Senator Thompson's plan provides for cuts in benefits that increase through time. Twenty years after it is implemented, benefits would be 20 percent below currently scheduled levels, after forty years benefits would be 35 percent lower, and after 60 years they would be 48 percent lower. While these cuts in benefits would be far more than enough to put the program in surplus over its seventy five year planning horizon, the Post still isn't happy. It complains "but he neglects to make clear that fully half of that solution would come from transferring general revenue funds to the Social Security system." Mr. Thompson probably "neglects" to make this point clear because it isn't true. We can see this with simple arithmetic. The SS shortfall is equal to 1.9 percent of projected payroll according to the SS trustees. The non-partisan Congressional Budget Office puts the shortfall somewhat lower. If we add this to the 12.4 percent payroll tax, this implies a shortfall that averages 13.3 percent of benefits (1.9 percent divided by 14.3 percent). The Thompson plan achieves this level of benefit reduction after 14 years, with the cuts growing further over the 75-year planning horizon. (Thompson's cuts apply to new beneficiaries, but I have ignored the $2 trillion accumulated surplus in the trust fund and the revenue from taxing SS benefits in this calculation.)
Where does the WaPo and Dean diverge on their math? Dean takes the current Trust Fund reserves and the surpluses that will continue BIG TIME over the next several years to be part of – well the Trust Fund. WaPo and Fred Thompson, however, would rather count those payroll “contributions” that we’ve paid for the last 25 years and will pay for the next decade plus as really employment taxes to fund things like the Iraq War, the Prescription Drug Benefit, and Bush’s tax cuts on capital income.
Let’s be real. Raising employment taxes to cut capital income taxes has been the GOP agenda for sometime and their means is accounting fraud with the Federal budget. Paul Krugman, Dean Baker, and I make this silly assumption that those Trust Fund surpluses are in some hypothetical “lock box” with a clear accounting for the dedicated payroll tax as Paul likes to call it. But the GOP is working with another accounting standard called the unified budget. It is sort of like when Dick Cheney asked some Andersen accounting partner to alter the books for Halliburton but forgot to tell his shareholders. Maybe silly old Fred Thompson just slipped up and let the world know about this accounting fraud.
Now if Senator Obama is smart enough not to be fooled with the GOP accounting fraud, let me be the first to applaud him. Maybe there are a few Republicans who as honest and Andrew Samwick about this issue, but again – let’s be real and recognize that the honest Republicans are not the ones in political leadership roles. Senator Obama appears to be willing to work with honest Republicans on this issue. But outside of Ron Paul – can you name me one Republican candidate who is being honest on this particular issue and does not wish to convert our past payroll contributions to employment taxes to bail out the General Fund fiasco? I certainly cannot.
As far as the long-run solvency of the Social Security system, I’m willing to wait until we have a Democrat in the White House as there is no urgency on this issue. Our gracious administrator correctly states that Clinton has not made any proposal. I sense he doesn’t trust her on this one and I have no reason to do so either. My only point – which I think she is taking – is that we should debate the Republican thieves on more urgent issues such as this insane war and the General Fund fiasco. Doing what is right on these issues can be political winners. The first order of business is getting a real President in the White House. Early 2009 will be soon enough to have the great Social Security debate.
14 comments:
pgl
maybe. but give them a chance to spread their lies now and 2009 may be too late to have an honest debate.
sounds like you think samwick is honest. i think you may be the only one here.
it's a shame no one can tell what the candidates really "mean."
You boys have outwitted yourselves...'course, that's not a difficult thing to do now is it but, I'll explain something to you real quick.
Fred doesn't BS and therefore, has nothing to "slip" over.
He's what we call a straight-shooter but, since you've never had one, you don't have a clue what one looks like.
You'll have time to study the phenomena...for the next eight years then, we'll watch how your "new" math folds on itself like a wet taco.
LOL, I can't help hitting Obombo before I go...If that boy ever "figures out" anything, it'll have to be explained to him for a day or so before he "discovers" it.
Coberly - my point about Samwick is simply this. He does not advocate using the Trust Fund surplus to subsidize the General Fund deficit.
As far as the other comment, me thinks his title needed to replace the "h" with an "n".
winghunter,
You're out to lunch with your pal Fred Flintstone. There is no crisis and the fund will probably never even run a deficit, much less go "insolvent," which would entail future retirees getting only 120% or so of current retirees in real per capita terms.
Oh, but I bet you did not know that one, did you? Youe Fred guy is just a tool for a big scam by the Wall Street crowd.
Barkley
Barkley
I doubt if wingnut even understood your reply. but i do. i am willing to defer discussion of it until 2030 as long as no one takes you up on the idea before then. for now i find it hard to see the difference between Foghorn's proposal to go from wage indexing to price indexing, and yours... that last 20% ?
pgl
i guess we agree again. i hadn't realized there was anyone outloud proposing to flat out steal the trust fund.
pgl Hmm wrong.
LMS has the practical effect of shielding the General Fund from its incurred obligation to repay money borrowed from the Social Security. It freezes any obligation on additional interest obligations from enactment to shortfall and in raising the cap delays the day of reckoning for Capital, potentially forever. A combination of trend economic growth and a cap raise could easily equate to the 'backdoor employment tax' you generally rail against. Boosti g future income to match cost equates to abrogation of the existing Trust Fund.
Is it 'winghunter' or ' wingnutter'? Because ' Obombo' and 'that boy' reveal a lot more than you realize. Or perhaps you expect us to not understand racist code. Frankly you can fold that wet taco and place it where it will serve as a prophylactic against your next cellmate. Oh wait! That would reduce me to the same contemptible level as you! Chalk it up to low self-esteem. Or crude irony. Or recognition of pond scum. Your choice.
bruce
like i said, thank you for keeping track of samwick.
i thought we should pay you for your work, not because you need a job, but because we need a smart watchdog.
one the people can hear.
"for now i find it hard to see the difference between Foghorn's proposal to go from wage indexing to price indexing, and yours... that last 20%"
Coberly reread Dean on Foghorn.
"Senator Thompson's plan provides for cuts in benefits that increase through time. Twenty years after it is implemented, benefits would be 20 percent below currently scheduled levels, after forty years benefits would be 35 percent lower, and after 60 years they would be 48 percent lower."
Fred's plan guarantees that future retirees get screwed and more so over time. Whereas under a wait and watch proposal like Barkley's the downside risk is less than half of Fred's guaranteed steal and i s more or less level going forward, and with an outcome biased to the high side.
Here is a question for you. What percentage would be acceptable to you? You don't like 75% of 160%, but I suspect you would be pretty comfortable with 97%. Is there a point in between when you would be satisfied to say 'case closed, Nothing really was the right plan'?
Bruce
for now "do nothing" is the right plan.
if in 2040, or whenever, the people decide, on the basis of honest knowledge, that they would rather pay a lower tax and take a lower benefit, i'd say they were stupid, but i wouldn't say they were 'wrong'.
i may be missing some details of foghorn vs rosser, but it seems to me they are both arguing that keeping the benefit level constant in terms of cpi is just fine. though rosser seems to be willing to accept a 20% increase in "real" benefits if that's what the current tax rate buys in 2041.
at the risk of repeating myself (i don't mind, but i have heard complaints) the issue is that any tax cut (or failure to raise) results in a benefit cut that is four times as large as the tax cut, on a per month basis in dollars. moreover, the tax cut will be a much much lower percent of present income than the benefit cut will be of retirement income: not raising the tax 2% of payroll results in a 25% cut in benefits.
one thing that will be interesting to see is if the people who vote for the tax cut will still think it was such a good idea when it come their turn to retire.
wingnutter has probably gone away, but his Fred Flintstone will be sent to the rock pile soon enough to try to establish lawn order...
Dale Well that might be part of the problem. Barkley proposes to allow benefits to rise with real wages as long as income allows that. Given trend growth that should be forever. Foghorn on the other hand proposes to lock in benefit cuts by shifting to CPI immediately. Altogether much different propositions. Barkley betting on growth going forward to deliver better than projected results, Foghorn essentially conceding slowdown.
Bruce
I will be glad to accept that interpretation.
Bruce
let me add a thought for your and Barkley's consideration:
back in the old old days
when mom and dad started getting old they had kids who would start to take over the heavier work.
and ultimately pay the bills. but it's the heavier work, and the live-in kids i am thinking of.
today we don't have that for the most part anywhere. instead we rely more and more on money solutions. savings and investment. and social security.
what barkley, bruce, and orszag ignore in your quest for intergenerational justice is that times have changed and will change more.
our grandchildren will need more money when they get old than our grandparents did.
Post a Comment