A Bit More On Obama & Entitlement "Reform"

by: David Sirota

Thu Jan 08, 2009 at 20:00


Per my earlier post on Obama's economic speeches of late, let me add one note about his declarations about Social Security and Medicare reform. Dean Baker doesn't think Obama's declaration on Social Security and Medicare automatically means he's looking to cut those programs. I agree that it doesn't automatically mean that - but I disagree with Dean that Obama's statement explicitly "does not indicate any intention to cut Social Security." Obama explicitly tied his goal of reducing the deficit to entitlement reform (not to tax increases, etc.) - which logically at least suggests the consideration of Social Security cuts to reducing the deficit. That is, unless someone can produce a magic pony and explain how alleviating the deficit mostly through Social Security "reform" (rather than tax increases) means not using money from Social Security to pay down the deficit (ie. a cut in Social Security).  

A pure, unadulterated optimist (which I sometimes can be) might say that it is possible Obama's reference to entitlement reform was a veiled reference to him fulfilling his campaign promise to raise the payroll tax cap so that it applies to income over $100,000. I don't think he was referring to that, considering his current focus on talking about tax cuts rather than tax increases (which is what the elimination of the payroll tax cap would be). But I'll concede that it is certainly possible, considering he promised to lift the cap when he ran for president.

The key here is making the progressive possibility (ie. Obama-led entitlement reform equaling the elimination of the payroll tax cap, not a benefit cut) into a reality. And as I said in the original post, that's going to require sustained movement pressure.
David Sirota :: A Bit More On Obama & Entitlement "Reform"

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A Bit More On Obama & Entitlement "Reform" | 45 comments
During the campaign (4.00 / 3)
Obama talked about raising the income cap for social security tax.  I think populists and progressives could get behind that kind of reform.
I bet (4.00 / 1)
That's what this is all about. he seems to want to stick to his campaign promise for the most part even if it roughs up some liberals (Tax credit for hire, middle class tax cuts etc).
[ Parent ]
There are tells everywhere. (4.00 / 1)
Enter stage right:

Senator Judd Gregg of New Hampshire, the senior Republican on the Budget Committee, and his House counterpart, Representative Paul D. Ryan of Wisconsin, said the extensive borrowing by the government could be a disaster if Congressional Democrats and the new Obama administration did not also work on long-term solutions including changes to Social Security and Medicare.

I don't think we need a road map.  This is why Social Security and entitlements are being added to his stimulus plan.  Quid pro quot.  

They're asking for another four years -- in a just world, they'd get 10 to 20. ~~ Dennis Kucinich  

[ Parent ]
Outrage! (0.00 / 0)
Add this to the numerous ignorant recent outrages of the blog sphere. crying foal on his year long proposal for middle class tax cuts as a never expected cave and his bipartisan rhetoric as a unexpected betrayal (really?).

http://change.gov/agenda/senio...

Barack Obama and Joe Biden are committed to ensuring Social Security is solvent and viable for the American people, now and in the future. Obama and Biden will be honest with the American people about the long-term solvency of Social Security and the ways we can address the shortfall. They will protect Social Security benefits for current and future beneficiaries alike, and they do not believe it is necessary or fair to hardworking seniors to raise the retirement age. Obama and Biden are strongly opposed to privatizing Social Security. As part of a bipartisan plan that would be phased in over many years, they will ask those making over $250,000 to contribute a bit more to Social Security to keep it sound. Obama does not support uncapping the full payroll tax 12.4 percent rate. Instead, he and Joe Biden are considering plans that will ask those making over $250,000 to pay in the range of 2 to 4 percent more in total (combined employer and employee).

What he said during the campaign is what he plans to do,Imagine that!.If some of you folks in blog sphere continue fake outrages like this and you will have no credibility left and will accelerate the stereotypes of the "angry left" in minds of many people. that's not a way to grow a movement, its a way to shrink it.

[ Parent ]
Trapped by the frame (0.00 / 0)
I track Social Security issues pretty closely (see my series at Angry Bear) and on my reading Obama was simply pivoting away from a question framed in terms of 'Entitlement Reform' to put Social Security and Medicare in the bigger financial context of stimulus and deficits.  That Social Security is in some sense 'on the table' does not mean that Obama is open for any kind of cuts or fundamental reshaping of the program.

I know from years of experience that you can't simply answer that kind of question by asserting 'Social Security 'crisis' is a phony, a piece of propaganda mostly patched together at a Cato organized conference in Summer of 1983'. Now that is in fact a pretty fair summation of the situation, and I can fully document the claim, but it simply doesn't accord with what people 'know' about Social Security. It just makes you look like a nut.

I don't know how versed Obama himself is on the real financials of Social Security, but even if he has read and re-read Baker and Weisbrot's Social Security: the Phony Crisis from cover to cover he might have answered the question in the same way even if he knew or suspected it would be spun the way it was.

When the Social Security question came up in the primary debate Hilary gave exactly the right answer given the actual state of affairs of the financials. And it killed her. While Obama at least got credit for having a plan. Because that is how the debate has been framed, and prying people out of that frame is more or less a retail operation. Because if it could have been done overnight Dean would have done it.

I put up a piece on my blog in 2006 and then reworked it for Angry Bear in May 2008. Calculating the Cost of Inactivity and showed that you can prove arithmetically that 'Nothing' was the perfect plan for Social Security over the last dozen years and that this held true even for years where there is a slight deterioration in the outlook (2006 & 2007 Reports). But when asked publicly what is your plan for Social Security 'Nothing' is still not the right answer, it just brands you as delusional in the eyes of the Village. Knowledge and opinion on Social Security have moved a long way since the early days of 'There is no crisis' in spring 2005. But we aren't there yet and Obama was still needing to navigate a mine field.

So with Dean I am willing to cut him a break here while maintaining an attitude of 'Trust, yet Verify'.

[ Parent ]
A goverment gets a deficit (4.00 / 1)
when they are spending more money then they are getting in revenues. There are two solutions to that, raising revenues or decreasing spending. Thus reducing the deficit could mean either or both of those options, it doesn't automatically mean one or the other.

Also Medicare Advantage would be another example of something that could be cut to save some money without cutting benefits,  it was mentioned in Daschle's confirmation hearing today and it sounding like that was something that has been discussed a lot.

We will have to see but I have a hard time Obama would make such an extremely dumb strategic move. If he makes a major move towards cutting SS benefits that would set up a huge fight with progressive groups and would probably kill any chances of getting UHC and major energy reform passed. I think it would go down in history as a move that killed Obama's presidency and I doubt he or his advisers would be dumb enough to try even if he wanted to (which I doubt).

John McCain: Beacuse lobbyists should have more power

Ummm... (4.00 / 1)
I think that it matters less whether or not Obama faces a fight from progressive groups than that he'll be DOA if he cuts Social Security.  But, it is behavior that only a Villager would make.  

Entitlement "reform" is the biggest red-herring of any "idea" I've heard about public policy in a decade or more.  Entitlement reform means cutting benefits, whether its cash transfers or insurance.  It also means cutting benefits from the consuming class, the broad group of people who spend the overwhelming majority of their income.  This is the basic underpinning of the consumer spending part of aggregate demand, a set of incomes you absolutely have to prop up with sound economic (fiscal) policy.  Whether it's Social Security, Medicare, or Medicaid, you just can't go cutting it.  You can change certain parts (and the Prescription Drug part D of Medicare is definitely the most obvious choice).  But the people advancing "entitlement reform" are not thinking about doing that.

Nor are they talking about increasing payroll taxes.  There are some really interesting plans out there that actually segment the tax burden well and introduce a little progressivity - although with a blunt axe - by cutting the overall tax rate but increasing the cap to gradually increase the amount of revenue coming in.

Which leads me to one other point: Social Security is not, but is structured like, an annuity.  The money is essentially segregated, and only through budgetary tricks is it treated like general Treasury funds.  

[ Parent ]
Capitulating is what they do. Ask Harry Reid. (0.00 / 0)
Obama is buying votes with our money and benefits.

I would like to see paycuts replace their raises.  I would like to see their benefits cut, and their pensions eliminated.  There have been efficiencies and new technologies since Madison and Jefferson so they should be able to work smarter and more efficiently.  We can cut the Senate to 50 and the House to a 100.  Let's add it all up and put it in the pot.  Every little bit helps in such "urgent and dire times".  

They're asking for another four years -- in a just world, they'd get 10 to 20. ~~ Dennis Kucinich  

[ Parent ]
you can count on this (0.00 / 0)
if the US govt ever runs into trouble rolling over its debt Social Security and Medicare Medicaid will be the first to go. And I mean go. Not only will they end the health programs and default on Social Security payments, they will take future social security revenues to service the US debt first, because it will not be considered a debt default by the bond market. Social Security is not US debt, as much as people want to think they are entitled to a "payback".

You want to save Social Security, then you need to stop this nonsense with the bailouts, and the Federal Reserve crapitative easing, and yes, the stimulus. All the risk is FIRST on the entitlement programs! If you are counting on social security or one of the medical programs near term (~5 years) then you should really pay attention to how the government is using its credit.

~* the * Will * to go on *~

Medicaid would essentially be unnecessary... (4.00 / 1)
...with a decent universal health care system...  much of Medicare could be pared back as well...  the key word is "decent" of course...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
I do agree that UHC could do this............ (0.00 / 0)
but how much will it cost? Will it cost much more than Medicare since it will cover many more people? It is all very complicated. It would seem that since we would all be in the same group that that would drive down costs. Plus there is no need for profit in this case. I hope they can come up with something at least "decent." I really think this would maybe HELP save the whole economy if done correctly.
[ Parent ]
Single payer, Medicare for all will save money (0.00 / 0)
[ Parent ]
yes i agree (4.00 / 1)
they should be able to cut down the bureaucratic expenses of health care but cutting out the insurance companies. the some sort of small tax might be required to cover the ongoing payouts, but the net cost would be less to everyone. but I wouldn't hold my breath on them cutting out the insurance companies. they could also just under cut them, but I wonder if that will even happen.

~* the * Will * to go on *~
[ Parent ]
I guess I can't count (0.00 / 0)
The Right has always known they cannot take on Social Security directly. It gained the name 'Third Rail of American Politics' for a reason. Instead their only hope was to shake the confidence in America and convince people that it was doomed in the long run. People tend to edge away on the bench when I tell them that this was a deliberate plan established by a specific set of people at a particular place and time. But it was.

The Fall 1983 issue of the Cato Journal was entirely devoted to Social Security: Continuing Crisis or Real Reform. Its contents were the collected papers given at a Cato organized conference in DC that summer. From the introduction

In order to consider the full range of reform proposals, the Cato Institute invited many of the nation's leading experts on Social Security to a two-day conference in Washington, D.C., June 6 and 7, 1983.
The edited papers from that conference, along with A. Haeworth Robertson's congressional testimony on the National Commission's recommendations for Social Security reform, constitute this issue of the Cato Journal. The papers cover four main areas: the political economy of the Social Security system; options for reforming the system; the economic effects of Social Security; and strategy for dealing with the implementation problems associated with dena tionalizing OASDI.
What was that strategy? Well in the TOC it is cited as 'Achieving Social Security Reform: a 'Leninist' Strategy' but the paper's authors Butler and Germanis title it more simply: Achieving a 'Leninist' Strategy It's worth a read because it explains precisely how the Right drained so much juice out of the 'Third Rail' in the years since that people could even think to put this on paper (or I guess pixels) "Social Security and Medicare Medicaid will be the first to go. And I mean go." That would have been considered crazy talk in 1983 and given a rational analysis of the actual financials at least of Social Security would still be crazy talk. And maybe will again. Once people realize they have basically been punked on this one. Tinkering with Social Security was, should still be, and maybe will prove to be political suicide for anyone who attempts it. From my lips to your favorite deity's ear.
[ Parent ]
I hope he does address entitlements (4.00 / 6)
They now account for around 50% of the budget, which after another 25% is spent on defense, leaves only around 25% for all non-defense discretionary spending.

Its about time someone gets serious about reforming the budget. That doesn't need to mean cutting benefits.

Universal health-care and lower health-care costs will bring down the costs of Medicaid and Medicare as well.

Likewise, raising the income cap for social security taxes, like Obama has suggested, will bring in a lot of funds and solidify the trust fund.

We shouldn't stop at entitlements though. I hope Obama is serious about cutting Pentagon waste and raising income taxes on the wealthy back to at least Clinton-Administration levels.

For far too long Democrats have been able to demonize any efforts to do anything with Entitlements while Republicans have been able to demonize any efforts to do anything with tax increases or the Pentagon budget. The result has been disastrous.

"Never separate the life you live from the words you speak" -Paul Wellstone

Entitlements... (0.00 / 0)
Universal healthcare would be another entitlement, simply expanding the regime that is Medicare and Medicaid.  

Which you might or might not have recognized, but I wasn't sure so I thought I'd point it out.

I agree with the rest of what you have here.  If we are going to have a budget that works, we need to start to think about budgets as setting the table for the entire economy, not just the balance sheet of the federal government.

We can handle - though we need - deficit spending right now.  Lots of deficit spending actually.  But we can only handle so much in the way of deficits and debt.  So while we should be deficit spending, we should be putting in place countercyclical fiscal policy by increasing the top marginal rates.  

This has the benefit not only of preventing massive deficits, but also takes money out the hands of the very wealthy.  Sure, income inequality is a huge problem of morality, but it's also a matter of economic policy.  Less money in the hands of the wealthy means less speculative, de-stabilizing investment, which doesn't have the same fiscal weight as other 'hard' investment or consumer spending.

Lifting the cap on FICA taxes is the same sort of deal.  Why do we abandon progressive taxation at $99k?  That's just ridiculous on so many levels.  Good fiscal policy here is good economic policy.  And it's counter to a lot of the conventional wisdom in the Beltway.  

Finally, we have to look at what government spending is done and not lump it all together.  Entitlements form the basis of the public social safety net (since the private social safety net has been eviscerated with the shredding of the social contract between business and labor).  Discretionary spending is the fiscal component of driving aggregate demand.  Military spending is about providing the public good of national defense.  But not all discretionary spending - which includes pure expenditures and 'tax expenditures - and military spending is created equal.

That which fills the gap in public economic externalities and a public good like real defense is good.  That which does not, well, to be simple, that's bad.

[ Parent ]
Raising the Cap is a Huge Mistake (0.00 / 0)
Reasons:
1. Social Security does not need the money, and certainly not before 2017. Extra money going to the Trust Fund simply ends up back in General Fund via borrowing. If the Trust Fund is real the combination of current FICA rates plus its balance will pay full benefits until 2041 (SSA) or 2048 (CBO). If in some sense it isn't real then putting more nominal dollars into it now is just a form of backdoor tax on more well off wage workers and simply works as a tax deferral for capital (by delaying the date the Trust Funds need to be repaid).

2. A cap increase is only pseudo-progressive. Since FICA does not bear on gains from capital a cap increase simply hits the upper middle class and collects little to nothing from the upper 5%. But by effectively increasing the marginal rate on people earning wages over the new cap it serves to undercut tax increases on all  upper income people. It is a Trojan Horse whose  only effect is to block real tax progressivity.

3. It helps preserve the erroneous concept that Social Security is in any real sense in 'Crisis'. It isn't and going along with strategies that suggest the opposite simply feed into the 'Big Government is the Problem' narrative.

If Social Security ever has the Trust Funds go to depletion it simply would mean a cut back in a check scheduled to be 160% in real terms to that a similarly situated retiree gets today to only 125% of that check. And this not for at least 33 but more likely 40 years or more. If I was 25 again I would be a hell of a lot more worried about my kid not having health insurance than only getting a 25% better real check in 2049 than my grandfather gets in 2009.

A cap increase is the wrong solution to a non-problem. Far better would be a push to get us back closer to Reagan era top rates. Progressives have simply been led down the garden path here. Leave Social Security alone, it doesn't need this particular form of 'help' from its friends. Social Security should not even be on the priority list, still less near the top. Raise top marginal rates and fund SCHIPS en route to attaining UHC instead. THAT'S Change we can Believe in.

[ Parent ]
My thoughts about SS............ (0.00 / 0)
Anyone with a rudimentary understanding of mathematics must realize that with the Baby Boomers coming into retirement we will have to raise more revenue and decrease spending. Whether that means raising the retirement age gradually, reducing benefits for all gradually, or not giving any benefits to those wealthy enough to forgo them - something in addition to raising the cap will have to be done. My preferred method would be to generate a formula to determine those wealthy enough to live without Social Security. I would make it so everybody is evaluated every year so if someone retired relatively wealthy, but later needed help then they would still be eligible for benefits. To those on the right who say that everyone who pays in should get something back,  I offer one word - insurance. We all pay for it, but only those with claims get anything back. What you pay for is the piece of mind that IF something happens then you have some help. Without some similar type of action people in my generation (I am 43) and after will have no piece of mind at all.  
Means testing social security will be the end of SS... (4.00 / 2)
...it will make it into a welfare program, and we know what happens to welfare programs...  Instead of "welfare queens" we'd have "social security queens" "living off my taxes!!!"

The late Senator Patrick Moynihan repeatedly warned against this danger when he was alive... Social Security must not discriminate or it will encourage forces that will try to ensure its elimination.

Besides, there are very few people who can live without social security... not enough to get any meaningful savings from the program.

It's not on the right that says that people that pay in should get something back... that's the way FDR meant it to be...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
I do not disagree with.... (0.00 / 0)
the fact that this may give talking points to those who want to eliminate SS and/or medicare, but they are against what I stand for anyway. However, I am disappointed in your argument  in your first paragraph. I am 43 and I will forgo my SS if my 401k and pension are enough to support me - and it will help my child have a better future. I would sign a contract tonight stating such if it was possible. You have made many posts about bailing out the automakers, but you are not willing to bail those who need more than those who do not? Does not seem to jive with many of your other posts? I am a true socialist - welfare is just a word to me.  
[ Parent ]
It is unlikely that your 401K and pension... (0.00 / 0)
...will be enough, unless you are one of the lucky few who actually have a defined benefit pension plan and your company stays afloat for the next 30 years...

95% of people, at least, are going to need that SS money for retirement...  cutting out the 5% or less that don't need it won't save very much money at all.

The problem is, where will that cutoff be... Every time a cutoff is calculated for these kinds of programs, the number is designed so that you have people saying, "I make $1 more than the limit..."  

It's just a recipe for disaster... people pay into the system, a very regressive tax, in order to get something back... that was the original point of the program, and had it not been for a conservative supreme court, there would have been a separate account for people much like your pension or 401L.

It is not just, IMO to promise one thing and then deliver another...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
I am lucky... (0.00 / 0)
I work for the local phone company and do have at least a fighting chance that my pension (which is defined benefit) will exist well into my retirement. It may not, but I have a chance. Also, I took my 401k money and moved it out of stocks well over a year ago so I have lost nothing in the meltdown. I may, in fact, make a good amount of money if we can right the ship as I will buy back in at some point on the cheap. Your whole point is logical and maybe correct, but just wondering - do you buy the notion that just requiring people who make over $250,000 pay more SS tax will save the system? If it requires more what ideas do you think have merit?

It is not just, IMO to promise one thing and then deliver another...

I agree with this in general, but I have had discussions at work lately and many people my age or younger do not think they will get any SS. They really believe this. I have no idea for sure what will happen, but these individuals already think they were promised one thing and are going to get another. The conservative ones support the idea of being able to opt out of SS altogether. Boy would that be a disaster.

[ Parent ]
There already is a form of "means testing" for some Social Security payments (0.00 / 0)
I work with individuals with disabilities and those receiving Supplemental Security Insurance (SSI)/ Title 16, have their payments reduced dollar for dollar for unearned income (other forms of SSA, pensions, etc) and by roughly fifty cents for each dollar earned.

Those receiving Social Security Disability Insurance (SSDI)/ Title 2, have a maximum limit (officially Substantial Gainful Activity- SGA- currently $980/mth for non-blind individuals) which functions as an on/off switch for benefits: earn less and receive a full check, earn more and lose your benefits (its quite a bit more complicated, but that's the gist of it).

Now I don't work with elderly individuals but my understanding is that Title 2 is what they receive on retirement age.  The SGA is not too important as savings, 401k, etc don't count as earned income but as assets so most recipients are not likely to lose their benefits.

Thing is, Title 16 (SSI) does have asset limits: if a recipient has over $2000 in recognized assets at any time they are in danger of losing their benefits.  It would not be much of a stretch to extend asset limits to other forms of Social Security benefits.

Truth is, though, for the population I work with the asset limits, SGA and other factors do contribute to a perpetual government-induced poverty.  Even with all the work incentives, most people can't make it just on earned income at the point they lose their benefits.

And don't let me get started on the fact that Medicaid and Medicare are tied to Social Security benefits and so the loss of benefits payments leads to a loss of medical benefits on people that are still disabled!

[ Parent ]
What you are describing is not something... (0.00 / 0)
...I would wish upon the seniors of this country... It's bad enough disabled people are treated like second class citizens.  You just gave a great description why means testing SS is bad news...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
SSI is welfare, SS is insurance (0.00 / 0)
I certainly agree that the SSI program could use a substantial increase in funds . For that matter if we had a better system of income guarantees on a Social Democratic model we wouldn't have to screw around with eligibility requirements in quite the same way.

But in the world we are living in today we need to understand that while SS is ultimately paid for by the open group that paid for it, i.e. is not a real net transfer from the outside, SSI is paid for from the General Fund precisely to supplement income from those who don't earn enough. It seems cruel to rigidly apply asset and earnings limits to recipients. On the other hand you don't want to be giving need-based assistance to people who have hard assets or large amounts outside income sources sufficient to support themselves without it.

BTW this is precisely why we want to avoid means testing on Social Security, it risks turning SS into a model of SSI where instead of collecting paid for insurance you are begging bureaucrats to grant you eligibility.

[ Parent ]
Welfare is paid out with no contribution required...... (0.00 / 0)
so it is nothing like my idea. Those who receive benefits would still be those who paid in - just not all of them. So you think poor old people who paid in all their lives would be "welfare queens" just because rich people did not get anything? They paid in so it is not welfare.

"living off my taxes!!!"

Well, yes some people do end up living off of other people's taxes in a progressive society. If I do well enough to never need any help but pay lots of taxes, great. I have never needed unemployment in over 25 years of working, I have never needed medicaid, I have never needed welfare, etc. I don't hold any grudge because my taxes have paid those who did need any of these types of things. The working poor pay no taxes as they get everything back that was taken out, but I don't care that my taxes paid for their schools, roads, police, fire dept. etc.  

[ Parent ]
What I'm saying is that the enemies of SS... (0.00 / 0)
...including Bush, have all proposed means testing as a way to sour the public on the program.  There's nothing more discouraging than to pay into a system that is supposed to be there for you, then find out that you make $1 too much to get the benefit.  These are the kinds of things that make people into Republicans, and the right wingers know it, which is why they push it!

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
I completely agree with your post (0.00 / 0)
but what I was promoting was not giving payments to people to whom $1000 would not mean anything, much less the $1 you refer to. I am only talking about the wealthy - the same group for whom we are considering raising their taxes on SS to begin with. By the way, the poster that said this would not generate all that much money is correct. I am only talking about 5-10% of the population. This would not save the program at all, but it would help some and seems fair to me. In 2007 SS accounted for 21.5% of our national budget (http://www.publicagenda.org/charts/federal-budget-expenditures) and interest on the debt was 8.7%. That is 30% of the 2007 budget which was no where close to being a balanced budget to begin with. That 30% will be 50% in 20 years if we do not do something to curb the trend.  
[ Parent ]
The truly wealthy don't pay FICA to start with (4.00 / 1)
I am only talking about the wealthy - the same group for whom we are considering raising their taxes on SS to begin with.

If most or all your income derives from capital you don't necessarily pay into Social Security to start with and so don't draw much out, you can't means test a check that doesn't exist. In any event since maximum payouts are currently capped you are not talking a lot of money here, unless you lower the means test so that it hits the middle class.

Look I am all for progressive taxation. It is just that cap increases and means testing Social Security is the totally wrong way to get there.

[ Parent ]
this just isn't true (4.00 / 2)
If we average 3 percent economic growth, the system survives just fine with some minor tweaking.  There is also the fact that immigration occurs and ads more payers into the system.  Medicare is a mess, but Social Security is fine.  The entire idea of insolvency was pushed by people who wanted to get their hands on the money.
[ Parent ]
Well I was actually thinking... (0.00 / 0)
about saving both medicare and SS. I did not make that clear but I think of them together as they both help the elderly. Also, you are assuming that the deficit will not eat any of the funds. If this is true the deficit will eventually kill us all by itself. Once our interest payments are too large our economy will collapse, we will default on our bonds and nobody  will lend us anymore money.
[ Parent ]
If we average 3 percent economic growth (0.00 / 0)
HAHAHAHAHAHA!!!!

Yer in a damn depression, didn't you notice?! and you're pulling statistics from before the Fed Govt was under water by an additional 7 trillion ( pulling 11T total, will push 12T after the stimulus ). You think all that money is coming back when we "cash in" on those AIG and GM warrants? Everyone gets a Pony out of this?! If social security is your future you might want to consider how the financial landscape has changed.

~* the * Will * to go on *~

[ Parent ]
You might want to detail exactly (0.00 / 0)
how a potential crashing dollar and exit by the Chinese from US denominated assets actually effects Social Security finances going forward. The answer might surprise you.

Hint a high interest rate benefits the bottom line of Social Security even as that same bottom line suffers by any negative effects on real wage, employment and inflation. But the argument that $12 trillion in public debt in and of itself is a negative for Social Security could use some examination. The answer is not as straightforward as you would have it be.

[ Parent ]
Anyone With A Rudimentary Knowledge of History Knows That This Is Bullshit! (4.00 / 4)
Anyone with a rudimentary understanding of mathematics must realize that with the Baby Boomers coming into retirement we will have to raise more revenue and decrease spending.

In 1983, a grand bargain was struck, and SS taxes were raised to create a trust fund, specifically to cover the excess cost the Boomers' retirement.  We have been raising more revenue for the past 25 years.  Where have you been?  In a rightwing echo chamber???

The only problem that exists is that these funds have been raided for "other priorities" such as the Bush tax cuts, the war in Iraq, etc., etc., etc.

Required reading: Social Security: The Phony Crisis by Dean Baker and Marc Weisbrot.

Supplemental reading: Social Security and Its Enemies: The Case for America's Most Efficient Insurance Program by Max J. Skidmore.

Get educated!  Get armed!

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
If................ (0.00 / 0)
these funds have been raided for "other priorities" such as the Bush tax cuts, the war in Iraq, etc., etc., etc.

Then

don't we now have to pay that back?

I do not disagree that these "other priorities" were completely misguided at best, but never the less they have already taken place. We now have to work with the hand we have been dealt. I do not care about history - what do our books look like today? How can we correct them?

[ Parent ]
Also...... (0.00 / 0)
your required reading was published in 1999. This was before Bush added over 4 trillion to the national debt. Not to mention that does not include this year or next. We are looking at $12 trillion by 2011. This does factor into the equation of what we do in the future.
[ Parent ]
math (0.00 / 0)
the left is still working on it. the most ideologically passionate not putting all the pieces together... yet. they've taken a vacation from the numbers portion of reality for a while since they want a form of 'justice' for the banks getting trillions of dollars. this is manifesting itself as stimulus packages, tax cuts, increases in entitlements, bailouts for heavily unionized segments of the economy. it hasn't dawned on them yet that a) they will ultimately have to pay for it somehow, and b) the great conceit of the TARP was that the bankers got the cash first, before any threat to the US T-bill market.

btw - we're looking at 12 Trillion by 2010, maybe this year. Who knows what money the US will throw around if the S&P goes below 600.

~* the * Will * to go on *~

[ Parent ]
Clown (0.00 / 0)
they've taken a vacation from the numbers portion of reality for a while since they want a form of 'justice' for the banks getting trillions of dollars

Dude you clearly never visited the numbers portion of reality as it relates to Social Security. Save your snark until you show you have actually done your damn homework. Because this lefty already has. And doesn't really appreciate some condescending ignoramus lording his assumed knowledge which in the event is backed by nothing.
2008 Social Security Report: List of Tables

[ Parent ]
1999 turned into 2009 (0.00 / 0)
But Dean's argument still holds up. If you examine the numbers as they have been reported from then until now. As he has. (And as I have). As to this:
your required reading was published in 1999. This was before Bush added over 4 trillion to the national debt. Not to mention that does not include this year or next. We are looking at $12 trillion by 2011. This does factor into the equation of what we do in the future.

Debt does not in and of itself adversely effect Social Security. It potentially could have a crowding out effect if the bond market simply collapsed but that would be relatively minor, mainly because Social Security is not dependent on the Trust Fund to meet current cost and under current projections won't be until 2017. At which point the actual dollar figures need to bridge the gap between tax revenue and cost start out very small (in relative terms) at about $20 bn and don't rise to significant levels until about 2029 or so. You could profitably consult my Angry Bear post on this Soc Sec XXXVIII: Financing Shortfall. That is if you wanted to deploy actual numbers instead of half-formed concepts derived ultimately from Right talking points.

Social Security is currently suffering much more from 7.2% unemployment than it ever would from effects of stimulus debt going forward. Like many people you are simply overestimating the role of the Trust Fund balances. I won't go as far as my friend Coberly and say that it wouldn't matter if the Trust Fund disappeared tomorrow, but he is far more right than wrong in saying so. Mainly because he has studied the actual numbers and done the math. Which would be good advice for anyone venturing to comment on this topic.

[ Parent ]
Paul in general I got your back on this one (0.00 / 0)
But this is just wrong and ultimately is just another form of the 'Phony IOU' argument.
The only problem that exists is that these funds have been raided for "other priorities" such as the Bush tax cuts,
There has been no raid, no theft, no looting, no diversion. Not yet anyway. If we accept that the Trust Fund is real and so backed by Full Faith and Credit of the United States Government then every excess penny ever collected in sitting right where it is supposed to be, parked in interest paying U.S. Treasuries to the current tune of about $2.3 trillion.

Now if you accept the argument that these bonds are in some sense 'phony' and so can or will be abrogated at some point in the future it would be fair to talk about 'raiding'. But as of now no responsible economist or policy maker has gone on the record suggesting that is a possible real world outcome. Certainly people like Bush hint at such with talk about 'cabinet full of IOUs' or 'bankrupt' but as of today no one at any point has actually spent one dollar of Social Security taxes that was not properly accounted for as borrowing and so credited to the Trust Funds.

The people who who originally promulgated the raid myth cynically want you to believe the heist they plan for the future already happened in the past. Well it didn't, as long as progressives don't buy into the bullshit 'phony IOU' message. The country as a whole owes the very large subset of wage workers within it a collective $2.3 trillion above and beyond what we are paying in taxes. If workers don't lose their nerve they will collect that money from General Fund revenues that are in at least good part collected from upper income holders of capital. Obviously capital  will try to pull a bait and switch and shirk their share of the payback, but that is where you and I come in.

Keep an eye on the bastards and keep educating the public and we should be able to pull this one out.

[ Parent ]
'Rudimentary my dear Webb-son' 'Rudimentary' (0.00 / 0)
Anyone with a rudimentary understanding of mathematics must realize that with the Baby Boomers coming into retirement we will have to raise more revenue and decrease spending.

Color me innumerate I guess. Because when I read the Social Security Reports (as I have annually since 1997) I always understood that the demographics of the Boomers were already taken into account. For example I could examine the following tables from the 2008 Report.
Table V.A2.-Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1950-2085 and Table V.A1.-Principal Demographic Assumptions, Calendar Years 1940-2085 and see the projected outcomes and assumptions of three different demographic models, all of which take Boomers into full account. In turn these numbers feed into the revenue/cost models Table VI.F2.-Estimated OASDI and HI Annual Income Rates, Cost Rates, and Balances, Calendar Years 2008-85 [As a percentage of taxable payroll]
As it happens a priori application of logic and rudimentary mathematics doesn't overcome the fact that the demographics have already been factored in.

There seems to be an odd assumption that somehow 'Looming Boomer Retirement' is a variable that is going to gobsmack the actuaries at SSA's Office of the Chief Actuary when instead modeling the effects of that are pretty much all they do.

We may at some point need to raise revenues or cut scheduled benefits. But an examination of the actual data shows that decision can safely (using the guidelines for actuarial balance of SSA itself) be delayed until about 2029 and depending on how the numbers actually perform over the next ten years for some time after that.

[ Parent ]
Somerby (4.00 / 1)
exactly (4.00 / 1)
I would prepare for four years of this: Obama keeping his actual plans close to the vest, and reporters forced to wildly extrapolate something out of nothing in order to make news.

Until the words "I'm cutting social security benefits" come out of Obama's mouth, I'm not going to get too concerned. OTOH, he did explicity say he would raise the payroll tax cap, so I remain optimistic.

[ Parent ]
David, I think you don't get the nerve of (0.00 / 0)
what Dean Baker is arguing in the piece you link to.

Dean Baker's comment essentially excuses Obama on the possibility that Obama misspoke, and that he didn't really have in mind to bring up SS, but only Medicare, even though Obama used the word "entitlements", which, of course, comprehends both Medicare and SS.

That's really the basic argument Baker is making.

If, in fact, Obama did indeed have in mind both Medicare and SS, then there's no real way to escape the conclusion that Obama was talking about making potential cuts in SS. Baker seems pretty much to concede this point.

And then Baker mentions that it is pretty imperative for Obama to "clarify" that he meant something different from what he appeared to be saying literally, given the prominence of the NY Times story.

The thing is, that story has been out for over a day, right? Where's the quick response if Obama didn't really mean to suggest SS was going to be involved? Will he even be believed that he didn't have that in mind at first if the "correction" comes so slowly, and only after the suggestion hits major criticism?

no, there's another possibility ... (0.00 / 0)
... which is the one Obama has alluded to in the past. For Social Security, he could raise the FICA income cap.  Many other countries don't consider their equivalent to Social Security to have a separate "trust fund": doing it this way lets us make FICA a regressive tax, paid by the poor and middle class and not by the wealthy (except on a small fraction of their income).

With Medicare, there are ways to save money by fixing Medicare part D (the drug benefit).  Cut out the HMOs, and get rid of the language banning the feds from negotiating with the government for a better price.

At this point, Obama has proposed no legislation.  It's better for progressives to engage with him (oh, you want to save money?  Here are progressive ways to do it) than to automatically assume he's going to sell us down the river.  And yes, scream like hell if he actually does do something awful.  But right now, everyone's just speculating.

[ Parent ]
A Bit More On Obama & Entitlement "Reform" | 45 comments
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