James Glassman's New Social Security Fix

Over at the invaluable Tech Central Station, occasional Reason Contributor Jim Glassman tips his hat to the power of rational argument when it comes to Social Security:

A few months ago I took the administration's position in a debate in Reason magazine with innovative economist Tyler Cowen of George Mason University. Sometimes, you learn something from such an encounter. I now see that Tyler was right, and what follows is adapted from his argument.

Read Glassman's full take here.

And read his Reason exchange with Cowen here.

Part of Glassman's motivation to rethink his original position has been the fecklessness of the Bush admin in selling private accounts:

Polls show the public split roughly 50-50 on personal accounts. But most of the support comes from young people, who are apathetic politically, and confidence in Bush's own "ability to make the right decisions about Social Security" is weak and falling -- down to just 27 percent last month, according to a CBS News/New York Times survey.

Comments

[Twba]

I can't wait to see the bipartisan compromise that keeps SS in the black.

[theCoach]

Is Glassman someone that people around here take seriously?

My favorite article of his is here. It gives great insight into the economic picture a couple of months into the Bush Administration, and how far we have come.

[theCoach]

Twba,
There is a pretty good chance that SS will remain in the black if nothing is done -- and, using the medium cost projection no problem until past 2040.

[Hakluyt]

Bush's "private" or "personal" accounts would have been a statist nightmare. Further, Bush's paternalistic rhetoric about creating an "ownership society" was also pretty nauseating.

[Brian]

That "Dow 36,000" Glassman can still pay the bills as a pundit and isn't working at Taco Bell raises the haunting question: is there anything a pundit can be wrong about that will discredit him to such a degree that he goes away forever?

[Don Mynack]

The only Social Security reform that is necessary is the ability to opt out of it completely. Anything else is just rearranging deck chairs.

[joe]

Warning: Cheap Shot Ahead

I can think of 36,000 reasons not to listen James Glassman when he tells us that private investment in the stock market will solve our problems.

End Cheap Shot Zone

In all seriousness, I find it odd that Glassman's list of reasons why Bush's Social Security phase-out initiative has stalled fails to include the growing realization that the Social Security Insolvency Crisis probabl isn't real.

[theCoach]

joe,
If you haven't, do me a favor and read the link in my first post. I think you will enjoy it.

[joe]

Brian,

Rich people still pay Glassman a lot of money to comment on financial matters. It's almost enough to make one question the premise that the corporate media functions as an efficient marketplace for ideas.

[Ruthless yuppie]

"It's not my money.
It's not my body.
Government must direct me the moment my feet in the floor in the morning"

[joe]

Coach,

Whew! We really dodged a bullet there, huh?

[jc]

Means testing = tax increase. Anyone who thinks otherwise is stupid.

I have no doubt means testing will happen, so at least give me the opportunity to make up the lost funds somehow by letting me increase my own retirement savings somehow (whether it be personal accounts or eliminating the funding limits of my IRA and 401k). I am completely confident that the government will crunch the numbers such that they get more money than I am allowed to recoup.

[joe]

Means testing=Tax increase

in exactly the same way that awarding a defense contract to Grumman is a tax increase on Boeing.

[M1EK]

The comment that raising the cutoff on payroll taxes would ruin the economy pretty much ruined this piece for me. I have a hard time taking anybody seriously who can tell me with a straight face that it's better that my boss at my last job (earning about $50,000 more than I did) deserved to pay an 8% smaller marginal federal tax rate.

[MP]

the growing realization that the Social Security Insolvency Crisis probabl isn't real.

You sure do have a lot of faith in ye ole "full faith and credit".

[Ammonium]

Dick Durbin came to my university and comforted us with the solvent-until-2040 argument. Most grad students and almost all undergrads are under 30 and thus are unlikely to take comfort that they'll spend their entire working lives paying into a system that will go bankrupt before they can retire.

The 2040 number is also misleading since social security's excess revenues are being spent outside of social security, but expenditures are growing faster than revenues. So to maintain current benefits and levels of spending either taxes or deficits will need to increase.

[jc]

joe, your analogy doesn't fit since Boeing's net income would be lower because their gross income would be lower by not getting the government contract. With means testing your net income is lower but your gross income is unchanged.

[joe]

Actually, I have faith in Ye Olde Economic Growthe, Ye Olde Productivity Growthe, and Ye Olde Immigratione.

M1EK, yeah, he didn't even have the decency to add "...without offsetting reductions in the tax rate." Glassman isn't just against raising taxes; he's against making them fair.

[joe]

jc, I think we might be talking past each other. When most people use the term "means testing" in regards to Social Security, they're talking about benefits, not the payroll tax.

[jc]

joe,

The payroll tax you pay now IS the benefit you receive later. Talking about them as two completely different things is stupid.

[Twba]

The payroll tax you pay now IS the benefit you receive later.

Thanks for the Newspeak.

[SimonSimpleton]

I would like to opt out please. Nothing taken from me, if in return I promise to not take from anyone else. (and not sue, cry "wolf", or whine like a baby if I spend my savings frivolously)

Why can't keep the argument simple?

[SPD]

From a Washington Monthly article about TCS:

During my brief phone interview with Glassman--he declined a follow-up--I asked him whether or not TCS published opinions that contradicted the policy views, of, say, AT&T [an openly-acknowledged sponsor of his web site].

"Frankly, we think that other points of view are well represented everywhere else," he responded cheerfully. "To have one point of view on an issue like telecom is something that we don't have a problem with." He added, "We're an advocacy group. There's no doubt about that. I don't think we ever had pretenses of being an academic think tank."

So, why shouldn't I take anything he writes with a shovel of salt?

[joe]

"The payroll tax you pay now IS the benefit you receive later."

Perhaps I'm confused, but I thought that once you reached the required number of quarters in which you contributed, you got the same check as everybody else, regardless of your income. No?

[jc]

OK twba,

The money you pay in payroll tax now is the money you receive as a benefit later.

[Jack William Bell]

So, apparently the answer is to make S.S. suck so bad that people have to save for their own retirement anyway.

Two problems with this:

(1) S.S. is going to start sucking pretty bad anyway. There isn't much choice. Even if they raise payroll deduction rates hugely, demographics is going to kill it. That's the problem with anything you operate as a Ponzi scheme.

(2) You still aren't solving the problem, just pushing it down the road a little further. I'd rather they just came clean about the whole thing, drop the program altogether and 'grandfather' in those currently on S.S. by paying them out of general tax revenues.

[Brian]

jc: No, means testing is not a tax increase. It's, well, means testing. SS is welfare, pure and simple. And while it has to exist to some extent to keep poor old people from starving, it's ridiculous to hand checks to Warren Buffett, especially when they're paid for by regressive taxes.

joe: SS payments increase with your income. SSA has calculators here: http://www.ssa.gov/planners/calculators.htm. I'd actually be in favor of switching to a fixed payment for everyone; again, no reason for wealthy retirees to receive *larger* welfare checks than the poor. Of course, most liberals won't go for that because it would undermine the myth that SS is some sort of investment program.

[theCoach]

Jack William Bell,
You are overstating the crisis in SS by quite a bit. As I mention above, there are absolutely zero problems for 30+ years (and the horizon is getting farther and farther away with each update to the productivity numbers). If at that time, projections still show a shortfall, it will be small and very manageable in any realistic situation where the stock market produces near historic gains.
Your understanding of the demographic situation is confused, or using assumptions that are not standard or not apparent (average age will be ?, immigration will be ?).

[joe]

Brian,

If that's the case, than Reagan's efforts to subject Social Security checks to the progressive income tax makes a lot more sense. A little Rube Goldberg, but much more understandable.

[jc]

joe,

Forget the caluculator Brian linked, it doesn't show you the formula. This link tries to explain the formula (you have to scroll down a bit to get there), it is so complicated you are justified in being confused. Tell me if you think means testing will make it less complicated.

http://www.heritage.org/Research/SocialSecurity/wm143.cfm

Brian,

I don't want to debate the pros and cons (moral and otherwise) of social security and welfare. All I'm saying is that means testing is only mentioned as a way to reduce benefits. If prior to means testing you were expected to receive 50K in benefits based on your contributions and means testing reduced your benefit to 30K without reducing your contributions, you have been taxed. Just because you paid the tax years ago doesn't mean it doesn't count as a tax anymore.

[Russ R]

"manageable in any realistic situation where the stock market produces near historic gains."

Alright Coach... I'm taking you to task on this one, as "your understanding of the demographic situation is confused."

The stock market doesn't produce gains. The companies in the market produce income, and some of that income (what's left after taxes) goes to shareholders. This income is the first portion of their gains, and tends to remain consistent over time.

Changes in share prices have been the source of most of the total return. The share prices you see are what investors, on aggregate, are willing to pay for the expected income they would derive from holding those shares. Sometimes they'll pay more, sometimes less. Right now, they're definitely paying more than historic levels (witness the lowest levels of dividend yields and interest rates in decades).

The funny thing about investments is, the more you pay up front, the lower your total return. So even without demographic factors, the returns of the past will be hard to match, given the higher starting valuation.

But, consider the reason for today's higher valuations, there are a larger number of people trying to invest for their futures than ever before. This has driven price multiples up and yields down... When all those savers become retirees and withdrawls start to exceed new investments, guess what... lower price multiples, higher yields. It can't be avoided.

So, a company's income can rise at the rate of productivity growth, but, at a lower price multiple, total returns are bound to be below expectations.

Sucks to be an investor now, don't it?

[nmg]

The payroll tax should be eliminated. The Trust Fund fiction should be abandoned and Social Security funded from general revenues (this is the partion effect of the so-called Trust Fund anyway). Social Security should have a high-threshold means test and only apply to the very poorest retirees who need money for food.

Basically, eliminate Social Security as we know it and hand out subsistence checks to the very poorest retirees.

nmg

[nmg]

And raising FICA is an absolutely absurd idea for two reasons:

1. The last thing we need is a bigger federal budget.

2. all excess revenues are simply turned into Trust Fund debt anyway. So more FICA revenues would have no effect on future solvency, it's just a way to bleed the working man a little more while they can.

If you don't understand why that is, you do not understand enough about the Social Security "Trust Fund". Raising FICA is a scam.

nmg

[joe]

nmg, if we're passing a Social Security bill that raises FICA anyway, we can include an article that dedicates some or all of the FICA revenue, too.

[Brian]

joe: "Reagan's efforts to subject Social Security checks to the progressive income tax makes a lot more sense. A little Rube Goldberg, but much more understandable."

Right. I'd have preferred straight-up benefit cuts for wealthy retirees, but that effectively did the same thing.

jc: "If prior to means testing you were expected to receive 50K in benefits based on your contributions and means testing reduced your benefit to 30K without reducing your contributions, you have been taxed. Just because you paid the tax years ago doesn't mean it doesn't count as a tax anymore."

Well, as you said, you've already been taxed regardless. If means testing kicks in then your future benefits will decrease, but that doesn't make means testing itself a tax increase. Taxes go to government, and benefits come from them. As a supporter of limited government, I advocate reducing both flows to what is absolutely necessary.

mmg: "Basically, eliminate Social Security as we know it and hand out subsistence checks to the very poorest retirees."

Yes, that's my ideal scenario. As I mentioned above, the left can't support that even though they should according to their rhetoric. It makes the system much more progressive, but the last thing they want is millions of voters no longer dependent on government checks.

[Brian]

theCoach: "As I mention above, there are absolutely zero problems for 30+ years"

Oh dear, don't tell me you actually think the "trust fund" has any economic significance. Also, the 12% regressive tax is a problem *today*.

[M1EK]

jc,

Social Security has always been welfare for most of its receipients, and always will be. The baloney about your 'contributions' and the SLIGHT relationship between what you put in and what you get out (per year) exists only because FDR needed it to sell this thing to a populace skeptical of outright welfare.

(And, of course, most senior citizens far outlive their 'contributions', even with a very generous assumed compounding interest - today's Taco Bell employee is paying the bills for the thousands of octogenarians in my hometown of Boca Raton).

[M1EK]

"Yes, that's my ideal scenario. As I mentioned above, the left can't support that even though they should according to their rhetoric. It makes the system much more progressive, but the last thing they want is millions of voters no longer dependent on government checks."

Thanks, Rush.

The center-right represented by the Democrats (I think it's dishonest at this stage to even call them 'left') supports this in theory; in practice, they can't win elections without today's retirees, who, unfortunately, would revolt at the idea of calling their spade a spade even if their payouts didn't decrease.

[Mo]

nmg,
Your idea is my ideal solution. It makes too much sense to actually be applied. Plus, let's remember, the people that would be losing the checks are the wealthies elderly. Those people are the most influential subset of the most electorally influential demographic in the country. In other words, Not.Gonna.Happen.

[joe]

Brian,

"As I mentioned above, the left can't support that even though they should according to their rhetoric. It makes the system much more progressive, but the last thing they want is millions of voters no longer dependent on government checks."

It must make you feel nice and superior to think so, but no.

The left, broadly, supports universal social security, rather than targetted anti-poverty measures, for the same reason we support yellow lines down the middle of the road that everyone has to obey, rather than cops pulling over the most egregious drivers.

First, because having a universal system prevents people from falling into poverty in the first place/eliminates the traffic conflicts that make accidents more likely.

And second, because the economy and society function better with a universal guarantee that everyone can plan around/because people can drive more confidently and go more places without fearing for their lives if there are clear and universally understood lanes that cars have to stay in.

[joe]

I realize that second point is controversial around here. Well, that's the difference between liberals and conservatives. Liberals feel that the effect of widespread fear and unpredictability among the workforce is, taken as a whole, a bad thing for our society and economy. It makes people unhappy, it discourages them from pursuing opportunities that carry risk, and it compels workers to be more servile in their dealings with bosses.

Conservatives believe that this fear and unpredictability is a net good for society, because it discourages complacency, encourages the more vigorous pusuit of potentially-productive endevours, and compels workers to be more servile to bosses.

[Twba]

Liberals feel that the effect of widespread fear and unpredictability among the workforce is, taken as a whole, a bad thing for our society and economy.

Believe what you have to in order to justify confiscating wages from a frycook and giving it to a wealthy dude driving a quarter million dollar RV.

[jc]

M1EK,

"My" baloney?? I didn't invent the cockamamie thing and I'm not trying to defend it.

[Captain Awesome]

Those are good points joe. But wouldn't a universal welfare insurance system do the same thing? Serve as an "in case shit" sort of system. It seems like the best of both worlds, reduced worry of becoming elderly and starving and less discuragement of private investment due to a lower total bill for government to fill. The alternative just seems like a way for the non-working wealthy to totally hose the working poor. Also I like Hans Monderman's roads, they're artistically superior and the added sense of danger makes people slow down and pay attention. I know it can be a contentious issue, but weren't we discussing a week or so ago the direct relation between percieved driving safty and risk-taking behavior. I'm not quite as ready as some others to swear off all trafic control, but the logic makes some sense, lets get some statistitians on it.

[M1EK]

jc,

I didn't say YOUR baloney, I said THE baloney.

[Russ R]

joe:

"Liberals feel that the effect of widespread fear and unpredictability among the workforce is, taken as a whole, a bad thing for our society and economy. It makes people unhappy, it discourages them from pursuing opportunities that carry risk, and it compels workers to be more servile in their dealings with bosses."

Then why are liberals so opposed to letting individuals choose whatever amount of risk mitigation they feel is best. Why not let people opt out of Social Security?

In other words, why do liberals hate individual liberty? Why do they hate allowing people to make their own economic choices?

Because liberals like being in control. Because liberals think they know better than the people they claim to be "helping".

[jc]

M1EK,

With all the "you"s in that paragraph, I misinterpreted. My apologies.

[joe]

Captain Awesome, I don't think it's very useful to plan the perfect Social Security System. The one we've got now wasn't considered perfect. We were in a situation that just wasn't good enough anymore, and made some changes that made the situation good enough, to the extent that such things are politically possible.

We're not going to tear down the walls and build a new Jerusalem. We're not even going to get the best Social Security system our smartest minds can devise. What we're going to do is let our good-enough system keep plugging along, until it ceases to be good enough anymore, and then we'll make whatever changes are possible in order to make it good enough again.

This is the way the government works. You think the system of land use law that's in place today was some genius's ideal vision?

As for the roads, that's a good design for roads in urbanized areas that are being shared by through traffic, local traffic, bikes, and pedestrians, and therefore need to achieve lots of different goals. I've done projects that turned normal roads into something comparable to that. For an arterial road, which exists purely to allow the efficient movement of vehicles, the straight, well marked street profile is the tool for the job.

[joe]

Since you answered, Russ R, I guess I don't have to. Thhpppttt!

I'm sure it gives you a nice feeling of superiority to pontificate on the eeeeeeeeevil motivations of those that think differently from you. Have a ball, wanker.

[Russ R]

"...eeeeeeeeevil motivations of those that think differently from you."

I accept that everyone will think differently from me, and from everyone else. That's what it means to be an individual. I'm also content to allow individuals to make their own personal choices and live with the consequences. Why can't people who claim to be "liberal" be content with that?

Don't worry joe, I've got equally kind things to say about conservatives, but I'll save it for the threads on social issues.

[nmg]

if we're passing a Social Security bill that raises FICA anyway, we can include an article that dedicates some or all of the FICA revenue, too.

We have a surplus now, and the excess is "dedicated" to congressional spending. So what do you propose we do with the even greater surplus that would be generated by raising FICA?

The point is that every excess dollar raised by FICA is a SCAM on the working class, because it is immediately spent and then that spending is simply tallied as an accounting of what we owe ourselves from the general fund in the future. Increasing the revenues from FICA will only serve to increase what we owe ourselves later.

To quote a drier source:
"These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, make it easier for the government to pay benefits." [Italics added] (Analytical Perspectives, Budget of the United States Government, Fiscal Year 2000 (Washington, D.C.: U.S. Government Printing Office, 1999), p. 337.) "

This scam can be solved by eliminating FICA altogether. Any so-called progressive should be in favor of such a plan which would benefit lower earners, and should recoil but the tortured logic of an analogy that compares road markings for faciliating orderly traffic to universal social security. Frankly, that may be the obvious attempt at grasping at straws I've ever seen.

nmg

[Brian]

joe: "The left, broadly, supports universal social security, rather than targetted anti-poverty measures"

That's nice, but the current Social Security is a terrible way of achieving that. "Universal" social security? Fine, pay everyone $X per month once they hit 67 or whatever, and fund it out of general revenues. Instead, we tax the poor disproportionately and pay more to the wealthy. I can't see any justification for that under liberal principles. Will Wilkinson explains this in much more detail here.

"And second, because the economy and society function better with a universal guarantee"

Any remotely viable SS reform maintains a guaranteed safety net.

[Russ R]

"Fine, pay everyone $X per month once they hit 67 or whatever, and fund it out of general revenues."

Better yet, don't take the money away from the people in the first place.

Where in the Constitution is Congress authorized to pay money from the Treasury to individuals on the basis of age?

[nmg]

Joe, I have another question.

What is the difference between a "universal guarantee" that you'll receive a check vs. a universal guarantee that you'll receive a check if you need it?

How does one cause our society to be stable and the other create economic chaos?

nmg

[joe]

nmg, "So what do you propose we do with the even greater surplus that would be generated by raising FICA?" Al Gore's lockbox solution - using the surplus to pay down the national debt, thereby freeing up debt capacity down the road - would be the most obvious answer. You know, my toddler does that, too - pretends that a task I tell her to do is impossible, when she doesn't actually want it done.

Brian, I certainly agree with the first part, and have a whole raft of my own ideas of how the funding and benefit mechanisms can be made better. As for the second part, there is a big difference between a universal retirement insurance system, and a universal safety net.

nmg, neither creates economic chaos. Both mitigate the "chaos." But making the program universal secures the futures of a lot more people - most importantly, those who, during their working lives, are above the poverty level but below the middle class. Poverty should be avoided, not just ameliorated.

[thoreau]

I like Glassman's idea: Means test benefits, raise retirement ages, don't raise taxes, and give as many tax incentives as possible to put money into some stream-lined version of the IRA/401k/etc.

Oh, and note the word "stream-lined." What part of Bush's heavily regulated "private" accounts plan could plausibly be described as "stream-lined"?

Really, that says all I need to know about Bush: Given the chance to reduce the size and scope of a program and make investing simpler for Americans, he proposed inventing yet another program instead. And one that would massively increase federal involvement in investments.

If a massive federal role in the market for stocks and mutual funds affects investing the same way that Medicare has affected the practice of medicine even for non-geriatric patients, then in 20 years any sane investor will send all of his money overseas.

[Douglas Fletcher]

There is a pretty good chance that SS will remain in the black if nothing is done...

Cool, Coach can predict the future. Let us know when you have some hot stock market tips, would you?

[Russ D]

Why not replace SS with some sort of government savings bond program? If you have $300 of FICA Soc. Sec. "contributions" a month, the gov't will give you $300 in bonds that mature in X years. If you don't want to wait, you can cash them in earlier at, say $120 right now, or wait 10 years to collect the full $300, or wait 20 years to collect $450; the gov't can always cap the interest accrual after X years beyond maturity, and cancel the debt completely if not cashed in in say 35 years or whatever.

The government still gets to keep all the extra cash from all those who decide to opt out, which many smart investors may choose to do because they may be able to get a better long-term return on their $120 than a $300 savings bond would give them. And those who want the security and the minimal amount of work can opt for the bonds. They could even be offered shorter-term bonds as they reach certain age milestones.

The problem with the current system is that it is tweaked with changes every couple of years; it's been around so long the tax rate to fund it went from 2% to 12.4% and is likely to keep climbing. The tax rate can't keep climbing forever, the means testing threshholds can't be increased forever... but no one ever knows what the changes are going to be which makes planning for your individual retirement based on such a system a waste of time (which is why the safest thing to do planning-wise is assume that your contributions have vanished).

[theCoach]

Joe has done a good job here, but to attempt to address comments that were directed at me...

"manageable in any realistic situation where the stock market produces near historic gains."

Alright Coach... I'm taking you to task on this one, as "your understanding of the demographic situation is confused."

-Russ R

Perhaps I am missing something, but I do not see a conflict with what we believe. I was trying to point out that if the stock market, or private accounts, are close to their normal returns, Social Security projections indicate that the program will remain solvent for at least the 75 year projection. Everything you say is true, but the important variables are the productivity and worker/retiree ratio, which is affected by immigration. The current SS projections have not counted the spike in productivity growth recently.

"Oh dear, don't tell me you actually think the "trust fund" has any economic significance. Also, the 12% regressive tax is a problem *today*."
-Brian

I do think it has significance, and SS is a bargain for the ~12% tax (as Joe says, it enables more people to take chances).

"There is a pretty good chance that SS will remain in the black if nothing is done..."

Cool, Coach can predict the future. Let us know when you have some hot stock market tips, would you?
- Douglas Fletcher

Douglas, these are projections. This is what the whole thing is based on. I am not making them, the SS agency, the OMB and CPB are making them. There are these people called actuaries who make these projections. As far as hot stock market tips, as Russ R says above, the indicators are that stock prices are historically high and that in general returns should be lower in the future. Also, it appears to me that Google is priced on the high side.

[nmg]

joe,
Al Gore's lockbox solution - using the surplus to pay down the national debt, thereby freeing up debt capacity down the road - would be the most obvious answer.

You don't understand how the budget works. This is exaclty what's happening now. By obfuscating the deficit, the surplus is in effect being used to pay down the debt (assuming budget levels would remain constant, congress would have to borrow more if it weren't for the surplus, adding to the debt.)

You know, my toddler does that, too - pretends that a task I tell her to do is impossible, when she doesn't actually want it done.

The task is impossible Joe. Also, how can a so-called progressive support a regressive tax on the poor like FICA? How can you possibly defend FICA, especially a FICA that generates a surplus?

But making the program universal secures the futures of a lot more people - most importantly, those who, during their working lives, are above the poverty level but below the middle class.

You haven't explained how a safety net against poverty is somehow less security than a universal check for everyone.

In the universal case, poelpe who don't need the check don't get it. In the safety net case, only people who need the check get it. In both cases, povery is addressed. Why does the universal case "secure the future" better for those who end up in poverty?

I think you're grasping at straws, and it would help if you understood the budget better. You know my two year old often pretends not to understand in order to get his way.

nmg

[joe]

I don't believe you actually have a two year old.

"You don't understand how the budget works. This is exaclty what's happening now." No, it is not. Currently, the Social Security Suplus is rolled into the general fund. Under the lockbox plan, it would be used to pay off debt. Each year's deficit would be calculated as (Tax Receipts - General Fund Expenditures = Deficits) rather than as (Tax Receipts + Social Security Surplus - General Fund Expenditures = Deficits). This makes the true size of the non-Social Security deficit apparent, increasing pressure on the Congress and President to keep it low, by eliminating the obfuscation.

I don't support FICA in its current form. I'd like to see no cap, and a lower rate, to make it flat. Or better yet, actually make it progressive. I also would like to drop the employer share, and make up the revenue with a higher top income tax bracket, a progressive capital gains tax, and a robust inheretance tax, but let's stay on topic.

"You haven't explained how a safety net against poverty is somehow less security than a universal check for everyone." Because more people know that they'll be getting checks.

"In the universal case, poelpe who don't need the check don't get it. In the safety net case, only people who need the check get it." I don't accept your premise that nobody above the poverty rate "needs" the check.

"In both cases, povery is addressed. Why does the universal case "secure the future" better for those who end up in poverty?" It doesn't - it secures the future better for everyone else.

I understand the federal budget just fine, thanks, as I demonstrated above.

[nmg]

"It doesn't - it secures the future better for everyone else."

But how does this guaranteed check secure the future better for Bill Gates?

nmg

[nmg]

I don't accept your premise that nobody above the poverty rate "needs" the check.

Pick a level then. Surely we can agree that millionaires do not need the check. The argument for universal social security has to rest on more than just that you think people above povery "need" the check (which is an abuse of the word "need" but I'll let that go).

Do you support the current practice of taxing the check if your retirement income is above a certain threshold? That is in effect a means test. So the only quibble then is what level should we cut off the check.

nmg

[nmg]

Under the lockbox plan, it would be used to pay off debt. Each year's deficit would be calculated as (Tax Receipts - General Fund Expenditures = Deficits) rather than as (Tax Receipts + Social Security Surplus - General Fund Expenditures = Deficits). This makes the true size of the non-Social Security deficit apparent, increasing pressure on the Congress and President to keep it low, by eliminating the obfuscation.

So, as you clearly explain here, the lockbox plan is little more than a change to the reporting mechanism and has no affect on finances.

Again, raising FICA with a "lockbox" provision would be little more than a scam, because the current use of those extra funds would not change, merely the reporting of them.

Raising FICA only increases the magnitude of the scam, and does nothing at all in terms of funding future Social Security. The Fund does not represent real assets that can be drawn against. Raising the size of the fund via more FICA revenues would be a fraud of criminal proportions (it already is now in fact). Even Democrats like Moynihan have said as much.

And yes, I do have two small children under 4.

nmg