Saturday, September 18, 2010

Dr Doom Does A Doo Doo

In yesterday's WaPo, accessible as one of Mark Thoma's general links, , Nouriel Roubini sounded very reasonable for anyone addressing the utterly corrupt and degraded "catfish" deficit commission soldouts. He proposed a cut in payroll taxes, to be made revenue neutral by following through on the Bush-mandated end of his own tax cut for those earning more than a quarter of a million a year. He then proposes, absurdly unrealistically, that if his favored payroll tax cut were to be actually implemented, in a couple of years it would be rescinded. Well, kiddie-poos, anybody who thinks that the probability of such a tax cut once delivered being undone in a few years is greater than that the Bush tax cut for the rich will be undone by this Congress, well, there is this bridge in Brooklyn that I hear is for sale and I have access for selling...

So, I have great respect for good old Doctor Doom, but on this one he is a bit too far from Washington. His proposal sounds not too bad on paper, but in the real world it sucks. He is too far from Washington, and really just does not know what is going on. The bottom line is that for the foreseeable future social security benefits will be dependent on the revenues from the specific taxes set up to fund it, the boring old payroll taxes that he wants to "temporarily" cut. Sorry, Nouriel, but that ain't going to happen. The bastards will not undo that cut, and then they will come down with all their bought-out disgusting piece of shit commisssions to use that as an excuse to really seriously cut future social security benefits far beyond the abysmal one year increase in some future retirement age for eligibility the current catfish commish is pushing. Get it together, Dr. Doom; you are out out to lunch with this. Leave the recognized funding for social security alone, even if it is highly regressive. It is the deep key to the deepest social contract that American society from the New Deal has.


coberly said...


you are right.

until the very end when you give too much away to the enemy by calling SS regressive. SS is not a "tax" in the ordinary sense of a tax. It's an insurance premium, and the payout is highly progressive.

It is desperately important you learn to understand this. Maybe you can explain it to the rest of the kind hearted left who want to fix Social Security by turning it into welfare.

The workers can pay their own SS "tax" forever, with an increase in the premium that amounts to twenty cents per week per year to pay for the fact that they are likely to be living longer than their grandparents.

Don't try to turn it into a "progressive" tax that turns it into welfare that FDR was smart enough to keep it from becoming "so that no damn politician can take it away from them."

It's hard enough keeping the damn politicians from taking it away as it is, without well intentioned people turning it into welfare, which, i guarantee they will know how to take away without any fuss at all.

Bruce Webb said...

The problem with Roubini and a bunch of left commentators is that they keep coming up with solutions to the wrong problem. Yes we should work to make the tax system more progressive. No we shouldn't devote those extra revenues to Social Security.

One is the reason Dale brings up, Social Security was set up on an insurance model for very sound reasons.

Two is Rosser's Equation. Although few people understand this CBO has calculated that 45% of future growth in Social Security costs is due to the formula that has its real benefits as measured in purchasing power growing over time. And as it turns out growing enough that even the projected 22% cut at Trust Fund Depletion still would leave a better real benefit than today. Yes we can and should take steps to shore up those benefits, but not at the cost of taking opportunities to use restored tax progressivity to address a whole bunch of other priorities more pressing than a nominal cut to benefits 27 years from now which may or may not be necessary anyway.

It kills me that in a world where the wealthy are fighting to the death to avoid a restoration of Clinton era top rates that people blithely suggest we can just slap on 4 or 6 or 12.4% on and dedicate it to Social Security. Which won't need the money for years. Not only is this not productive, it simply feeds the narrative that somehow Social Security is the biggest problem facing us when in reality it should be far down the priority list.

Plus addressing the biggest challenge we have today, which is high unemployment that threatens to become structural has the side effect of fixing Social Security along the way. There is nothing about SS that can't be fixed with 5% unemployment and 1.5% real wage, achieve that and money rolls in the door to the Trust Funds. I think they call that 'Win Win'.

TheTrucker said...

Thank you, Bruce Web. The analysis and the proposed address to the problem is marvelously simple when we allow the mind to operate at something other than the bean counting level as you have done. It is unfortunate that none of our political leaders have the ability to deliver this message in a way that the majority of the citizenry can understand.

Jack said...

"It is unfortunate that none of our political leaders have the ability to deliver this message in a way that the majority of the citizenry can understand."

I would suggest that it is not an issue of ability to deliver by the congressional leadership, but one of willingness. The resolution to the unbalanced budget and the fact that Social Security is not the problem are too clear cut to be the subject of factual debate. The debate is purely political and driven by a lack of equal representation in the congress. Yes, we all have one voted, but the effect of money is to distort the understanding of those who vote. I can't say that Roubini has gone to the dark side of the debate, but many like him seem not to understand issue that they are certainly observant enough to know better. Then add the entire propaganda industry of think tanks propagated for the express purpose of misrepresenting the facts of such issues and the result is a captured Congress and CatFood Commissions appointed by a President who seems to be out to lunch on issues that he certainly understands better then his actions imply. said...

Let me say that I probably overdid it in terms of hyperbolically picking on Roubini, whom I mostly respect. It may have been frustration that someone like that was falling for something like this, although the analytics if one could have the politicians behaving are correct: temporarity cutting the fica tax while eliminating the Bush tax cuts for high income folks could be a revenue neutral way of providing some fiscal stimulus. But one could achieve the same result by simply further cuts in income taxes for lower income people.

There is a huge amount of politics behind this, clearly. One can go back to the last period of the Bush presidency when there was a push by Dem Kent Conrad, then Chairman of the Senate Finance Committee along with some high level people in the Bush adminstration to impose a simultaneous benefit cut with a tax increase on the social security system, it being thought this was the only way to sell a tax increase. That got squashed by Cheney, who maintained the "no tax increases" mantra, along with Grover Norquist et al. But the ghost of that, that somehow Social Security is the easy target for reducing the deficit continues to haunt us.

CMike said...

Does anyone have figures for the percentage of all earned income these days that is exempt from the Social Security tax because it is made up of portions of individual incomes that exceed the cap and what those percentages were one, two and three decades ago?

Does anyone have figures for the ratio between earned and unearned income these days vs. what those ratios were in the past?

Bruce Webb said...

CMike the answer to your first question in brief is 90% then, 83-84% now. I don't have the answer to your second question but it is not in principle hard, someone here can answer it off the top of their heads. Even shorter answer 'a lot'.

CMike said...

Thanks Bruce. (And does anyone think this change bodes ill for Social Security's future? I haven't seen this matter being discussed.)

Bruce Webb said...

It doesn't help. The outlook for Social Security brightened so much between 1997 and 2001 that Barkley and me independently came to the conclusion that the odds of long term solvency were more likely than not. The dates of Trust Fund Depletion were being pushed out at a rate of more than two years per year and the 75 year payroll gap shrank from 2.23% of payroll down to 1.89%. On my reading this was a result of better than projected productivity actually translating to improvements in Real Wage. Under Bush economic policy this progress in SS solvency first stalled then reversed, in my view precisely because of the flattening of Real Wage and failure to invest in the infrastructure that would have sustained productivity.