In today's New York Times, former editor Bill Keller has an especially obnoxious column about baby boomer entitlement. I am not going to dispute at all his listing of various selfishnesses that we baby boomers have indulged in from Gordon Gekko type follies to self-obsessing about 60s music and other such stuff. Fine. However, partway in the column morphs into yet another of these Social Security bashes by yet another of the Very Serious People, all for the purpose of reducing the deficit to save the future generations from the awful selfishness of the otherwise overly entitled baby boomers. I grant that he briefly mentions taxes and defense spending, but only to dismiss them as insufficient to solve the problem (that is, by raising the former and cutting the latter). Social Security is what must be seriously hit.
Now good old Dean Baker takes him to task pretty strongly today at http://www.cepr.net/index.php/blogs/beat-the-press . He focuses on how rich Bill Keller is, and how he will not be affected by cuts the way most people will be. He also brings up the point that it is health care costs that are most responsible for the dramatic upsurge in past and projected future entitlement spending, which Keller simply said nothing about, thereby really making himself look Seriously Foolish. That is a killer for Keller right there. While he did not comment on Keller I also note Bruce Webb's latest post on angrybear in which after going through a lot of useful analysis he recites his old ditty: "If privatization is necessary, it won't be possible. If privatizatization is possible, it won't be necessary," which about sums it up, at http://www.angrybearblog.com/2012/07/a-social-security-ditty-if.html#more .
Let me add two more points particularly to Dean's justified screed against Keller's pompous silliness. One is that he left out the matter of economic growth. We know how the surplus that Clinton left got turned into the current massive budget deficit. There were the tax cuts, vaguely recognized by Keller. There were those two wars, not quite fully finished, which Keller did not name but did also vaguely note defense spending. But then there was the recession, which has been the biggest souce of the problem. If this could be overcome and we could return to growth of the sort we have previously seen, this would do wonders for alleviating the deficit, and also for putting us back into the second condition noted by Bruce Webb, that we would not need a privatization fix for social security because it would easily fund itself. Of course cutting Social Security and other spending while raising taxes threatens to be the sort of growth-killing austerity we see all those Europeans dragging themselves down with, thus undercutting the effort to get growth going again.
The other point, which may be the key to the real tendentiousness of the hypocrisy of this column, is that he is calling for sacrifices by the baby boomers while guilt tripping the lot of us, the people who would really pay for his proposed social security changes would not be baby boomers at all, but those very young people he is supposedly standing up for against our wickedness. Everybody knows that any changes will affect neither those already on SS, which includes some front end baby boomers already along with some set that will be due to get onto it pretty soon, which will probably expand the set of the unaffected at least haflway down into the baby boomer pile, with only some of the rump end tagalongs vulnerable. No, while changing cost of living indexes may affect even current recipients, the effects will be much greater down the road for those much younger who are supposedly being protected, and of course any increases in future eligilibity ages will be borne by those much younger than baby boomers. Keller is basically selling a fraud here.
So, we are back to one of my favorite lines. Those seeking to convince the young on the basis of the spoiled wickedness of the baby boomers that they should support cuts in future Social Security benefits are being told in effect, "Accept definite cuts now in your future Social Security benefits, because otherwise you might have to accept some cuts in the future to your future Social Security benefits!" Gag.
5 comments:
"the effort to get growth going again..."
I guess you haven't got the memo, Barkley? The austerity drive in Europe and the deficit mania in the U.S.A. should be hints that the honchos are on to something you haven't grasped yet: the benign growth machine ist kaput. Oh, they'll give lip service to the ol' time religion growth but they know -- as you SHOULD know -- that growth ain't gonna happen without ending the upward redistribution of income and wealth. Big Time. And they are not buying that. The rich folks are planning on hunkering down and holding onto the 'edge' they've got. 'Growth' as a 'technocratic' way to smooth over class conflict is obsolete.
Keller falls for the "people live 14-more years" illogic in arguing for a raise in the age at which SS benefits become available. People who reach 65 today live about 4 more years compared to people who reached age65 in 1940. That means only four more years of potential payout. But, we have already increased the retirement age for full SS benefits to 67, thus eliminating half of the extra years' payout due to increasing lifespan. Is it important to close more than half of the 4-year increase? I leave it to you, but remember two things:
1). Real income is way up since 1940, and we might want to devote a few more resources to SS recipients, and
2). People who live 14 more years pay into the SS program for an additional 12 years-- Ten of the fourteen extra years working till 65, and two more working years to reach the new retirement age of 67.
The real reason that the trust fund faces liquidity problems is not due to the baby boomers or the youth, or any particular American citizen - other than the U.S. Congress. It was the Congress who discovered a clever way of paying for expenses, when the revenues ran short. And, this was by borrowing from the SS trust fund (and 23 other trust funds) the excess FICA dollars and "interest."
And, this clever way of leveraging money provided, from an accounting perspective, an asset to the SS trust fund and a liabilty to the Treasury, for an "accounting wash." The clever leverage comes in to play from a cash perspective, which is more relevant than the accounting perspective.
When was the last time you paid for groceries with accounting dollars?
The cash was used immediately, and the liability portion was deferred for 27 years (until the cash outgo exceeded the cash income). Economic Darwinism comes into play now, when the trust fund interest (and eventually, principal) can be redeemed to pay the cash shortfall either by general revenues (if a surplus) or increasing debt held by the public (if a deficit). Guess which vehicle was used?
That would be a great loan for the average Joe, don't you think? Just imagine, you use the asset part immediately, and do not have to pay anything, nothing, not even interest for 27 years.
Don Levit
S-man, I simply avoided discussing at all how one would get growth going again in what was already a long post. That is a large topic of its own. I agree that greater equality of wealth and income would help that, for what it is worth, but there is a lot of other stuff involved as well.
Richard, I agree.
Don L., This matter of the accounting and the size of the funds goes back to the Greenspan fix adopted by Reagan and Tip O'Neill, and must be seen in the broader context of what happened to the tax side of fiscal policy during the Reagan administration. In a nutshell, Reagan reduced income taxes while lowering their progressivity while raising fica, which is regressive, thus sharply making the tax code far less progressive. The deficits arising from the income tax cuts then had to be "paid for" by the surpluses accruing to the Social Security Trust Fund.
Barkley:
What you wrote about the relationship between income and FICA taxes may well be true, but, as far as I know, it is a matter of opinion.
Relevant, reputable excerpts and links would be helpful.
What I wrote can be backed up by several reputable government sources.
I have the excerpts and links for those who are interested.
Please pose a specific question, so I can provide a specific link.
Don Levit
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