you've said. some folks here are a bit too proud to acknowledge that some of them will certainly be the ones in dire need of social help.

mr real bill, we force ourselves to insure ourselves in old age because we know that there is a significant probability of our self-enabled destitution which many at times in their life (apparently including you now) irrationally will not acknowledge. perhaps ironically, forced-participation insurance schemes are built specifically for people like you.

this is no different than states forcing you to carry car insurance because people believe irrationally themselves to be much better drivers and in much more control than they actually are.

Once you and others hopefully realize that Social Security is not the only way to handle starving old poeple, maybe you can see past your natural aversion to the extreme vocal libertarian types and see that Social Security really is a terrible program, both morally and practically.

mr jb, i'd like to hear your alternatives.

gaius marius|1.18.05 @ 11:00AM|#

Look at it another way: Social Security treats its recipients like mutual fund holders, but with a 50% expense ratio. So private investors can double the yield without taking any risk.

there is a massive, massive difference, however, mr usoe. there is no guarantee of benefit in private investment. i submit that is what you're in SS for.

as i've said ad nauseum, if you view SS as an investment program, you don't understand what SS is. it has utterly nothing to do with ROI. it is a mandatory-participation insurance plan. it is the safety net that saves you from the gutter if your life fucks up royally.

all else is propaganda passed on to us by the investment mania that currently deludes most americans. when people see their home and their insurance as "investments" to be "managed", they're off the deep end with greed.

|1.18.05 @ 11:50AM|#

Only rare and unexpected events, like fires and car accidents, can be insured against. Old age is common and predictable. According to the latest figures available in the Statistical Abstract of the United States, about 75% of American men and about 85% of American women survive to age 65. This means Social Security is closer to a transfer program than it is to an insurance program.

The obvious question is, why is the transfer necessary? Why not get rid of the old age benefits, and allow people to save for their own retirements? Shouldn't a person's retirement be his own responsibility, anyway?

|1.18.05 @ 11:53AM|#

Here is a serious question that I have not seen addressed in the media hype: what will become of the current subsidy to homemakers and under employed spouses? Both my mother and mother-in-law receive 1/2 of their husbands SS benefits. This is because each person is guaranteed no less than 1/2 of their spouse's benefit check. This serves to subsidize the returns of my father and father-in-law. Never is this mentioned in any of the debate, but it could be a big saver for the program. Occaisionally I see something about where money for disability payments, etc. will come. That is also an issue, because if we continue to provide such benefits on a different budget, we can't book those savings as increases in returns for future private accounts. (The general tax burdens for that sort of thing would need to be netted out from the private account benefits to be accurate, wouldn't it?)

|1.18.05 @ 12:09PM|#

Gaius,

Whaa? Insurance always is an investment. Even car insurance is a derivative contract triggered by accident events. I appreciated your arguments in a prior thread about SS is an insurance against private investment success. But I disagree with the insurance assertion.

Currently, SS more or less operates as a giant annuity scheme where the formula used to determine payouts are not obvious to the outside. In my mind, I equate annuities = insurance investments. Usually, the rules in an annuity are printed (fine print, to be sure) before you buy in. SS fails that test, and I'm fascinated by Ayatolla Usoe's observation regarding the current SS return is half of straight up long T-Bills.

What is wrong with a privatization scheme that cuts out the SS administration black box, and simply buys people TBills with their contributions. I'll even go with requiring that these accounts roll over into new TBills (of owner-selected duration) or related BPD instruments (or muni bonds) when they mature.

I'm singularly unimpressed by the idea of SS-tagged money being used to buy equities. I think there's a lot to be said for distributing T-Bills to citizens on receipt of FICA withholding. I don't see how an implementation like this fails the social insurance mission of SS.

|1.18.05 @ 1:09PM|#

"this is no different than states forcing you to carry car insurance because people believe irrationally themselves to be much better drivers and in much more control than they actually are."

Uh yes it is different than the state forcing people to carry car insurance. The state does that to force individuals to be responsible for the damage they do TO SOMEONE ELSE a result of their own negligent actions.

That's not the same thing at all as forcing participation in Social Security.

|1.18.05 @ 1:13PM|#

" there is a massive, massive difference, however, mr usoe. there is no guarantee of benefit in private investment. i submit that is what you're in SS for."

If you'd been paying attention you'd have known that what he advocated was having private accounts invested directly in US treasury bonds and earning an actual higher rate of return on that basis.

There is certainly as much "guarantee" that the federal government will pay back the individual bonds it has outstanding as there is that it will continue to pay SS benefits in the same manner it is doing now.

gaius marius|1.18.05 @ 1:42PM|#

Only rare and unexpected events, like fires and car accidents, can be insured against.

that's incorrect, mr hanneken -- anything can be insured against. the insurance premium may at some point become pointless to pay, but i can insure against my crossing the street.

but i think the operative question you're stating really is, "what are we insuring against?" the answer is: against the probability that life deals us an obscene hand.

i'm well enough on my way that i can expect never to need a SS check to live comfortably. and yet, i want to pay into SS. why?

because i am well aware that, despite making good decisions and working hard, i can be fucked by the unpredictable and unforeseen. i could lose everything at any time through nothing that could be construed causally as my responsibility. having insurance that guarantees me a primitive existence for life beyond my ability to work is my hedge against that disaster.

The obvious question is, why is the transfer necessary?

fwiw, i would favor means-testing payouts.

the mandatory nature of the insurance is the social prerogative. we all know that we will have to feed you in your aged destitution, should it befall you. we as a society have decided that we will not intend to allow you to starve on the street. so we compel you to participate in the insurance -- even if you don't believe you'll ever need it -- because we are aware you might.

this is exactly the same, despite what was said above, as common defense. you may not believe your home will ever be invaded -- but we compel you to participate because we are aware it might.

if you wish to opt out, i hear other nations are accepting applications. but i think you should consider staying; such insurance is hard to come by.

gaius marius|1.18.05 @ 2:15PM|#

I think there's a lot to be said for distributing T-Bills to citizens on receipt of FICA withholding. I don't see how an implementation like this fails the social insurance mission of SS.

i think, mr keith, that it fails because it removes the insurance and replaces it with equity. give them t-bills and anything can happen. they could sell them, trade them, et al -- a million opportunities to go back to zero well before they die, including simply an unnaturally long life.

the point of the insurance is precisely to remove the individual from a position in which they can screw it up under any circumstances.

gaius marius|1.18.05 @ 2:25PM|#

including simply an unnaturally long life.

rereading you, mr keith, i see you make explicity limitations on use -- but it still undermines the fundamental insurance aspect by the above method, if no other.

one can accrue x, which may be a perfectly reasonable amount for a 30 year retirement -- but them be so fortunate as to live for 40 years past retirement. consumed t-bill equity cannot pay for that. insurance can.

|1.18.05 @ 3:24PM|#

gaius,

I find your religious faith in government, that it
can not fail and pay out nothing, rather cooky.

Everything else might screw up so we need to
have God ... er Goverment, PBUH, take care of
it. See no risk now! A Politician, PBUH,
will do it!

-rover-

gaius marius|1.18.05 @ 3:47PM|#

I find your religious faith in government, that it can not fail and pay out nothing, rather cooky.

no faith involved, mr rover -- but any examination of reality must quickly lead the the conclusion that gov't insurance guarantees are far more valuable than private ones.

gov't can fail; gov't can refuse to pay. but they do so are very low rates compared to private insurers, where bankruptcy and reneging on promises without warning is de rigeuer.

SS, fwiw, should have no trouble continuing to pay out benefits if it stays realistic about its aims. gov't can, after all, simply direct more dollars into SS.

the big question -- as mr rauch rightly notes -- has nothing to do with SS but with bush's horrifying budget busting in the general finances, which may lead it to print money abjectly. thos are the problems that urgently need to be fixed (if they are in fact "fixable" any longer), imo, and not SS.

|1.18.05 @ 3:58PM|#

gaius,

One can suddenly become destitute at age 40. Social Security won't help you then. For that, the government has provided various safety nets, paid for through taxes. This should be enough to satisfy your social contract concerns.

Suddenly becoming destitute is largely independent of growing old and leaving the workforce. Conflating the two is what makes Social Security so hard to deal with. The core of the problem was very well put by Isaac Bertram above, "we pay benefits to millionaires so that Aunt Myrtle (who needs the money to survive) can pretend she's not on welfare."

gaius, you say that, fwiw, you want to means test the payouts. Well, it's worth a lot. Why won't you accept that we should simply move the whole payout mechanism into welfare paid by the general fund and phase out the ferociously regressive social security tax and system? If you want to imagine that some portion of your income tax is insurance against a destitute retirement, feel free.

|1.18.05 @ 4:00PM|#

"gov't can fail; gov't can refuse to pay. but they do so are very low rates compared to private insurers, where bankruptcy and reneging on promises without warning is de rigeuer."

I can only laugh at the above.
Government, PBUH, breaks it's
promises less than anyone else? Perhaps Bush,
PBUH, really was right when he couldn't think
of any mistakes he had ever made.
Governments, PBUH, change the rules (their
promises) all the time. A good example would be
... Hey! Social Security!

We live in different worlds. We do have one thing
in common. I want to run my own life.
You also seem to want to run my life.

|1.18.05 @ 4:05PM|#

Thank you MikeP

|1.18.05 @ 4:24PM|#

Gaius,

We can have a federal program that provides aid to needy elderly without having an unreconstructed Social Security program that hands out money to people simply for being old. I think you agree with that, since you said you're in favor of means-testing benefits. I find that a lot less objectionable, although there are obvious moral hazard issues, and I would rather leave charity to the private sector.

|1.18.05 @ 4:44PM|#

i Governments, PBUH, change the rules (their
promises) all the time. A good example would be
... Hey! Social Security!

Indeed - SS benefits have already effectively been reduced for some people by the government changing the rules to make up to half of SS benefits received taxable for those whose income is over certain levels. That is already a back-door form of "means testing". Give the money our with one hand and take some of it back with the other. Don't be surprised if they decide to tax it all away with the other hand and still pretend you're getting your SS benefit!

gaius marius|1.18.05 @ 5:39PM|#

One can suddenly become destitute at age 40. Social Security won't help you then. ...Suddenly becoming destitute is largely independent of growing old and leaving the workforce.

true, mr p, but having the physical means to return from destitution is an age issue.

i personally believe that such people should be strongly motivated to work out of their hole if they are able -- keeping welfare for the able-bodied as undesirable place as possible to be is an essential component of that.

you want to means test the payouts. Well, it's worth a lot.

indeed, i think we should to minimize the expense to us all.

Why won't you accept that we should simply move the whole payout mechanism into welfare paid by the general fund and phase out the ferociously regressive social security tax and system?

i haven't seen much discussion of the payroll tax as being a candidate for revision. is this a feature of the bush plan i've not seen?

i'm not married to the method of premium payment that finances the insurance, mr p. what i'm adamantly in favor of retaining is the insurance policy beyond individual control.

gaius marius|1.18.05 @ 5:41PM|#

We can have a federal program that provides aid to needy elderly without having an unreconstructed Social Security program that hands out money to people simply for being old. I think you agree with that, since you said you're in favor of means-testing benefits. I find that a lot less objectionable, although there are obvious moral hazard issues, and I would rather leave charity to the private sector.

we agree, mr hanneken.

|1.18.05 @ 6:29PM|#

i haven't seen much discussion of the payroll tax as being a candidate for revision. is this a feature of the bush plan i've not seen?

Not that I've heard. But means testing, which we seem to agree upon, is not part of the plan either.

i'm not married to the method of premium payment that finances the insurance, mr p. what i'm adamantly in favor of retaining is the insurance policy beyond individual control.

And I think that calling it insurance is obscuring the reality of the situation. In particular, insurance only pays out if the adverse event happens. In contrast, Social Security checks are mailed to addresses at yacht clubs.

Unbeknownst by almost everybody, three-quarters of the people in this country pay more in payroll taxes than income taxes. A good portion of this money goes to people who don't need it simply because the government stole it from them back when they were earning a paycheck.

It is hard to imagine a worse system than Social Security is now. Trying to save it just because it claims to be insurance is really shortsighted. We would be much better off dealing with such issues using private and voluntary mechanisms wherever possible while leaving a residual safety net in place out of the general fund.

|1.18.05 @ 6:48PM|#

Oh and while I am being "anti-social" at the moment
and wearing my wild eyed radical libertarian
hat - I really do agree with MikeP.

Setting aside the Consitutional question:
(ie The Feds ought not run welfare either)

I would propose and could happily live with
scraping the SS system and moving any needy
to the welfare rolls.

SS is HORRIBLE as an old age pension (it gives
a very bad return and discourages work)
and it is HORRIBLE as welfare (It costs WAAAY
too much)

gaius marius|1.18.05 @ 7:11PM|#

You described all the possible failures of
individuals deciding for themselves how to
plan for retirement and never questioned
the possibility of government failure.

i make that case here, mr rover, because few here rationally consider even the obvious weaknesses of individualism.

in a place where the obvious weaknesses of government were never voiced, you'd hear more about it from me.

gaius marius|1.18.05 @ 7:27PM|#

It is hard to imagine a worse system than Social Security is now. Trying to save it just because it claims to be insurance is really shortsighted. We would be much better off dealing with such issues using private and voluntary mechanisms wherever possible while leaving a residual safety net in place out of the general fund.

i'd submit that the worse system would be leaving the elderly destitute to their own devices, come what may.

i agree with you, mr p, that SS could be reformed in some ways (sliding scale of means-testing, particularly).

but bush's privatization plan is simply dangerous and fixes nothing. indeed, the issuance of trillions in debt (when we are already issuing debt like wild men) is incredibly unwise -- all the moreso when you consider you'll have to provide for many twice over (once for the money they'll lose in the market, again to fund their actual retirement).

it -- like iraq -- is an ill-considered ideological sop.

out of the general fund.

i have to ask, mr p -- why is putting it in the general fund important to anyone? it's not as though washington can then quit collecting taxes. if anything, they need to dramatically increase taxes and cut spending to cover their massive revenue shortfalls.

|1.18.05 @ 8:09PM|#

i have to ask, mr p -- why is putting it in the general fund important to anyone?

I'm merely trying to minimize the intrusions of government. Putting the money back into the budget makes the funding more like turning a dial rather than requiring an entirely new machine.

it's not as though washington can then quit collecting taxes. if anything, they need to dramatically increase taxes and cut spending to cover their massive revenue shortfalls.

Hmmm. Perhaps in phasing out the viciously regressive payroll tax, Congress will average it into the overly progressive income tax and we'll get something closer to a single flat tax with large exemption and no deductions.

I can dream....

|1.18.05 @ 8:43PM|#

By the way, rover, I too am much more libertarian than the position I'm taking in this discussion. But, as they say, you can't get there from here.

And Social Security in particular is one of those government programs that should breed nearly universal opposition. In fact, if the progressives and liberals really understood what Social Security was, they would be clamoring for reforms with voices much louder than Bush's.

|1.19.05 @ 10:52AM|#

i have to ask, mr p -- why is putting it in the general fund important to anyone?

Because the payroll tax is so regressive and the whole pretense that this is an "insurance premium" is so flagrantly dishonest, as is the pretense of the existence of a "trust fund". I would think you, of all people at this site, would be at the forefront in denunciation of fraud.

SS is HORRIBLE as an old age pension (it gives
a very bad return and discourages work)
and it is HORRIBLE as welfare (It costs WAAAY
too much)

Head of nail, meet hammer.

And Social Security in particular is one of those government programs that should breed nearly universal opposition. In fact, if the progressives and liberals really understood what Social Security was, they would be clamoring for reforms with voices much louder than Bush's.

Likewise. Tho I fear Bush's "reforms" may be worse than doing nothing. I fear that "privatization" is loaded with traps.

|1.19.05 @ 11:54AM|#

gaius: i'd submit that the worse system would be leaving the elderly destitute to their own devices, come what may.

There are alot of flaws with SS and favoring reform does not necessarily mean favoring a Randian "let them eat cake" approach either.
It doesn't do any good to falsely accuse reform proponents as heartless monsters. It kills the debate with a strawman. NO ONE is arguing that we just let old people starve in the streets (except maybe a few extreme Randians but they are a fringe)

Social Security doesn't even fit the criteria of a program aimed at helping the very poorest seniors. It pays benefits irrespective of income. There is no means test. Yet you defend it on the grounds that it is a program for elderly poor. The reformers want it changed because it doesn't really do this. You are talking past each other.

Who gets the biggest checks from SS? The ones who earned the most and thus contributed the most. At the end of the day, the very poor who have been poor all their lives are still very poor under SS.

It's certainly possible to drastically reform Social Security without leaving hordes of seniors to starve in the streets. Why not have a program where everyone puts their full 12.4% into a savings account? After a lifetime of earnings that is a HUGE chunk of change. Anyone who is stupid or unlucky enough to somehow lose it all by the time they are retired can be provided with a modest living supplement (basically:welfare).

The advantage of this would be that there is no cross-generational funding going on, which causes resentment and accounting loopholes for Congress. The cross-generational transfer is by far the biggest flaw in SS.

Everyone agrees that the real problem we want to address is broke retirees. I support the goal of our society keeping broke retirees off the streets.

But why force everyone to participate in a solution that will only apply to a few? It's teh same kind of foolishness behind drug prohibition. Outlaw all use of drugs because a minority few will turn into junkies. Look at the costs of that approach.

For the majority of participants, SS is a hindrance to their financial picture. They are WORSE off at retirement because of the program. They won't really need the benefits they'd be far wealthier if they had been able to keep the 12.4% throughout their lives.

Let people save their own money and for those who screw it up or get unlucky, provide them a means-based living supplement. Very simple.

It doesn't mean you're heartless if you want to change social security. There are plenty of intelligent ways to achieve the goal of feeding the starving elderly.

jb