The wage increases mean that newer beneficiaries get a bigger pension than their predecessors, even after adjusting for inflation. Thompson was suggesting that we base the formula upon inflation alone. Then every pensioner gets what his big brother or sister did, adjusted for inflation. But not more.
Mark notes:
Now, as to indexing, here's what happens if you don't adjust for rising living standards. Nominal wage indexing (as is done now) accounts for both changes in inflation and changes productivity over time (see the %Δ equation above), whereas price indexing only adjusts for price changes, it makes no allowance at all for changes in living standards (i.e. for changes in productivity).
True but we need to add one bit to this. Ms. Shlaes is not comparing what my son will receive when he retires some 45 years from now to what my daughter will get when she retires. Fred Thompson’s proposal will make sure that my kids get no more than I get even though they are likely to earn more over their lifetime than I did. Which means they will pay more into the Trust Fund than I did. Yet, they are supposed to get no more than their dad got? Is Amity Shlaes too stupid to understand this? If so, why is Bloomberg giving her a column?
38 comments:
Some things are better said by lolcatz.
pgl as I understand the formula the current schedule would have your kids having a 60% better check than a simularly situated recent retiree with a similar career path. That is over time Social Security has been more and more a replacement wage. And as Prof Rosser informs us 75% of 160% = 120%.
Which is to say that even if we bought into the economic assumptions of Intermediate Cost, and I certainly don't, it is a little difficult to explain why I should be worried about a 'Crisis' that if it comes will find me 84 years old and with a 20% better check than my Mom gets today.
Thompson's plan is unwise and unnecessary but we could and should have some discussion about the current relation between a 12.4% FICA rate and our responsibilities to our theoretical grandchildren. There is a case to be made for diverting a portion of Social Security to Medicare and extending the latter to all children. There is nothing sacred about the current Schedule, the real concern is that they don't hijack the Trust Fund to pay for tax cuts on capital. Whether we have established the right balance between current and future utility of the payroll tax is an open question. As I put it at Thoma's we are having a Pampers vs Depends debate without even knowing it.
Bruce,
That Pampers vs Diapers issue is precisely the point of the conservative approach to what is not a Social Security problem. Divert and dissemble, the propagandist's tool. When you're looking for novel ways in which to divert responsibility for carrying the cost of running a government it's always effective to pit the members of your target group against one another. With some issues its good to use race or religion. With an issue that concerns taxation and the Trust Fund as a source of new found wealth for the wealthy, the young vs the old works just fine.
my apologies to bruce and barkley.
while it is true that the Trustees project a real value of both average income and average benefits that is 160% of the real value today, anyone who watched the Boskinization of the CPI, or who read today's news that SS benefits will get the lowest cost of living increase in years this year because inflation is low...anyone who has been to a grocerty store...will understand that CPI is not an honest measure of cost of living.
anyone with enough imagination will understand that living in that bright future when wages are 160% of what they are today will involve some very real expenses which while entirely necessary to negotiatiate the infrastructure changes that will accompany that higher standard of living...will not be reflected in a benefit fomula pegged to the CPI
on account of some future Boskin will argue that living like a civilized person in 2050 is an "improvement" and not "inflation."
and it seems so easy to forget here that the workers who are paying that 12.4% tax are the ones who will be getting that benefit which is 160% of today's paid for with a tax on wages that are both 160% of todays.
sorry this is not more clear. but after pages and pages of trying to make things clear i have realized that people won't understand anything they don't want to understand.
some economists who think they are liberals are so afraid of saying the t-x word that they will stand there silently while the republicans cut benefits just like they were going to to with Bush's privatization... only this time without even the private account.
one more time: my grandmother lived in a world without cars. she could walk to the store and take a bus downtown. by the time she retired everyone had a car and there was no longer a bus, or a store on the corner. she could not live without a car. but the CPI, Mr Boskin, and apparently Bruce and Barkley think that because a car was an improvement in standard of living, and not "inflation" that she should have had her benefits pegged to a level too low to be able to buy even a used car.... even though her payroll taxes entirely covered her benefits (on average) that is... no one else is paying for her car... and if you don't understand that you don't understand Social Security... and she herself contributed to that rise in standard of living.
sorry, if i get to raving it is only because i have been here before.
Coberly initial benefits are set by increases in Real Wage, retirees seeing their first check adjusted by increases in standard of living during their working lifetimes, after that increases are tied to inflation. That seems fair enough to me. It simply isn't true that current retirees paid for their benefits 'on average, in fact each generation has received a better benefit than they paid for. Which is okay by me, my parents raised four boys in houses that never exceeded three bedrooms, my high school senior brother shared a tiny room with me a seventh grader-probably any teenagers definition of hell. My nephew lives in a huge house where his son has both a bedroom and a playroom. Why I should be expected to sacrifice my current income for my nephew's retirement rather than my Mom's is frankly baffling, particularly since given trend growth my nephew gets every promised benefit anyway.
coberly.
i beleve you are, correctly, saying that cpi is not a cost of living index but a questionable cost of goods and services index.
Bruce
i don't know what we could do to overcome your frank bafflement.
the money you pay in to SS, as you know, goes to pay current retirees, or (currently) gets lent so that it can pay later retirees (you). it shouldn't take too much imagination or thought to see how each retiree gets what he pays for, which is a point too important to be lost in quibbling over accounting details.... and you should know that accounting details are no more real than any other model we impose on nature for ease of description.
the point i am exactly trying to make is to overcome the "greedy geezers" frame that Petersons ilk have sold the public, including some who should know better.
your nephew will have paid for his own SS just as surely as if he put the money in the bank himself, just as surely as your granny paid for her own SS.
while it's true that we "pay as we go" for all of these things, there is also a little conceptual matter about accruing rights. and a little about taking the gains and losses as they come to us... in terms of "something like interest" and "something like insurance premium."
i am out of energy for now. Bruce is smart enough to understand from what i have said so far. i am sure if he gives it serious thought and overcomes some tricks of perspective he will get it.
Juan,
absolutely.
2
Bruce
i am not able to write very well now, so you are going to have to forgive my style and tone and try to get to the substance... if it's worth it to you.
You and Rosser are -- I believe -- essentially arguing that a cut in benefits is a just fine solution to the Social Security "problem." Since that is what the Bushes want, you should have no trouble keeping the Republicans happy with this line.
On the other hand, if the Repbus can be convinced that "because" it's not a "real" cut in benefits, there is no need to worry and everyone can just wait until 2041 when the "cut" would be needed... it might be best strategy to let them believe that. Because by 2030 or so when and if it become clear that a tax increase or a benefit cut will be needed, the people may be better educated and will understand that NOT taking the tax increase will cost them Four dollars in benefits for every dollar in taxes they "save."
I don't expect to be here then, but I hope that by then there will be somebody smart enough to explain this to the people so they will understand what a bad decision that would be.
Meanwhile I get a little crazy when I hear you ... who of all people should know better ... talking about sacrificing your current income for your nephews retirement instead of your mom's.
In the first place you aren't sacrificing anything. Your payroll tax will come back to you in benefits... yes, through the miracle of pay as you go with wage indexing... that will be so close to what you "could have earned" by private investments, taking into account insurance, inflation, market risk, ... that it isn't even worth talking about the difference. And in the second place the tax is so small... it makes no real difference to your living standard... especially if you realize you would have to provide for your retirement without the tax...
the fact that your current tax goes to pay for your mother... and if you can account for the differences between the pay as you go part of that and the trust fund part you are a better accountant than all the other people who think they can...
sorry, out of gas here. actually it hardly matters what i say unless you do the thinking yourself. the hard part is to learn to think around the constructs you have already made. they may be perfectly good constructs, dr. ptolemy, but there are better constructs that make the whole picture much easier to understand.
The problem is not that there is a trust fund, nor that it is currently being lent.
The problem is that it is being lent to the rest of the government, which spends it, and has no intention of repaying it when that money is actually needed for its intended purpose.
So I ask, why is the trust fund lending money to the federal government's general fund by buying US bonds?
Theoretically, it's a sound investment because as long as the program exists, the government exists. However, just because the government exists, that does not mean that the program will exist.
Logically, you shouldn't lend money to an entity that pathologically loses money and can independently declare you non-existent.
goodwin's point is to the heart of the issue. The "Trust" Fund, a misnomer if ever there was one, was set up to begin with inorder to supplement the pay as you go character of SS costs/benefits in the future. The idea being at the time that there would be too much of an imbalance between workers and retirees, and worker's payments would be overwhelmed by retiree benefits. If the Trust Fund monies are lent out to cover general expenses, and yet the general budget runs at a huge deficit, those future workers will still be burdened with paying the debts. The whole thing sounds like some kind of a Ponzi scheme, and the result is that current costs are offset by FICA payments. How then are these payroll taxes any different than general income taxes? The result is that current tax reductions are being financed through the Trust Fund and will need to be paid back by those future generations.
Coberly I suggest that you still are missing the point here. There is a difference between a program that is self-financing and one that is paid for by current participants.
Over time the economic pie has been growing in real terms. Workers entering the workforce now will be contributing more to that future pie than workers in the middle cohort. Social Security has been set up in such a way that those in the second half of the workforce (for simplicity people over 40) get a share of the productivity generated by those in the first half. The end result is a retirement benefit that has slowly improved in real terms over time. Well that is a good thing. But on what basis should we conclude that the current schedule actually hits the sweet spot?
I am happy enough that given trend growth my nephew will get a check 60% better than what his colleagues with equivalent career tracks get when retiring today. But should I be willing to take a tax increase if by some chance it looked like he would only get a 59% better check? More to the point should I demand that the current year minimum wage worker take a tax hike to avoid a marginal cut in a benefit 35 years down the road? A benefit cut that might not even happen?
That is the issue at hand here. Your apparent position is that at all costs we have to maintain the future utility of that retirement check even if it means adverse consequences for current utility for that paycheck. Well Barkley and I are taking a little more nuanced position. It is not at all clear that we have actually struck the right balance between current and future utility under the current schedule.
Lets put it in another context. Lets say you worked hard all your life in a civil service job and managed to buy your house and put your kids through college. The kids now all have good jobs making money you never dreamed of but are also spending at or above their level of income. Does the fact that you have some money in the bank place an obligation on you to help them buy that vacation home on the lake? I don't think so.
The same principle holds for Social Security. Boomers and Boomers' parents came through. Collectively we have grown this economy at rates in excess of 2.4% and in most years substantially more than that. Now we are handing that economy over to the next generation with the simple requirement that they continue to grow it above 2.4%. If they do they will get a 60% better retirement check than someone retiring today, if they don't maybe they will only get a check 40% better or 20% better. That doesn't seem to be a lot to ask. I see no reason to pay an additional $2 a day out of my paycheck on the off chance that these slackers can't grow the economy at more than the 2.0% of Intermediate Cost.
I want my nephew to have that 3000 sf lake house, I want my grand-nephew to have his honeymoon on the Moon, but if it turns out the lake house only turns out to be 1500 sf or that honeymoon only in Tahiti, well I fail to see how that is my problem.
You on the other hand are in the position of insisting that a modest current sacrifice is worth it so as not to deprive my nephew of that extra 1500 sf in 2041. Well thats nice of you but I have friends struggling to make rent on a 400 sf apartment today. Pampers vs Depends.
Jack,
Agreed. Payroll taxes became functionally equivalent to personal income tax. If this is accepted, tax shifting from corporate to personal and from upper to lower income personal becomes more evident.
From my perspective, this has been, continues to be, a state mediated socializing of capital's costs with most of the burden placed on the back of the U.S. working class or, if you like, a state enhanced exploitation of labor that can be understood as one manifestation of right wing, state power taking, neo-corporatism,,,itself a reaction to the 1970s ending of the postwar 'golden age'.
Goodwin
no choice. we have the government we have, just like you have the father you have. difference is we have more actual control over the government than you have over your father. but in either case their honor or profligacy determines to some extent your financial well being. in fact, the government will pay as promised if we don't let ourselves be fooled. but that means you have to make yourself more knowledgeable.
Jack
there is a difference between the payroll tax payers and the general tax payers. the general tax payers are the higher ends of the graduated tax and the corporate taxes and a few other minor taxes. the payroll tax payers are the lower end of the working class (income less than 100,000 $/yr.
so it does make a difference.
also the tax involved in making up the Trust Fund is not "huge". it would be the equivalent of a dollar a week raise in the tax for each worker every year from 2016 to 2036 while those same workers are getting a pay raise of ten dollars per week every year.
it makes a difference if we know exactly what we are talking about.
juan
your comment is only true if the trust fund is not repaid out of general taxes.
and while it is likely the high end taxpayers will find a way to pass those cost on to their employees and customers... there is nothing new about that.
i think a first order look at who pays taxes in this country would make your claim about the backs of the working class look ridiculous. on the other hand, a deeper look might reveal that you are exactly right.
the fact is that "money" comes out of "business" and the distribution of money as between owners and workers is a nearly arbitrary, almost wholly political (i.e. power) decision.
but that is far too abstract for a discussion about the practical needs of Social Security in the here and now while waiting for the revolution.
by the time you get through designing a "fair" system, much less getting in enacted, the bad guys will have found a way to destroy Social Security resulting in an immediate hardship on the working classes, loss of security while working, inability to retire, and lower overall income.
i will try to stay in the real world as much as i can.
Bruce
you are a different proposition altogether. you know a lot, and you are smart enough to think it through carefully.
may i modestly suggest that you give up the analogies and follow the money very carefully, keeping in mind some respect for the value of "now" as against speculation about some future.
once again, i have run out of energy. i will try to give a more careful answer to you in a little while. but it won't help if you are married to your metaphors.
btw... there is no "at all costs" in anything i say.
show me the hardship to the current worker that would come from having his taxes raised a dollar a week per year while is income is going up ten dollars a week, and his life expectancy is going up.
numbers, please.
"Bruce
you are a different proposition altogether. you know a lot, and you are smart enough to think it through carefully. may I modestly suggest..."
I wonder what that remark suggests regarding your comments to Goodwin, juan and Jack? I can only speak for myself, but I find the comments of both Goodwin, juan and Bruce, for that matter, enlightening and on point in regards to the debate as to what needs to be done, or not done to "save" social security. No, I'm no expert economist, but I don't think such expertise is required to understand the basic point. Social security has, in this country during the past seventy years, come to be understood as an entitlement that each generation bestows upon the elderly who have worked all their lives, and had provided in the same way for the past generation of the elderly. It's not intended as one's primary retirement income, but in this day of the ever disappearing pension it is ever more critical as a safe guard from poverty after a life time of working and contributing to the general welfare. The so-called social security funding problems are manufactured by an ownership class and their managerial henchmen
(and women) that seeks only to preserve and expand its own wealth at the expense of all others. That's not hard to follow.
coberly, You equivocate far too much and that may well be the reason that you find yourself fading out from the inclination for prolonged ranting. There can be no equivocating on the issue. The only increase in taxes that is long over due is that which would restore some semblance of balance to the responsibility of citizens to support the functions of their government
PS: I think, though I could be wrong, that you've got your description and distinction of payroll and general income taxes all screwed up. Is there an accountant in the house?
Jack
you could be right. but in order to have any idea what we are talking about we all need to be a lot more careful. and if not abandon arm waving entirely at least be prepared to explain what we mean. maybe more than once.
the fatigue is entirely a function of age. as, i suppose, is the ranting.
since you asked first, let me go back line by line and ask what you mean, and try to explain what i mean.
Bruce has demonstrated that he understands Social Security far better than most people who comment on the blogs. That's all I meant. If you feel your understanding is at a level of detail sufficient to support your conclusions, I am not in a position to really disagree with you, though, I hope to demonstrate that careful understanding of real facts leads to slightly different conclusions than you seem to have reached.
pause: jack, we have yelled at each other before. what i have found is that we usually actually agree with each other, but you take a more emotional line than i do which leads you at times into absurdities such as telling me what -I- believe about very personal matters. nothing terribly unusual about that. but if we are going to make sense about Social Security... and I believe it is very important that we do... we need to be a little careful to distinguish "facts" from "impressions", not always as easy as advertised, even for me.
"enlightening and on point" perhaps i would understand this better if i could remember the specifics. i am thinking something like "operational definitions" specific, but I don't want to get into a game of philosophy of science here. just ordinary... "did you mean..?" and "are we talking about the same thing here?"
expertise is absolutely required to understand any point. even to know what the "basic point" is. but you don't need to be an economist. in fact from what i have seen it may be better if you are not. too many prejudices.
"an entitlement that each generation bestows on the elderly"
well, i don't think so. and i think it is critical to understand the difference. though it may be entirely correct to think of it this way, it is more correct to think of it as a means by which the workers of this country save their own money for their own retirement.
we have had a long phase-in period in which your description might have seemed more correct. but the principle, and the mature phase of SS is better understood as an insured savings program (and yes a retirement plan...though other writers have thought it important not to call it that, and legions of superficial readers have thought they were very clever to repeat what they had read).
"it is not intended as primary retirement." well, maybe not. but this is not a very useful statement. for those whose other plans fail, SS will be their sole retirement. that is about as primary as you can get. of course for those who are able to invest in other ways successfully, SS may form a small part of their final retirement income. but it serves no particular purpose to say "not intended as primary retirement" except perhaps to remind those who can that they might want to try to find ways to supplement it.
"after working and contributing to the general welfare" this is very important and i am glad you said it. we have to assume that each person has contributed to the general welfare in ways that are not reflected by their stock portfolio... and that way we don't say stupid things about who "earned" how much of their SS benefits. we do have an accounting system that assigns a dollar value to the benefits they will get.... but it is a sign of the sin (disease) of greed to obsess about exactly how much of that dollar value was "earned." in fact the benefits are a close approximation to what they paid in... close enough for ordinary justice.
"ownership class and managerial henchmen" not a very useful string of words. though i might agree with you about the morals and motives of the people yelling about the SS "problem." In fact the "actuarial" predictions are quite reasonable and about as close as you can get with ordinary (not omniscient) accounting. the facts, however, the ones you are not sure we need to know, point to a very tiny actual money deficit. one that could be covered, if it actually turns up, with a very tiny payroll tax increase... on the order of a dollar a week per year while incomes are going up ten dollars a week per year. knowing the actual numbers saves us... or should save us from stupid shouting and arm waving matches.
"that's not hard to follow" is the kind of statement that throws me into despair. it is a purely meaningless noise intended to assert the "truthiness" of another statement not only not based on any facts, but not base-able on facts. if it makes you feel better to say such things, fine, go into a room with other emotive types and say them. but don't expect to win any debates, or help the people keep from being fooled by those henchmen you are talking about. we need real facts. some approximation of a real understanding of exactly what we are talking about.
i have no idea what you mean by "equivocate." please cite example.
no taxes are overdue. long or not. there may be a need for a slight tax increase in future. not yet.
"some semblance of balance". i can restore actual balance, dollar for dollar. what semblance are you talking about?
"the responsibility of citizens to support the functions of their government" sounds good until you ask what are the legitimate functions. then you find that most citizens are willing to support what they see as legitimate funtions. the problem here is to make them see that SS is a legitimate function. and fooling ourselves about a benefit cut by calling it not a "real" cut, is not a good way to stand up to the henchman who would be only so glad to make a benefit cut on those terms.
payroll taxes: that's the 6.2% taken out of your check for OASDI. Another 1. something percent goes to Medicare. all the other taxes... income tax, corporate tax, inheritence tax, tarrifs, are general taxes. am i all screwed up here? please explain.
Coberly over the last twelve years I have had one friend in tears because her paycheck was delayed, her infant twins were looking to be denied formula and Pampers because her boss was stiffing her on her weekly check. Then again I sat by a grown man who was literally crying because his daughter got a $101 traffic ticket that he simply couldn't pay, he was already working two jobs, for him an unexpected $100 payment was simply too much. Bringing it back home I went through a bankruptcy thinking a particular debt was off the books only to find out that I had to find a way to come up with $140 month which stripped away most of my discretionary spending for a couple of years. I am not crying, twelve years later I have the means to take a year or two off from working while still paying my mortgage. Still I know all too many people for whom $1 dollar a week might not mean too much, but for whom $50 dollars a year means quite a bit. For that matter you might want to come up with numbers of your own.
"show me the hardship to the current worker that would come from having his taxes raised a dollar a week per year while is income is going up ten dollars a week,"
Well yeah if his income was going up at that rate considering inflation. We can quibble whether the real incidence of the payroll tax is 6.2% or includes the employer match for a total of 12.4%, but either way I see a lot of hardship. If 'rising inequality' wasn't a constant theme on the econoblogs and minimum wage increases something simply accepted as the price of an ever increasing economy I might be sympathetic to the 'only a dollar a week' argument. As it is I don't see that you have made a convincing reply to the current vs future utility argument for the paycheck dollar. Not everybody is seeing that $10 a week increase in their paycheck.
2
Bruce
as i tried to say earlier, your comments require some effort to address because you know more than most people. all the more reason we need to be careful about just what we are talking about.
the ten dollar per week increase is "real" dollars, not inflation. use the 1.1% real increase in wages used by the Trustees, compare to the Balance on p 44 Table IV.B1 for OASDI.
i understand about being poor. still, you can play games with poverty and wages and minimum wages until you recognize a certain lack of ultimacy... those are all things that can be, and should be affected by other factors. but giving a person an extra dollar a week by taking it out of what amounts to their retirement savings is not the smartest kind of financial planning. those people are very likely to still be poor when they retire, and that dollar a week they saved will cost them four dollars a week in benefits.
and, to save you the trouble of pointing it out, i am well aware that the dollar a week is cumulative over twenty years so it become twenty dollars a week for the average worker who started out at 700 dollars a week in pay, but who is projected by the same Trustees to be earning 1000 dollars per week, inflation adjusted, at the end of those twenty years.
so while you can wave your hands in a vague way and talk about "maybes", all i have to go on here is the printed numbers by the Trustees. absent a compelling argument to the contrary, i have to accept those as the "most likely" bet on the future.
as for the employer match... another empty argument... whether that is "really" the employees money or not, absent a change in the law, what the employee "sees" is his 6.2% rising to about 8.3% in 2042 or so. and that means that each year what the employee would see is a ten dollar a week raise, a one dollar a week increase in tax.
you appear to want to not increase his tax at the cost of decreasing his pension.
and this appears to be because you think of the tax as a tax on you... which is pretty much how the Republicans see it.... instead of a protected savings for retirement... which is what it is from the point of view of the worker.
just to be sure i haven't neglected it: i understand the stories about poverty. you don't seem to understand that at ANY level of income there will be the SAME stories of poverty. what i think we need to be talking about here is protecting against poverty in old age by saving a certain percentage of your income while still young with options.
if that poor woman needs more money, get her a raise, get her welfare, give her a loan. if you who really ought to know how to manage your money better need more money... don't try to get it by cutting (not raising) the payroll "tax"... you have lots of better options.
sorry if this is not as clear as i would like it. we still have a ways to go.
Well my original response got lost.
Coberly you simply have not made the case that the scheduled benefit is precisely at the level that social fairness would put it. You simply assume that and wave away the cost as trivial.
I'll leave it at this. I think current levels of FICA are too high. We could lower the tax somewhat and still be more likely than not to deliver scheduled benefits.
It is fine to construe things at the level of the average worker, but cumulatively 1.95% of all payroll up to the cap is a lot of money and it is not at all clear that society's number one priority for that would be retirement security as opposed to Medicare or SCHIPS.
Bruce
i don't know what it would take to make the case. i don't know much about "social fairness" or "society's number one priority."
i do know that as a working person putting an extra dollar a week into a wonderfully protected savings account so i will have four dollars a week when i retire makes good sense. and as my income goes up, it makes sense to put more into that retirement account so i won't have to live like a cave man when i retire.
you seem to have the hots for that dollar a week that is every bit as strong, and illegitimate as Bush does. though you being a tender heart want to give to the poor while Bush of course wants to give to the rich. at least Bush isn't fooling himself about stealing from the poor to give them their own money back.
If you want to give the poor a raise, give them a raise, don't steal their retirement. if you want to give the poor medical care (give their doctors a raise) either give them a raise with the understanding that it is to be dedicated to health insurance, or find some other way, but don't steal it from their pension.
this appears to be one of those things that if you have to ask you'll never get to know. But it's a damn shame the plain good sense of the people who invented Social Security is going to get lost between the greed heads and the people who see it as a pot of gold they could put to a more socially fair use.
coberly,
You're obviously convinced of the greater validity of your own arguments. That's fine for you, but you have obviously not convinced others here, and that should send a clear message to you. One significant problem with your argument is that you seem to hold the opinion that the working stiff is not paying in enough to FICA to justify his future call on benefits. "Only $1.00 per month,"
is it? Well there are a great many of us who hold the opinion that that would be $1.00 too much so long as the funds keep going to support the general budget and so long as the greatest share of the nation's wealth and income go untaxed. Your argument is a sham that sounds reasonable, but only goes to support the claims of the worst right wing ideologues regarding the evils of social security as a welfare program.
coberly,
nothing to do with whether the trust fund is repaid out of general taxes but, as first approximation: Table 3 (Federal Receipts by Source, As a Percentage of Total Revenues, 1950-2006) in: SELECTED DATA RELATED TO THE FEDERAL TAX SYSTEM, JOINT COMMITTEE ON TAXATION , March 14, 2007 JCX-11-07
http://www.house.gov/jct/x-11-07.pdf
where you will notice, as percent of total federal revenues, employment tax revenues rise, corp tax revenues fall, personal tax revenues essentially flat, which surely appears to be a longer run tax shifting but then can't be so long as its pretended that 'employment tax' is not a tax and one primarily drawn from the U.S. working class.
Sure there is also annual outflow but also surplus used for?
juan,
you would be right about the SS surplus if it is never paid back. i am not as sure it will be paid back as i pretend to be when i am talking to the right wing crazies who call it "worthless iou's."
but i take solace in the fact that even if the surplus taxes paid by the boomers and lent to the government are never paid back, the boomers will get the benefit of their taxes in the form of benefits... assuming we are smart enough not to let them "save social security," something i am beginning to doubt we are... and the baby busters will get the benefit of the taxes they will pay that they would not have if the trust fund was repaid, in the form of benefits for a longer life expectancy.
yeah, in the aggregate there is a few trillion on the table, but by the time you divide that by 200 million taxpayers and 75 years there is not enough to get upset about in the great scheme of things.
try to imagine that when you got your present job the boss had offered you 5% less than he did. would you have turned him down? did youhave the option? if you did,the working class is in a lot better shape than you say you think you did. if you did not have the option, then by what logic do you claim that you "earn" your pay... you couldhave got 5% less and would have no reason to believe you "earned" more.
sorry if that is not clear. best i can do for now.
i am not pretending that "employment tax" (payroll tax?) is not a tax. it certainly is for the employer though nine new york economists say it's "really" the employees money. i am saying it's not a tax because the employee gets it back. it acts like a savings account. where the interest is low...but higher than inflation... and the account is insured...not to the amount you have "invested" but to the amount you would have invested... try that on wall street... and it is absolutely safe from all the ills that cash is heir to.
but not, sadly, safe from all the people that think they know something about it.
jack
i taught a math based class in two colleges long enough to have some sense of the quality of my thinking compared to that of the average undergraduate. there are people here with advanced degrees who are surely smarter than me, but so far they have not convinced me. i think i am still a good enough thinker to be convinced by careful argument, but hand waving and invective don't work for me.
if you are going to tell me i should suspect that there is something wrong with my thinking, you should be a little more careful to avoid what may be no more than typos:
i can't imagine why you think i said the "working stiff is not paying in enough to justify his future call on benefits. i thought i was saying the exact opposite. unless you mean the Trustees projection that after 2041 there will need to be a raise in the tax or a cut in benefits. In that case I am arguing that a raise in the tax would be unnoticeable to the average sane worker, while a cut in benefits would be catastrophic to the average retiree.
the tax increase would be one dollar per WEEK per year. not "one dollar per month."
at that time the payroll tax will not be going to support the rest of the government it will be strictly pay as you go taxes = benefits.
as for my sham supporting the evil right wingers. you better make an actual case for that or apologize.
juan
imagine that your revolution has already occured.
the workers get together and design a retirement security plan. it would look very much like Social Security.
now you are proposing that the workers raid the neighboring country of rich capitalists and force them to contribute to the retirement plan.
sorry this is short, but if you think about it it might turn on some lights.
juan
aids to imagining:
in about 1936 a bloodless revolution occured creating the workers united states of america.
in this government of workers, no one earns money by capital, and the highest wage earner earns no more than three times the average, while the lowest worker makes at last two thirds of the average. in todays economy that breaks down to 20,000 at the bottom, about 33000 average, and about 100,000 at the top for really important and difficult jobs like economics professors.
the workers are smart enough to know that a time will come when they will want to retire, and that no one can be sure that he will be so lucky his whole life that he never falls into the lowest earner category, so they set up a plan whereby every worker contributes about 12% of his income to a retirement plan. since he expects to work about 40 years, he will have saved enough to live on about 40% of his average earnings for his 12 year life expectancy in retirement. since he can't know in advance that he will be lucky, he agrees that the retirement plan will have a built in insurance feature so that the highest earners will get only about 30% of their lifetime average earnings, in order to provide the lowest earners with about 50% of their average earnings. the better off still get more than the worse off, but the worst off are protected from absolute destitution.
this is essentially what Social Security does. if it turns out that people will be living an extra six years or so, but will still want to retire at about the age of 62 (and they will. take it from me... unless of course they have jobs like economics professor)
they will find that they have to save about 20% of their income for forty years in order to have 40% of their income to last for the new 20 year life expectancy. remember we are doing without capital here, or "investment" income.
now what you propose, is that the workers of this workers united states look across their borders at the rich capitalist state next door and demand the rich capitalists contribute to the workers retirement plan so the workers will be able to consume more both while working and later in retirement. of course the capitalist country would get nothing in return.
now i have no brief for that rich capitalist country. but as long as us proud and free workers can support ourselves while "saving" for our retirement...or honoring our fathers and mothers collectively (it amounts to the same thing)...i am too proud to beg from the rich, and too moral to rob them.
coberly,
That's the entire basis of taxation. Society as a whole (the tyrannical majority) forces individual members of society to contribute what they would not have voluntarily surrendered to finance common goals.
People are continually assuming that in the end, social security as a program will continue and will be funded ultimately by an increase in "regular" income taxes (i.e. those which are progressively applied to a specific definition of earned income defined by the IRS with no ceiling). There is a cake at the end, and you expect that it will be there, and that someone will pay for it.
For the younger members of this group, like myself, I expect that we are generally seeing that "the cake is a lie." There is no cake. I'm paying for a variety of things, but by and large, I am not paying for the benefits of current retirees, nor am I paying to fund a pool that will pay the benefits of future retirees.
I am paying money and that money is being used for the general operation of the federal government, in particular the armed forces and largely fictional debt service (fictional because on a consolidated basis 70% or thereabouts of it doesn't exist).
Social security is a classic pension fund SPE fraud, except that instead of hiding debt from the parent company's balance sheet, the fund is being used to provide cash to fund current operations under the guise of a real debt to pay unspecified future obligations. You have a defined contribution plan that is significantly overfunded and is projecting it's financial condition based on expected returns that will not be realized since the federal government will ultimately just default on the securities that it is "holding." Meanwhile, the government as a whole uses the overfunding of the pension plan to cover it's own massive deficits.
It's a scam. People in current periods are getting their cake, but in the end, there is no cake for anyone else because the cash that was set aside to purchase cake is being used to buy guns and pay private military contractors to kill civilians in a country half way around the world that can't govern itself, let alone pose any significant threat to the US.
The idea of social security is an honorable one, but its original purpose has been subsumed in the modern era by its usefulness as a shell the decrease the progressiveness of the American tax structure by making false promises to the underclasses who bear the lion's share of the tax burden.
j. goodwin,
Well said!!!
coberly,
in many/most nations there is no social insurance other than provided by family and community. it was/is not forced but happily volunteered, was/is custom and culture.
but
the process of capitalist development corrodes, atomizes, weakens the 'initial' conditions even as it makes them more necessary, even as it creates the basis for its replacement while struggling to prevent it until nearly all within begin to accept there to be no alternative.
let's imagine that there are and that time is limited.
juan
social security does in an industrial empire what the family did or the tribe.
no doubt capitalism is bad. but it's what we have. and while we have it social securit is the best hedge against poverty in old age.
jack
j goodwin is so wrong it will take a whole day to explain it to him. tomorrow.
j.goodwin:
one step at a time.
taxes are the way the rulers of a society, perhaps the majority if we are to beleive in democracy, get the money they need to do the things they want.
this can be bad things like building torture chambers for political enemies, or it can be good things (arguably) like building the roads, schools, and internet that make private wealth building possible.
taxes are necessary because most people will not voluntarily give enough of the money they earned with the help of government to support that government. even if you and i understand the need, there is always some bozo out there who sincerely believes he deserves a free ride.
i need to stop here for awile, but your next comment about social security is such a doozer you can be sure i will be back to comment on it.
meanwhile contemplate: taxes under tyranny bad. taxes under democracy... maybe not so bad. society in which you never have to do anything "involuntarily" impossible. grow up.
goodwin,
"People are continually assuming that in the end, social security as a program will continue and will be funded ultimately by an increase in "regular" income taxes (i.e. those which are progressively applied to a specific definition of earned income defined by the IRS with no ceiling). "
no one assumes this who knows anything at all about how Social Security is funded. Sad to say, that turns out to be not so very many people. You need to learn more.
"I am paying money and that money is being used for the general operation of the federal government, in particular the armed forces "
If you are talking about your Social Security payment, you are dead wrong. Your payment goes directly, of course, to pay for current retirees, and a part goes to a Trust Fund to pay future retirees.
The Trust Fund is simply a normal business loan (okay,not quite normal, but in principle no different... you get your money back with interest).
BUT this is just the mechanism. It is no different than what happens to your money when you put it in the bank or buy shares in a company. The money goes out the back door the day you pay it in. It goes to pay for current expenses, or investments, or loans to people who will use it...etc. All that matters to you is that you get it back when you need it. And that is what Social Security guarantees... absent ignorant voters letting criminals in congress take it away from them by pretending to "save" it from a phony crisis.
your "fraud" and "scam" paragraphs are the kind of ignorance that will, ironically, become self fulfilling prohesies. learn how Social Security works, and then don't let the bastards steal it from you. there is NO reason why you should have to let them.
"...absent ignorant voters letting criminals in congress take it away from them by pretending to "save" it from a phony crisis."
Well, you're finally beginning to understand the problem. That is the very scam/fraud to which goodwin and many others are pointing. The language is just a bit harsher. We all know how Social Security is supposed to work, and throwing more FICA payments at the fund is not going to make it work any better than the "criminals" that the "ignorant voters" send to the congress. The point that you seem unwilling to acknowledge is that our esteemed representatives in the Congress are treating the Trust Fund as though it were a direct source of funding for general purposes. They are already beginning to suggest that the Fund is "just so many IOUs."
Jack
well, i finally began to understand this about ten years ago when i first looked into it. the difference between you and me is that i kept looking and i actually know what i am talking about.
So, your naive belief that the system will continue to operate as designed, rather than the belief that the redesigned system that is currently in place -- a system that was redesigned by a conservative administration -- is actually a ruse based on current trends, makes you a person who is both better informed and more knowledgeable about the subject, while those taking a contrary view are fools who need to learn more about that which they speak.
Ok.
My comment regarding taxes as being tyrannical was a sarcastic attempt to mirror your apparent disdain for taxing the rich, and favor for taxing the poor. I regard them as not a necessary evil, but a fundamentally sound strategy for financing common goals that is not evil, but as good as tithing might be considered by a loyal church-goer. I'm not happy about how I'm represented currently, but that's something entirely different.
I wouldn't mind paying higher taxes (and I'm already in the upper echelons of the tax structure). However, I'm totally opposed to regressive tax structures because I believe that the undermine the orderly conduct of business, create short and long term risks for individuals, and thereby destabilize society as a whole.
You, apparently, disagree.
Goodwin
good lord. how could i disagree? i can't even tell what you are talking about.
i hope i did not call anybody a fool. but i am pretty sure i have given this more careful thought than most people,,,, even some experts who have written books about it.
i am all in favor of taxing the rich. just not for Social Security, which is far far better as a workers savings plan than it would be as welfare, which is what taxing the rich for it would make it.
as for "regressive tax structures," calling Social Security a regressive tax is to completely misunderstand the program, ignore the progressive payout, and violate a well known principle of reality which is that fronts have backs.
I'm beginning to think that turk fowler and his alter ego marko have finally shown up in yet a new and more devious disguise. Social security=welfare???, if the rich are expected to pay their share? What on earth are you talking about? Social security is not a retirement savings plan. It never has been. It has taken on ever increasing importance to the average worker since the persistent demise of the defined benefits retirement plans that corporate America, that's the rich coberly, decided to take that money and run.
And you continue to ignore the point that social security funds, the excess that is supposed to be in the "trust fund," are being used to hide the eventually disastrous effects of the significant tax reductions that the rich have enjoyed during the past decade.
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