Social Security...not really doomed?

[jesse_ewiak 0]

From washingtonmonthly.com

 

SOCIAL SECURITY DOOM MONGERING, PART 2....A fellow named Silent E liked my Social Security chart from last night, but suggested that instead of charting the calendar year of projected Social Security doom, I should instead chart the number of years remaining until doomsday.

 

Funny he should ask. The Political Animal graphics team had a similar thought last night, but I foolishly ignored them. So Silent E, this chart's for you: a year-by-year rundown of how much time is left until the Social Security trustees predict Social Security doom. Remarkably, no matter how much time goes by, we never seem to actually get any closer.

 

There's a very serious point to be made here. Projections of Social Security solvency are based on projections of future economic growth, and the Social Security trustees have been systematically too pessimistic about the economy for the past decade. What's more, there are good reasons to think that they're probably still being overly pessimistic.

 

If that's the case, then it's probable that the system as a whole is solvent forever and that we won't even have to touch the trust fund for another 40 years — if then. And frankly, a "crisis" that's at least 40 years off and might very well never occur at all just isn't something we should be spending a lot of time on right now. Predicting economic growth within a few tenths of a point 40 years in the future is a mug's game, and trying to justify radical changes on such speculation is foolish.

 

Social Security is safer without private accounts than it is with them. We should leave it alone and convene again in ten years to see how things are going.

[kkktookmybabyaway 0]

And if things get worse 10 years from now those same people would be bitching about how we should have done something earlier.

 

Paul Harvey always bitches about how everyone says Social Security is going to go bankrupt, and a few days ago I heard Nancy Pelousi tell a group of 25-year olds that SS will be good for another 40 years -- of course, that doesn't mean jack for these kids because by that time they'll be 65...

[Guest Salacious Crumb]

The point is the system is going to break at some point and we need to fix it before there's a problem. It's better to get the problem solved now and anyone who's in favor of not addressing the issue now is an idiot.

[jesse_ewiak 0]

In the last ten years, the 'doom' date has moved into the future three years. And that's basically with using the projection of the US economy being slightly lower than average for the next forty years.

 

Medicare is the biggie, it's estimated in about 2050, it'll take up 9.5% of the GDP instead of the current 2.5%. By the same token, GDP used for SS will move from 2.5% to 4.5%. But, Social Security provides Republicans with a chance to introduce a conservative nostrum that they've long pined for: private accounts.

 

We don't need them, and they won't actually do anything to solve whatever problems Social Security might have, but an invented crisis is a good excuse to introduce them anyway. Conversely, there's no way to plausibly pretend that private accounts will save Medicare, so why bother?

 

After all, let's say we go with private accounts. How can there be an economy where...

 

a). Social Security goes broke but...

b). investment returns are at 7% which is the basic rate the stock market has risen overall.

 

 

Also, the system isn't going to break...

 

The below is the Social Security Trustee 75-year financial estimate. To do this, they make estimates of population growth, life expectancy, economic performance, and so forth, and then add them all up into an overall estimate of long-term solvency. In fact, they make three estimates and the one you hear about in the news is the middle one. In that projection, Social Security starts running a deficit in 2042.

 

 

The assumptions in the middle projection from 2015 forward are the following:

 

Labor force growth: 0.2% per year.

Productivity growth: 1.6% per year.

Average hours worked: no change.

 

Equals: GDP growth: 1.8% per year.

 

This growth is lower than normal, but that's because GDP growth = population growth + productivity growth. Since population growth is slowing down, so will GDP growth.

 

Still, what if you assume that things will be a little more robust than this? After all, this is America, land of engenuity. If you project GDP growth of around 2.6% per year, you end up with Estimate I, and in that scenario Social Security never runs out of money. In fact, if you project GDP growth just a few tenths higher than 1.8%, Social Security stays solvent for the next century.

 

In other words, if GDP growth averages, say, 2.3% over the next 75 years, Social Security is in good shape and we don't have to do anything.

 

So here's the puzzler: for private accounts to be worthwhile, they need to have long-term annual returns of at least 5%, and 6-7% is the number most privitixation advocates use. But are there any plausible scenarios in which long-term real GDP growth is less than 2% but long-term real returns (capital gains plus dividends) on stock portfolios are well over 5%?

[Guest Salacious Crumb]

So I guess your the type that drives his car around another 6 months after the breaks start grinding and then whine when you have to pay 4x as much to get things fixed.

 

That's basically what social secruity is. You can either pay now and fix the problem before it happens or pay even more in the future because you ignored the problem. I would rather invest my SS because I know I'll get a lot more out of it that way than having to basically hope I luck out and the system is still there 42 years from now.

 

Hell, we drastically and expensively change things overnight for environmental stuff that has far weaker evidence to support it than SS reform.

[lomasmoney 0]

My take on it is why should someone 18-25 whom has a very likely chance of not recieving social security/ medicaid in its current chance be forced to pay into those programs. Why should i get 38.00 or whatever it is taken out of every check to go to a program that i am not sure i will have access to.

[NoCalMike 0]

How about the government stops "borrowing" money from social security everytime there is a surplus?? Where do you think Bush took money from in order to afford his tax cut? Also it seems to be a little known fact these days that Social Security is NOT a retirement fund. It is an insurance safety net, meant for a long list of things, not exclusively retirement. Also the fact that they only tax up to $87,000 of income for the social security tax is fucking bullshit. It should not cut off period. If you are a part of this society, using it's resources and citizens as employees to get fat off the land, then you goddamn better pay your taxes.

[NoCalMike 0]

My take on it is why should someone 18-25 whom has a very likely chance of not recieving social security/ medicaid in its current chance be forced to pay into those programs. Why should i get 38.00 or whatever it is taken out of every check to go to a program that i am not sure i will have access to.

Lets say you get injured next week at work and cannot work again ever? A little program called Social Security pays you for the rest of your life. That is why you pay into it.

[NoCalMike 0]

So I guess your the type that drives his car around another 6 months after the breaks start grinding and then whine when you have to pay 4x as much to get things fixed.

 

That's basically what social secruity is. You can either pay now and fix the problem before it happens or pay even more in the future because you ignored the problem. I would rather invest my SS because I know I'll get a lot more out of it that way than having to basically hope I luck out and the system is still there 42 years from now.

 

Hell, we drastically and expensively change things overnight for environmental stuff that has far weaker evidence to support it than SS reform.

As opposed to hoping some big company that doesn't lie to your face and tell you your money is just fine with them, and they sell off taxes and laugh at you. Face it, Social Security has always been there thus far, and the closest we have every come to it not being there when it counted was fabrications and scare tactics by the corporate and wealthy elite that just want to get out of paying taxes for something else. Social Security is there for a reason, and it is a good and noble reason.

[kkktookmybabyaway 0]

How about the government stops "borrowing" money from social security everytime there is a surplus??

 

I'd be all for SS tax money going into it's own "account." Every time I hear the words "Social Security Trust Fund," I want to vomit.

 

And too bad its reason has been perverted over the years. Back in the day it was nothing more than a supplement for people who outlived the current age expectancy. If anything, the age requirement to collect SS should be jacked up at least 5-10 years. Too bad it will never happen...

[Styles 0]

My take on it is why should someone 18-25 whom has a very likely chance of not recieving social security/ medicaid in its current chance be forced to pay into those programs. Why should i get 38.00 or whatever it is taken out of every check to go to a program that i am not sure i will have access to.

Because that money pays for the old people of today's SS, and if a politician were to even suggest altering that, then the largest voting demographic would not vote for that politician.

[Jobber of the Week 0]

Social Security isn't doomed. If the economy is going to be as good as the Republicans are telling us it is, then we should be able to fund Social Security for at lesat fourty years. Gee, I wonder why the people who tell us the economy is going to be getting so strong are concerned about social security?

 

Reagan solved this over twenty years ago when he appointed Greenspan to set up the trust fund. This trust fund accumulates a surplus that pays for social security. Unfortunately, Dubya has given Donald Trump and friends a tax cut, while going into costly wars with manufactured motives and throwing billions at projects like missile defense shields.

 

 

When Bush tells you that Social Security can't stand on it's own legs, he's covering his ass for the fact that he drained the funds.

[NoCalMike 0]

Social Security isn't doomed. If the economy is going to be as good as the Republicans are telling us it is, then we should be able to fund Social Security for at lesat fourty years. Gee, I wonder why the people who tell us the economy is going to be getting so strong are concerned about social security?

 

Reagan solved this over twenty years ago when he appointed Greenspan to set up the trust fund. This trust fund accumulates a surplus that pays for social security. Unfortunately, Dubya has given Donald Trump and friends a tax cut, while going into costly wars with manufactured motives and throwing billions at projects like missile defense shields.

 

 

When Bush tells you that Social Security can't stand on it's own legs, he's covering his ass for the fact that he drained the funds.

I used to think our society as a whole was smart enough to realize all of this jobber, but the way most people have been easily deceived over the past few years, I really fear that all it is going to take is a bunch of soundbytes by Bush and company for the american masses to sway. I mean Bush is already planting the seeds by saying phrases like, "this social security problem" when there clearly is no problem besides the government stealing from social security funds for their own agenda like say....tax cuts?

 

The problem is a stance like "who can take care of your money better, you or the government" is so simplistic and neanderthal in nature that it pretty much clicks with your average joe who doesn't pay attention to politics. I am not talking necessarily about members of the left or right, Bush supporters, Bush haters etc.....just your average joe that doesn't follow politics and like a lot of people frowns upon taxes just for the sake of hating paying taxes.

 

Honestly, I think Bush will ultimately fail in his attempt to privatize social security, thus fucking over pretty much everyone but the wealthy elite, but I have this depressing feeling he will get the agenda pushed far enough that it will be a lingering battle in the future...

[Guest sek69]

Something to think about:

 

WASHINGTON (CNN) - As part of its effort to reform Social Security, the White House is seriously considering changing the way benefits are calculated, a shift that could mean lower benefits for future retirees.

 

Administration officials insist, however, President Bush has not made a decision to embrace the approach and the first White House priority is a massive public relations campaign this month to raise awareness of their version of the system's problems.

 

As reported in the Washington Post Tuesday, the reform idea would be to use inflation rates instead of workers' wages to calculate Social Security benefits.

 

The approach, known as "price indexing," was advocated by the president's Social Security Commission in 2001, a panel Bush has cited for having recommendations he generally supports.

 

Though the president has started to speak out about his belief Social Security must be reformed, and has advocated private accounts for younger workers, he has, so far, been vague about how he would pay for that as well as other specifics.

 

He has promised, however, that those at or nearing retirement would not see their benefits cut.

 

White House spokesman Scott McClellan confirmed changing the formula for benefits is one option administration officials have been discussion with GOP members of Congress. He refused, however, to define what Bush means when he talks about not touching benefits for those "near" retirement.

 

Instead, he repeated the president's oft-used phrase that he doesn't want to "negotiate with himself" by discussing specifics in public.

 

Changing the way benefits are calculated could cut benefits significantly for future Social Security recipients.

 

Republican support

 

It is an idea that has support among senior Republicans on Capitol Hill.

 

Senate Majority Leader Bill Frist, R-Tenn., told CNN it is an idea he "would strongly support, that we adjust benefits according to price increases and not wages."

 

The Republican leader cited this as a way to help pay for private accounts for younger workers, which he believes would yield more money in the end.

 

"We need to remember that you can have access to the personal accounts, which will grow much faster than either prices or wages," Frist said.

 

One Republican lawmaker with close ties to the White House acknowledged to CNN that although there is much concern in Congress about the political consequences of advocating any benefit cuts, it is the leading approach among options to pay for Bush's reform ideas.

 

"The only other way to pay for reform, for private accounts, is borrowing, and for those in our party concerned about the deficit, that's not the way to go," the GOP lawmaker told CNN.

 

Although the president has not yet offered a private account proposal, some rough estimates say the transition cost could be between $1 trillion and $2 trillion.

 

Administration officials said that while price indexing is something the White House is seriously considering, the president has not decided yet to push it.

 

White House officials are planning a large scale public relations campaign, starting this month, to sell the American people on the idea that Social Security is a program that is in crisis and needs to be fixed.

 

Administration sources said they intend to follow models used during the presidential campaign using the Internet, local and regional media and other non-traditional sources in addition to speeches from the president and his aides to lay out problems in the system.

 

"We want to spark a national debate about the problem before we really embrace solutions," said an administration official.

 

Democrats' worries

 

Many Democrats have said they think the White House is overstating the crisis in order to sell a long-standing GOP proposal, diverting some of the system into the private sector.

 

They note that the Social Security Trustees estimate the system may go into the red in little more than a decade, but it won't deplete its reserves until 2042, and even then recipients would still get 73 percent of the current benefit level.

 

A separate Congressional Budget Office analysis puts the date for the depletion of reserves at 2052, and says payouts after that would be 81 percent of the promised level. 

 

 

So basically they want to cut benefits, and they are gonna run an ad campaign that will end up convincing tons of people that it's a good idea to give old people less money.

[NoCalMike 0]

That article ignores the goddamn fucking FACT that Social Security is not a retirement fund though, it is just ONE OF THE THINGS social security helps out with.

 

Imagine someone with Bush's wealth and bank account having "worries" about Social Security, it is highly comical. The only thing he seems worried about is trying to absolve his wealthy buddies from having to contribute anything back into society.

[Jobber of the Week 0]

To bust out the old train analogy, social security is the third rail of politics.

 

If they really want to touch the third rail just when all the baby boomers are reaching retirement, nothing we can do about that. The aftershock could be felt for a while. Those boomers that felt that they had the rug pulled out of them just when they reached retirement age might not be aching to vote Republican.

[Crimson Platypus 0]

I just want the money that I put into it to come back to me. No one else. As it stands I am out an extra x dollars every other week that I will NEVER see again, and probably NEVER benefit from. Bullshit.

[lomasmoney 0]

I just want the money that I put into it to come back to me. No one else. As it stands I am out an extra x dollars every other week that I will NEVER see again, and probably NEVER benefit from. Bullshit.

That's my main deal with Social Security as it pertains to me, I don't mind putting in money in taxes and whatnot to help the common good right now, but I want a guarantee or something that I will recieve similar benefits when my time tfor social security comes.

[The Czech Republic 0]

As opposed to hoping some big company that doesn't lie to your face and tell you your money is just fine with them, and they sell off taxes and laugh at you.

I'm worried about the big government that will lie to my face and tell me my money is just fine with them, then laugh at me.

 

Social Security is there for a reason, and it is a good and noble reason.

Good, yes, but let's not kid ourselves into calling it noble.

[Guest Agent of Oblivion]

I'm just going to avoid this whole hornets nest and die young.

[Crimson Platypus 0]

I'm just going to avoid this whole hornets nest and die young.

Dibs on your SS money!

 

 

I called it first!!

[Guest goodhelmet]

NoCal Mike is right on when he states that Social Security is not only for the elderly.

 

Social Security also helps the following people...

 

1. The Disabled

2. Children

3. The Unemployed

 

The Republicans seem to leave that part out when calling for the head of this very liberal and worthwhile program.

 

Shit, if you have a problem with Social Security then at least know what it entails..

 

http://www.ssa.gov/OP_Home/ssact/comp-toc.htm

[NoCalMike 0]

Crimson and Lomas. You two are missing the point of Social Security. Think of it like a social security net aka INSURANCE, since that is exactly what it is. It is not a trust fund for YOU. Just like Insurance, you pay in, and keep paying in, and if you are fortunate, you will not need it until you retire if even then. Now your best friend that gets crippled in a car accident will probably need it because he can never work again, and that is what social security is for, or at least one of the things it is for. People seemed utterly confused about how Social Security works and why it is a necessary entity in american society in it's current form. Like I said, if guys like Bush were so concerned about the funding for it, they would stop STEALING FROM IT, to fund other things like tax cuts.

[Big Ol' Smitty 0]

My father died when I was 9 and left my brother and I no inheritance. However, we were entitled to his social security money. I probably would have been far less able to afford college and my mother would have had a much more difficult time making ends meet if it weren't for social security.

[Jobber of the Week 0]

I think we all know what each other thinks of Paul Krugman around here, being that he's known for being to the left, but this article was pretty good today because while there's some opinion thrown in there, it's got some explinations for those who don't understand why they should care.

 

Stopping the Bum's Rush

 

The people who hustled America into a tax cut to eliminate an imaginary budget surplus and a war to eliminate imaginary weapons are now trying another bum's rush. If they succeed, we will do nothing about the real fiscal threat and will instead dismantle Social Security, a program that is in much better financial shape than the rest of the federal government.

 

In the next few weeks, I'll explain why privatization will fatally undermine Social Security, and suggest steps to strengthen the program. I'll also talk about the much more urgent fiscal problems the administration hopes you won't notice while it scares you about Social Security.

 

Today let's focus on one piece of those scare tactics: the claim that Social Security faces an imminent crisis.

 

That claim is simply false. Yet much of the press has reported the falsehood as a fact. For example, The Washington Post recently described 2018, when benefit payments are projected to exceed payroll tax revenues, as a "day of reckoning."

 

Here's the truth: by law, Social Security has a budget independent of the rest of the U.S. government. That budget is currently running a surplus, thanks to an increase in the payroll tax two decades ago. As a result, Social Security has a large and growing trust fund.

 

When benefit payments start to exceed payroll tax revenues, Social Security will be able to draw on that trust fund. And the trust fund will last for a long time: until 2042, says the Social Security Administration; until 2052, says the Congressional Budget Office; quite possibly forever, say many economists, who point out that these projections assume that the economy will grow much more slowly in the future than it has in the past.

 

So where's the imminent crisis? Privatizers say the trust fund doesn't count because it's invested in U.S. government bonds, which are "meaningless i.o.u.'s." Readers who want a long-form debunking of this sophistry can read my recent article in the online journal The Economists' Voice (www.bepress.com/ev).

 

The short version is that the bonds in the Social Security trust fund are obligations of the federal government's general fund, the budget outside Social Security. They have the same status as U.S. bonds owned by Japanese pension funds and the government of China. The general fund is legally obliged to pay the interest and principal on those bonds, and Social Security is legally obliged to pay full benefits as long as there is money in the trust fund.

 

There are only two things that could endanger Social Security's ability to pay benefits before the trust fund runs out. One would be a fiscal crisis that led the U.S. to default on all its debts. The other would be legislation specifically repudiating the general fund's debts to retirees.

 

That is, we can't have a Social Security crisis without a general fiscal crisis - unless Congress declares that debts to foreign bondholders must be honored, but that promises to older Americans, who have spent most of their working lives paying extra payroll taxes to build up the trust fund, don't count.

 

Politically, that seems far-fetched. A general fiscal crisis, on the other hand, is a real possibility - but not because of Social Security. In fact, the Bush administration's scaremongering over Social Security is in large part an effort to distract the public from the real fiscal danger.

 

There are two serious threats to the federal government's solvency over the next couple of decades. One is the fact that the general fund has already plunged deeply into deficit, largely because of President Bush's unprecedented insistence on cutting taxes in the face of a war. The other is the rising cost of Medicare and Medicaid.

 

As a budget concern, Social Security isn't remotely in the same league. The long-term cost of the Bush tax cuts is five times the budget office's estimate of Social Security's deficit over the next 75 years. The botched prescription drug bill passed in 2003 does more, all by itself, to increase the long-run budget deficit than the projected rise in Social Security expenses.

 

That doesn't mean nothing should be done to improve Social Security's finances. But privatization is a fake solution to a fake crisis. In future articles on this subject I'll explain why, and also outline a real plan to strengthen Social Security.

 

It's pretty sad to watch the State of the State tonight and hear Arnold talk about a spending problem, then sit down at the dinner table and see news and opinion pages filled with stories about how all this credit-card spending in Washington is endangering the social programs.

 

For all the party unity and talk of conservative values, it's like these guys just don't get it.

[NoCalMike 0]

The most depressing thing about the State of the State was the fact that Arnold S. was giving it. Really, how could this state be so duped?

[Jobber of the Week 0]

He made it very clear last night that he was a party guy after all. I figured he was going to amp up the moderate stuff after he spoke at the convention and possibly swung the election to Bush (heck, he campaigned in Ohio the night before!) He made it known in pre-convention interviews his association with Bush would cost him points in California, so he was going to hang back. And then he didn't. I assumed this was a favor to get some sort of money or attention from DC to California.

 

But there was no reconciliatory effort once he pulled out that Tom DeLay redistricting crap. "Did you know that (x) seats went up for grabs and none of them changed parties?" That's like a polite way of saying "Waaahhh! We need more Republicans!" Perhaps he has gotten tired of dealing with the legislature and just wants to force stuff through with a party majority.

 

He also said that status quo is a symbol of corruption or unfair elections. Appearantly the reason the legislature leans Democratic is because of the way the districts are set up, not because the people in any given district sent in more votes for the Democrat instead of the Republican.

 

The message was VERY clear. "Get the hell out."

[Crimson Platypus 0]

Crimson and Lomas. You two are missing the point of Social Security. Think of it like a social security net aka INSURANCE, since that is exactly what it is. It is not a trust fund for YOU. Just like Insurance, you pay in, and keep paying in, and if you are fortunate, you will not need it until you retire if even then. Now your best friend that gets crippled in a car accident will probably need it because he can never work again, and that is what social security is for, or at least one of the things it is for. People seemed utterly confused about how Social Security works and why it is a necessary entity in american society in it's current form. Like I said, if guys like Bush were so concerned about the funding for it, they would stop STEALING FROM IT, to fund other things like tax cuts.

Oh no I understand the point of Social Security, I just don't see any guarentee that the money that I put into it will be used for my retirement. I'm not saying that it won't be there, or that it will, or whatever. I just like to have guarentees when it comes to my money. I would much rather put money into a 401k or something of that nature, something that I feel like I have some sort of control over, rather than trusting the government.

[The Czech Republic 0]

Oh no I understand the point of Social Security, I just don't see any guarentee that the money that I put into it will be used for my retirement. I'm not saying that it won't be there, or that it will, or whatever. I just like to have guarentees when it comes to my money. I would much rather put money into a 401k or something of that nature, something that I feel like I have some sort of control over, rather than trusting the government.

You should feel that way: after all, it's YOUR money, YOU earned it. NoCalMike's crippled buddy isn't your burden.

[Crimson Platypus 0]

Oh no I understand the point of Social Security, I just don't see any guarentee that the money that I put into it will be used for my retirement. I'm not saying that it won't be there, or that it will, or whatever.  I just like to have guarentees when it comes to my money.  I would much rather put money into a 401k or something of that nature, something that I feel like I have some sort of control over, rather than trusting the government.

You should feel that way: after all, it's YOUR money, YOU earned it. NoCalMike's crippled buddy isn't your burden.

Exactly.