Saving Social Security, Episode Three: Policy Warrior

Worried about the viability of Social Security? Unless you're already collecting it, you should be!

Follow the animated adventures of Sonny, exactly the sort of youth who is set to get screwed by a system designed during The Great Depression, when workers were plenty and retirees rare.

In Epsiode 3, "Policy Warrior," Sonny, John McCain, and Barack Obama compete in various game show contest and learn that a few tweaks aren't going to save anybody's retirement account.

Created by Lineplot Productions.

Click below to watch. Go here for embed code.

Episode 2 of the series Saving Social Security is titled "Boom Baby Boom" and explains the demographic death grip that will force major cuts in benefits or massive increases in taxes (or both) to pay for the nation's mandatory savings plan.

Watch episode 1, "Pimp My Walker," by clicking below:

Comments

[JMR]

Like the rest of the financial-clusterfuck news I've commented on today, I'm sure this has no implications whatsoever for future inflation...

[domoarrigato]

buy TIPS - 3% + inflation. you will fare better than stocks for the next 10 years.

[SIV]

domo,

Why do you think it's inflation?
You are going to get so screwed on TIPS with deflation. I thought they were 0 + CPI.

[JP]

I don't think these cartoons are sufficiently hideous.

[domoarrigato]

SIV,

I'm sooo glad you asked. TIPS are really cheap right now because everyone is afraid of deflation. They are actually 3% + inflation right now.

You can lose money if there is deflation, but deflation is a very quickly passing phenomenon - unless this is 90's japan. Once the government actually starts selling the 700 billion in treasuries they need to market to get the cash for the TARP, interest rates are going to spike. This will induce the fed to monetize that debt. People are going to start to get the joke. Inflation is the only possible outcome other than decades of politically unpalatable stagnant growth.

[TallDave]

Did FDR not have access to actuarial tables, or did he just hate his grandkids?

[SIV]

Interesting domo,

TIPS might be a good hedge for me.I stil think the deflation is likely to persist.I'm also concerned with how the BLS decides to measure inflation/deflation.Would excise taxes or a VAT count as part of a price?
If deflation does continue I'll expect price floors to be established through taxation if necessary.Especially with fuel.

[TallDave]

domo,

In Freedom to Choose, Friedman notes that in every case money supply increased, inflation increased with it.

This has not been true in the 1990-2005 period though. There's a theory that this was because global trade and cumulative productivity enhancements are pushing down the costs of most things. This might be why we saw so much recent inflation in equities and real estate relative to CPI goods.

[TallDave]

*Free to Choose

[domoarrigato]

SIV,

Having traded TIPS next to a dyed in the wool BLS conspiracy tin-foil hat nutcase (who I'm pretty sure doesn't read this site...) I've looked really really hard at the BLS methodology. CPI does what it's supposed to do pretty accurately with few quibbles. The component called homeowners equivilent rent is one notable exception which I won't get into, but it is wrong in a way that will make CPI actually overstate inflation in a down housing market.

Price floors by taxation? hmmm, interesting idea, but I have to say I doubt that. Prices are not calculated with tax, btw, but price floors via higher sales tax would be state by state, and have never been proposed by anyone credible that I know of as a sure for deflation. They only cure that does matter is exactly what they are doing - thrown money at the problem by the forkload. And that leads inevitably to inflation down the road.

[domoarrigato]

TallDave,

You are certainly right on your figures. I think money supply as it is currently defined means a lot less than supply of credit and cumulative balance sheet. We saw a bubble in wealth, and huge price increases in fixed asset prices that dont feed into inflation because of that same wierd homeowners equiv rent thing that I mentioned - it understates on the upswing, opposite of the other situation.

You are dead on that global productivity and cheap imports are what kept it down though. I think that effect is likely to go away:
1) as china starts to consume
2) as china and japan become less willing to reinvest their cumulative current account surplus in US debt. can you blame them?
The one bubble that did feed in, was food and energy which is why "real" cpi (which TIPS use) is 5% even though the fed's preferred measure of core (preferred because it's lower) is half that.

[SIV]

domo,

Aren't cigarette excise tax increases factored into CPI as an increase in price?
What about fuel excise tax increases?

[domoarrigato]

SIV - I stand corrected - you are correct. My hat, sir.

[Dave T]

I'm not sure that portraying old people as thugs shaking us down for money is really going to sell the message, regardless of how true it is...

[Man from Uncle]

Can the stills from these things just once not be a closeup of one of the stupid looking characters? I hate looking at these pictures.

[Ian]

Dave T as a young social security paying minor it worked for me but I already disliked social security, sure it wont convince old people but no one can convince them, we need to focus on young people.

I have a question on the fact at the end of the video it said that to not cut benefits we need to raise the payrol tax by 34 percent, so from around 12 to around 16 percent which i think a lot of baby boomers would find acceptable. I guess what i want to know is do they mean increase TO or increase BY?

I'll show it to my civics teacher he said it would be easy to "tweak" social security

[Martin Brock]

It means By, but I don't find this increase acceptable. The whole idea of raising the payroll tax to "repay the trust fund" is incredibly Orwellian. It's like I've "saved" by lending to myself, so I later "return" my "savings" by somehow repaying myself.

The whole idea of a "trust fund" presumes that we'll tax productive means other than labor to "repay the fund", so we'll raise marginal income taxes for this purpose. That was the plan all along. I'm not saying it's a good plan, but it's the plan.

As a start to repealing Social Security outright and replacing it with the yield of genuine investment (not TIPS and other State Capitalist benefit programs), we should target Social Security benefits at parents who raised productive children while means testing other benefits.

Ultimately, we should replace Social Security benefits with payments directly from children to their own supportive parents, secured by some realistic program of life and disability insurance for the children. People with fewer children then may accumulate more capital other than children, secured to some extent by diversification, while people with more children accumulate less of this other capital.

Social Security is a statutory benefit program dressed up superficially to resemble the accumulation of entitlement to rents on real productive means when, in fact, the program is much more like the support of aging parents by their children, the actual custom it largely replaced. Most advocates of "reform" only want to replace Social Security with another statutory benefit program resembling the accumulation of entitlement to real means of production. That's why the Bush reform proposal included the promise of TIPS and similar "investments" for the "private accounts".

The support of aging parents by their children really does return the yield of a genuine investment while the interest on TIPS really does not. TIPS are the purest form of rent seeking I can imagine, and a dizzying variety of what we now label "capital" is little different. Until the ideological Capitalists acknowledge this fact, we'll never address the problem.

Children are real means of production requiring huge investments, and according to Ludwig von Mises and Julian Simon, Human Action is The Ultimate Resource. Denying this reality doesn't change it, even when the deniers label themselves "Capitalists".