Meteor Blades at http://www.dailykos.com reports that Senators Graham, Paul, and Lee are proposing to put in a phased increase in the Social Security retirement age to 70 and to also limit the benefits paid to higher income people. First of all, I agree with Dean Baker and Bruce Webb, both of whom continue to do yeoman labor pointing out the many flaws in the arguments by many commentators about social security, that there is no serious financing problem with social security.
That said, I agree with Blades that this is a pernicious proposal. Raising the retirement age will hurt minority and blue collar workers. It is also not clear that we will continue to see increases in life expectancy, with poor white women particularly showing declining life expectancy in recent stats. Yes, cutting benefits to higher income types would be progressive, but it would also undercut them being willing to support the system. If somewhere down the road (not now), a fix is needed, raising the income cap on fica would be preferable as a progressive solution.
I also note that these proposals resemble those put out by Bowles and Simpson, who co-chaired the Cat Food Commission, and which some commentators think was wonderful, although the commission never formally put anything out as a whole, due to opposition to any tax increases by the likes of Paul Ryan. Ironically, Ryan has left social security alone in his bizarre budget proposal, just passed by the House without a single Dem supporting it. He is too busy going after medicare and medicaid, while proposing massive tax cuts for the rich that mean that his budget would run even higher deficits over the next decade than the status quo. What a joke, given all the serious commentators claiming he was "serious."
It would be a shame to raise the retirement age, particularly because the pthan the more well-to-do.
ReplyDeleteAnd, who os SS most important and relevant for - the less well-to-do.
That being said, the government should never have been able to loan the SS surplus to the Treasury. I still would like to know what legislation gave Treasury that power?
It introduced a new way of financing government - a backhanded, indirect way.
In additioin interest should have been paid in cash, not debt.
The who;le trust fund is nothing but phantom orinciple and interest.
SS is not alone, however. The federal retirees' trust fund is run the same way.
And, it has a $5 trillion liability which is listed on the balance sheet, along with debt held by the public.
I have reputable governmental links and excerpts to support my statements, for anyone who is interested.
Don Levit
Folks:
ReplyDeleteSorry about the first part of my reply.
What I was trying to say is that the lower-income people live a lot shorter lives than the higher income people.
Maybe someone has the statistics to back that up.
I have seen it in various studies.
And, who is SS primarily for? The lower-income people.
If they raise the retirement age, it should be wealth-related.
Don Levit
BS Don:
ReplyDeleteSS is not only for the lower income brackets. It is there and counted on by the vast majority of the US population well beyond the Median Household Income. SS is not a welfare program which you imply and it is still an insurance program meant to serve all US citizens and those who pay into it for 40 quarters by law.
Since TBTF and Wall Street has stolen much of the risk-laden 401ks forced upon people to replace pensions, SS places a larger role for many of us being able to retire. The lower scum as you imply has a lower life expectancy. Black males live to be an average age of 67 years Don. How noble of you to deviate from your views on SS and other programs to grant them and others a boon and support keeping SS age limits the same.
I await your answer and I hope you come with some facts other then this BS laden post(s).
run75441:
ReplyDeleteYou are correct that people way beyond the median household income rely on SS to be there.
The concentration of wealth now is as bad as it was before the Great Depression.
My statements about the lower income people simply means they depend on SS as a higher percentage of their income.
Yes, SS is for everyone, but because of the "bend points," the benefits are skewed towards the poorer families, which I think is the beauty of the system. However, to raise the top income that is taxed to "infinity," would be unfair, in my opinion.
Those in the highest bend point receive only 10 cents in benefits for every dollar paid.
Don Levit
Actually, fixing SS is simple. The Greenspan commission set the tax such that it would cap at 90% of wage/salary income. However, due to the subsequent failure of productivity gains to be broadly distributed and thus the stagnation in median wages, the tax failed to collect the projected 90%. So just readjust the tax cap so that it always collects the 90%, where ever that might be.
ReplyDeleteDon:
SS was put on budget by LBJ for smoke and mirrors political reasons, just as Fannie Mae was taken off budget and partially privatized for the same political/fiscal obfuscatory effect.
John:
ReplyDeleteFixing SS is not simple if the actual surplus FICA dollars have been lent to the Treasury, and the interest is credited in debt, not cash.
The only thing the trust fund represents is a draw on the Treasury without an authorization.
When the trust fund pays benefits, it does so like the government pays all its expenses - with or without a trust fund.
So, they're just numbers, like in a calculator. You call that a fix?
Do you need reputable government citations, or would you rather stick with the illusion of a simple fix?
Don Levit
Nah. The trust fund T-bonds are as money good as any other T-bonds, (and it's not the only such trust fund), and get paid out of the general fund/other tax collections. That's the long established plan and the accounting. Any future shortfall, after the trust fund is empty, can readily be fixed as I indicated.
ReplyDeleteDon:
ReplyDeleteQuit trying to steal the money owed to the wage earners that SAVED the money in T-Bonds inside the SS trust fund. In the year 2000 the wage earners bought over $100B in T-bonds INSIDE THE TRUST FUND even though the US government was operating at a surplus. And this was done because the laws say that excess FICA tax proceeds _MUST_ be used to purchase T-bonds. Your crap about the government _needing_ to raid the trust fund is a lie for 2000 and for 1999. In your "unified budget" world, what should have happened, beginning in the 1980's as the lying filth Republicans cut income taxes is that FICA taxes should have been cut. That didn't happen because Republicans are lying filth. Now they want to talk "unified budget" in order to stick it to the wage earners AGAIN.
There is room for honest disagreement concerning MMT and unified budgets. But Republican liars will forever lie to benefit the rich. In 2001 they lied and cut income taxes as the SS trust fund continued to grow. And now they lie again in order to stiff the debts they owe because of their previous lies.
John:
ReplyDeleteActually, all T-bonds are not created equal.
In fact, there are 4 levels of government debt, of which future SS and Medicare benefits are level 4, the weakest federal obligation to fulfill.
It is also interesting to note how the FASAB, the accounting advisor for the federal government, views your FICA taxes.
They are considered nonexchange transactions, which means you are compelled to pay in, but the government pays you only out of the goodness of its heart.
I don't think this is what Roosevelt intended, when he envisioned SS to be self-supporting, with no use of general revenues.
I can provide reputable government citations to back my statements.
What can you provide, other than your opinions?
You see, John, this is not a debate between you and I. It is a discussion between you the GAO, the FASAB, the Treasury, and even the Social Security Administration itself!
I know a little about illusions, John. I have, them, too.
They give me hope.
As Ernest Becker stated in "The Denial of Death," "Some illusions are absolutely vital."
Don Levit
Barkley: "Yes, cutting benefits to higher income types would be progressive, but it would also undercut them being willing to support the system. "
ReplyDeleteHow about cutting representation to the 'higher income types' so that the proportion of people acting as parliamentary representives for these rich 'types' is in proportion to their numbers in the general population?
Then we may not care that much about how 'willing they are to support the [social security] system.'
I have a head full of crazy ideas tonight!
"That being said, the government should never have been able to loan the SS surplus to the Treasury. I still would like to know what legislation gave Treasury that power?"
ReplyDeleteDon the Social Security Amendments of 1939 made explicit what was to that point only current practice under the SS Act of 1935: that all Trust Fund balances be held in instruments fully guaranteed as to principal and interest by the Federal government. Which in practice means Treasuries.
Social Security has run large anticipatory balances before, indeed by 1950 the Trust Funds had the equivalent of 20 years of cost in the 'bank', which bank was made up of Treasuries, or in your terms a 'loan' from SS to Treasury. This has been a feature and not a bug for over 70 years and there was no particular fuss when the then sizable balances were redeemed with no questions asked between 1971-1982.
The whole 'phony IOU' argument ant the pseudo-economic and legalistic justifications for it are historically a product of that period in 2003-2005 when Barkley and I among others were pointing out the dates of Trust Fund Depletion were retreating so quickly that it was shaping up as an event that would never happen. Whereupon the Bushies trotted out the argument that the TF assets, whose reality had never been challenged during previous redemptions, were just pieces of paper, empty promises. Only in this way were they able to preserve the 'crisis' narrative.
And of course many gullible people bit.
"In fact, there are 4 levels of government debt, of which future SS and Medicare benefits are level 4, the weakest federal obligation to fulfill."
ReplyDeleteDon I have debunked that particular piece of urban folklore several time. There is no government agency that recognizes those four levels and your belief that they do rests on a grotesque misreading of I believe a CBO paper. Ultimately the meme seems to trace back to a misbegotten attempt to apply Maslow's Hierarchy of Needs to debt repayment sequencing, since we don't need to redeem the Trust Fund assets right now they are obviously not the pressing need say that interest payments on T-Bills would be. You are simply making the category mistake of confusing urgency for reality.
AGAIN.
Levitt, not everything goes down the Memory Hole.
Bruce:
ReplyDeleteyou are entitled to your opinion about their being no levels of federal government obligations to paying off debt.
For me, I will side with the GAO paper in which I found this information.
In addition, there is an earlier GAO paper, of which the same material was mentioned.
I understand you are somewhat of a celebrity, bit I'll side with the GAO, thank you.
In regards to buying Treasury securities, you left out the middle part in between the surplus FICA funds and the Treasury securities being bought.
They were bought because of the loans first made to the Treasury from the SS trust fund to pay for other government expenses.
Is this what Roosevelt intended when he wanted the fund to be self supporting, with no use of general revenues?
They represented collateral for the loans which were made to pay for current expenses, which you seemed to overlook.
Do you need reputable government citations to prove my point?
Tell me this, for I know you DO know a lot about SS.
Where in the legislation is the interest to be paid in debt rather than in cash?
That doesn't seem to coincide with Roosevelt's intention of not using general revenues.
Don Levit
How would the Trustees hold cash? In Benjamins? The law requires that all cash surpluses be invested in securities fully guaranteed as to interest and principal by the U.S. Government. I.e. 'loaned'/invested in the form of Treasuries.
ReplyDeleteThis isn't that hard.
GAO, particularly since its restructuring is not an actual agency of the Federal Government in the same way Treasury, OMB, or even CBO are. Instead it is a blend of research institute reporting to Congress like CRS and a semi-independent outside auditor. If you have anything supporting the idea that the published opinions of an author of a GAO Report have the force of law then bring it.
ReplyDeleteAnd there is no 'middle part'. Treasury collects money and credits it to various accounts internally and then on at least a monthly basis reallocates it to various funds including the Social Security Trust Funds. While some of this allocation to the Trust Funds comes in short term Notes it mostly all gets rolled over into the equivalent of 10 year Bonds. But even at the outside calculation the cash surpluses are converted monthly, the interest payments quarterly, and tax on benefits bi-annually. Something which can be tracked via Treasury's Monthly Trust Fund Reports which come complete with full line item balance sheets.
ReplyDeleteYou could look it up. I did.
Bruce:
ReplyDeleteAre you saying that the SS trust fund did not loan money to the Treasury?
If that's the case why is the intragovernmental debt owed by the Treasury to the SS trust fund over $2 trillion?
You didn;t answer why interest is paid in debt, and not in cash?
Don Levit
Don are you willfully not reading?
ReplyDeleteSS is required by law to invest any surpluses whether those be cash surpluses from taxation or in interest accrued on existing principal in instruments fully guaranteed as to principal and interest by the federal government. Which in practice means Treasury Notes and Bonds. Now you can call the practice of purchasing a Treasury Note or Bond as a 'loan' and equally you can regard the subsequent instrument held by the Trust Fund as a 'debt' to Treasury and NOTHING I have ever posted over the last ten years would say different. Your attempts to insinuate that I am somehow dodging this question are kind of pathetic.
You persist in trying to portray a design feature of Social Security, and one that has served and continues to serve the interests of its contributers and beneficiaries ever since, as some sort of nefarious innovation. Well it isn't, it has been integral to Social Security Trust Fund finance since the Trust Fund was set up on Jan 1, 1940 pursuant to the SS Amendments of 1939 and implicit in the practices at Treasury in the years 1936-1939 prior to those accounts being formally transformed into a Trust Fund.
You started this thread with this:
"That being said, the government should never have been able to loan the SS surplus to the Treasury. I still would like to know what legislation gave Treasury that power?
It introduced a new way of financing government - a backhanded, indirect way.
In additioin interest should have been paid in cash, not debt."
The answers were simple
1) The Amendments of 1939
2) It wasn't new (in that it was in place before first monthly benefits under Title 2 were paid in 1941)
3) Neither the law nor practical reality allowed retention in cash
At which point a person with any sense of shame would have concluded that maybe challenging Professors of Economics like Barkley from a position lacking any historical knowledge of the program was a poor idea. Instead you continue to double down trying to draw distinctions that don't exist.
Give it up, you are not exactly building a fan club in the econoblogosphere, Instead you might spend valuable time looking up the word 'risible'.
BTW Don as I was thinking over this exchange last night I realized that I had made a factual error in my April 24 8:57. Not enough to effect my overall argument but real.
ReplyDeleteBut unless you are real familiar with SS finance not something easy to spot. Let's just say that I am not expecting the 'gotcha' moment to come from you. Hint a detailed study of the Treasury Department's Monthly Trust Fund Reports is the place to start in finding that error.
Bruce:
ReplyDeleteFrom you postings, I have learned a couple of your beliefs.
1. Social Security does not contribute one cent to the deficit.
Correct. In fact, the trust fund has REDUCED the deficits over the years by more than $2 trillion.
2. The government should keep its hands off of Social Security. The contributions and interest should be used only to pay benefits and administrative expenses.
I agree with you.
Unfortunately, due to the excess dollars and "interest" being used to pay for current expenses via a loan to the Treasury, all that remains of those dollars are numbers, like in a calculator.
When the trust fund is tapped, it is the same process the government utilizes to pay all expenses, whether in a trust fund or not.
I can provide governmental links and excerpts to support all my statements.
What do you provide - your celebrity status of 10 years and Barkley's position as a professor.
Sorry, I'll side with the government citations and links, including from the Social Security Administration itself.
Just specify which staement(s) you would like me to support.
Don Levit