Will talking more about Social Security accomplish anything?

[PoS]

It is a very difficult thing to do. If you say just end it, you will have retirees in significant financial straits. If you don't, you will simply make future retirees suffer the consequences. There is no free lunch. The bill that our parents and grandparents ran-up has to be paid by someone.

Hopefully it can be phased out in stages so that taxpayers wont be put in a catastrophic situation. Say, the oldest retirees could be put on some sort of government assistance program while those not of eligible age will get a fraction of what they put in back and the rest of the program gets cancelled.

 

[JohnfrmClevelan]

Well, actually R&R had only found a correlation between growth and debt that turned out to have a problem in the data set. If I recall, the later results still pointed in the same direction, though, with less robustness.

There are some other papers that claim to show a correlation, and there are some other papers that claim there is no correlation, and there are papers that claim to show that higher deficits are a result of slower GDP growth, mostly due to lower tax receipts. To me, the last explanation is the only one that makes logical sense. If I'm going to trumpet a theory that isn't solidly supported by data, I at least want it to be the most sensible explanation.

That is not an explanation and there are a lot of unanswered questions, because fiscal and monetary policies intermingle and the different tools work differently in these their various combinations. The type of debt and its relation to GDP and GDP growth are important. Also varying economic situations react differently and are impacted with differing lag times and sometimes with a lead.

Also the major effect on growth is not even. It is not even in the same direction, which is what Keynes pointed out. If the government spends money the economy will grow. This impact will initially be greater, if the money is debt financed deferring the slowing effect of taxation into the future. When the spending goes on and the size of the debt climbs there are many ways that this can effect growth negatively. There are bubbles, inflation, interest payments that grow to a point, where the government can no longer cope. Which of these or which combination will trip an economy depends on the circumstances.

But a government can always "cope" with interest payments paid with fiat dollars, because the dollars themselves cost the government nothing to make. This is a point that people are not catching on to - I'm not saying that all spending is good, or that you cannot spend too much, or that it won't lead to inflation, I'm saying that the government can create all of the dollars it needs to pay any bills denominated in dollars. They can do this without spending any real resources. With a change in the laws (or by using the platinum coin), they could even do this without issuing bonds at all. That makes the risk of default zero (save for political stupidity, like choosing to default), which was not true when the govt. was promising to procure more gold for bondholders.

When you apply Keynes, you have to remember that Keynes' theories (which I agree with) were designed for a gold-convertible currency. Bonds represented real debt, because the govt. had to come up with gold, not just more paper. So back then, running a surplus actually did affect the govt.'s ability to create more dollars in the future, because that surplus meant the govt. got some of their gold back (or owed less).

These theories haven't changed since before we went off the gold standard, but they need to be re-examined, because going fiat was a fundamental change. Interest rates work differently, money creation works differently, trade deficits work differently - lots of things changed.

 

[JoeTheEconomist]

This is a complicated problem.

Hopefully it can be phased out in stages so that taxpayers wont be put in a catastrophic situation.

The idea here is to mug non-voters. That is how Social Security has worked for 80 years. Voters give to themselves at the expense of non-voters. In the case of the phase-out, it means that the FICA contributions of voters were contributions on which they demand a return. FICA contributions of future workers are just taxes on which they get nothing. I am not sure how well that idea will fare as the non-voters get a chance to vote.

Traditionally the bait and switch is used well we won't charge them a payroll tax. How are you going to pay-off the voters as it is phased-out? With increased income taxes. Do you really think that there is a difference between a payroll tax and higher income tax?

Say, the oldest retirees could be put on some sort of government assistance program while those not of eligible age will get a fraction of what they put in back and the rest of the program gets cancelled.

The suggestion is to end it for non-voters basically. Why not, just end it and let government assistance provide for those in need as well as it can? Move what assets the system has to the govt assistance program.

I am not interested in the direction of reform, only that we have an honest discussion about it.

 

[tres borrachos]

The last real reform was 1983.

No politician wants to admit that there is a problem that would require a change.

I agree 100% with this.

 

[dad2three2001]

The flaw in your reasoning is that Social Security is not an arm of the federal government. It demonstrates that you do not know the limits of Social Security, or structurally how it is paid. It is silly to compare an appropriated expense to a financial system with defined inputs and outputs. That is silly. Suggesting that FICA taxes go into the 'same pot' is beyond silly. It is factually inaccurate. FICA taxes are used to pay the benefits of existing beneficiaries. Since 2010, there hasn't been so much as a penny left over to go 'into the same pot'. It is a cliché to suggest that the Social Security Trust Fund has been raided. The SSTF gets better terms than any private pension. So where is all of your to-do over the pension money going 'into the same pot as every other federal tax'. No one raises the complaint about private pensions because they would be dismissed as a crank. It is passable for Social Security because very few people understand that the government has no liability for the promises.

So the more than $2.5+ trillion in excess payments (we call them treasury bonds) aren't really owed to SS trust fund? So the right wingers screaming about 47% not paying taxes is a myth?

 

[JoeTheEconomist]

I agree 100% with this.

What problem???? CBO put a life expectancy on full benefits at 2031. That means that someone reaching full retirement today has a longer life expectancy than Social Security does.

 

[dad2three2001]

Hopefully it can be phased out in stages so that taxpayers wont be put in a catastrophic situation. Say, the oldest retirees could be put on some sort of government assistance program while those not of eligible age will get a fraction of what they put in back and the rest of the program gets cancelled.

Lol, SS has worked in Germany (basically the same system) for nearly 150 years. Weird right? Right wingers (Libertarians ARE FARRRR right economically) ALWAYS have problems properly funding or running programs then want to complain about the same programs

The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it.
P. J. O'Rourke

 

[JoeTheEconomist]

So the more than $2.5+ trillion in excess payments (we call them treasury bonds) aren't really owed to SS trust fund?

The Federal government owes all bondholders equally whether it is China or SS. My comment is in response to someone who believes that payroll taxes are lumped into a pot with all other taxes. While the money is owed, and 2.8 (the latest figures) sounds big, that surplus will be gone in roughly 17 years (CBO's latest projection). The problem isn't that the Trust Fund was raided, it is that 2.8 trillion is basically economic parsley compared to what the system spends.

So the right wingers screaming about 47% not paying taxes is a myth?

Not sure what this has to do with Social Security. It isn't right wingers who came-up with the figure. It is the Tax Policy Center, a left of center think tank.

 

[dad2three2001]

What problem???? CBO put a life expectancy on full benefits at 2031. That means that someone reaching full retirement today has a longer life expectancy than Social Security does.

How many times has it been 'tweaked'? Do you HONESTLY think it will not be fixed again? It was WAY worse before Greenspans commission in the 1980's, where Reagan increased taxes by 40% and used revenues to hide the true cost of his tax cuts for the rich?

 

[JoeTheEconomist]

How many times has it been 'tweaked'? Do you HONESTLY think it will not be fixed again? It was WAY worse before Greenspans commission in the 1980's, where Reagan increased taxes by 40% and used revenues to hide the true cost of his tax cuts for the rich?

The system wasn't in worse shape in 1983. The system was insolvent. That is a cashflow measure. Actuarially, SS has been deteriorating steadily since the day the first payment was collected. In 1983, you had a lot more room for tweaks. In 1983, Social Security wasn't means tested, today it is. In 1983 millions of federal workers weren't part of the system. They are today. Only 6% of the work force isn't covered. I am not sure where the 40% comes from, but let's assume that it is correct. Are you ready for another 2.72% which is basically another 20%. That is a step price to pay when the government is cutting back programs like Meals On Wheels. Mind you that doesn't fix social security. That is the cost to make the problem of boomers a problem for Millennials.

Here is what the 1983 reform did. It preserve benefits for voters largely at the expense of non-voters. I don't think that will work again.

 

[dad2three2001]

The Federal government owes all bondholders equally whether it is China or SS. My comment is in response to someone who believes that payroll taxes are lumped into a pot with all other taxes. While the money is owed, and 2.8 (the latest figures) sounds big, that surplus will be gone in roughly 17 years (CBO's latest projection). The problem isn't that the Trust Fund was raided, it is that 2.8 trillion is basically economic parsley compared to what the system spends.




Not sure what this has to do with Social Security. It isn't right wingers who came-up with the figure. It is the Tax Policy Center, a left of center think tank.

So taxes aren't lumped into the same pot? Weird, Everyone I com,e in contact with thinks a tax is a tax.




Yes, that's EXACTLY what the tax policy said *shaking head*

"1. Forty-seven percent of Americans don't pay taxes.

The most pernicious misconception about people who don't pay federal income taxes is that they don't pay any taxes. That oft-heard claim ignores all the other taxes Americans encounter in their daily lives. Almost two-thirds of the 47 percent work, for example, and their payroll taxes help finance Social Security and Medicare. Accounting for this, the share of households paying no net federal taxes falls to 28 percent.

And those aren't the only other taxes they bear. According to economic research, the corporate income tax discourages domestic investment; that depresses wages, so workers are effectively paying some of the corporate tax. More directly, many households pay federal taxes on gasoline, beer and cigarettes. And then there are state and local sales, property and income taxes — all of which are often less progressive than the federal income tax. Putting all these together, a family of three with an income of $30,000 would owe no federal income tax (in fact, they would get money back). But they could easily pay more than $4,500, or 15 percent of their income, in taxes."

Five Myths About the 47 Percent

 

[dad2three2001]

The system wasn't in worse shape in 1983. The system was insolvent. That is a cashflow measure. Actuarially, SS has been deteriorating steadily since the day the first payment was collected. In 1983, you had a lot more room for tweaks. In 1983, Social Security wasn't means tested, today it is. In 1983 millions of federal workers weren't part of the system. They are today. Only 6% of the work force isn't covered. I am not sure where the 40% comes from, but let's assume that it is correct. Are you ready for another 2.72% which is basically another 20%. That is a step price to pay when the government is cutting back programs like Meals On Wheels. Mind you that doesn't fix social security. That is the cost to make the problem of boomers a problem for Millennials.

Here is what the 1983 reform did. It preserve benefits for voters largely at the expense of non-voters. I don't think that will work again.

The usual right wing talking point. I'm shocked

Of course we couldn't just take the cap off of the limit right? Solves the problem 100%

There is NOTHING really wrong with SS except the GOP hate for a social program. Germany has had it for nearly 150 years. SS keeps half of seniors out of poverty, in fact the nest anti poverty program the US has ever come up with. Solutions are easy, your myth of $23 (?) trillion in unfunded obligations is over 75 years, lol

 

[dad2three2001]

Between 1984 and 2010, the excess funds were used to buy government securities which earn interest. Starting in 2010, interest on those securities are what allowed Social Security to pay full benefits. Starting in 2020 or so, the principal will be redeemed because payroll taxes + interest will not cover the expense of benefits. By 2031 (according to CBO), the Trust Fund will be exhausted.

Myth No. 1: Social Security is going bankrupt

The extra money built up in a trust fund that collects interest. But due to demographic and economic changes (more on that in a minute), it's expected that insurance payments will begin to exceed income in 2021. Around 2033, the fund will run out.

But even then, the revenue Social Security collects each year would still be enough to pay out about three-quarters of scheduled benefits as far as the eye can see.

Myth No. 2: Meeting Social Security's future shortfall is really hard

We only need to come up with about 0.9% of GDP in order to make Social Security's revenues match up with its expenses for the next 75 years. To put that into perspective, 0.9% is close to the cost of unemployment insurance, the high-end Bush tax cuts, or one-fifth of the Defense budget. That's not insignificant, but it's hardly apocalyptic.


There are two basic ways to close that gap. We could increase payroll tax revenue by raising the cap (currently any personal income beyond $110,100 is exempt from Social Security payroll taxes) or raising the rate. Or we could cut benefits by lowering payments and/or raising the retirement age.

Myth No. 3: Social Security's financial challenges are due to rising life expectancies

5 Huge Myths About Social Security - DailyFinance

 

[dad2three2001]

I agree, but the point was that Republicans are willing to try, but they get hammered by Dems as murderers when they do. So there is no point in trying anymore. SS is the Dems responsibility.

Yeah, because the GOP, who fought EVERY social program from exception, has wanted to 'save it'... lol

Privatizing isn't saving...

 

[dad2three2001]

Old debt and deficit hawks are two very different things. One is the accumulation of past deficits and the other is the current one. I am a deficit hawk, but in terms of past deficits (which we cannot change) need to be financed over the period of time which they are expected to live - 30 years is the max. They should issue a 50 or 100 year debt at these prices.

Weird how 90%+ of current debt can be traced to GOP policies and more than 50% of future debt (future deficits) can be traced to Bush policies directly, not counting the financial crisis he gave US?

Almost like they don't want Gov't to work properly, perhaps making it small enough to drown in a tub?

 

[dad2three2001]

I don't believe that it is a positive thing. I sense it is just the politics of delay that have created a larger and larger problem. I think that the politicians are waiting until a crisis defines the solution by itself, such as the financial crisis.

Politicians aren't waiting, the GOP has decided against governing for the best interests of all, for over 20+ years now, THAT'S why there hasn't been a fix.

 

[dad2three2001]

I have written a number of times about the differences between today and 1983. There isn't much room in which to kick the can. I think that s-corp earnings are going to be subject to taxes at some point. But younger workers are going to have a problem with increasing taxes for Social Security at a time when they are cutting back programs for the young. Interest today is around 420 billion, and that amount will only rise. If interest rates normalize the government will have to find $200 billion in spending cuts just to compensate for the higher interest cost.

And if federal revenues got back to Clinton levels of near 20%-21% of GDP? It's false choice between cutting programs for the working while the 'job creators', specifically the top 1/10th of 1% of US who get half of all cap gains and dividends, pay less than half the effective taxes they paid in the 1950's, on MUCH less income (share of the pie) and just getting more revenues from the leisure class!

 

[dad2three2001]

Neither party is willing to touch Social Security. Neither party has had a serious reform package in 30 years. The Bush proposal was a terrible idea, and it couldn't even get out of a GOP controlled committee. All of the politicians are the same here. In 2012, Romney and Obama agreed on one thing, Social Security is - you know - structurally sound.

Budget of the Congressional Progressive Caucus Fiscal Year 2012

Our Budget Safeguards Social Security for the Next 75 Years

• Eliminates the individual Social Security payroll cap to make sure upper income earners pay their fair share
• Increases benefits based on higher contributions on the employee side


Congressional Progressive Caucus : The People's Budget

 

[JoeTheEconomist]

So taxes aren't lumped into the same pot? Weird, Everyone I com,e in contact with thinks a tax is a tax.




Yes, that's EXACTLY what the tax policy said *shaking head*

"1. Forty-seven percent of Americans don't pay taxes.

The most pernicious misconception about people who don't pay federal income taxes is that they don't pay any taxes. That oft-heard claim ignores all the other taxes Americans encounter in their daily lives. Almost two-thirds of the 47 percent work, for example, and their payroll taxes help finance Social Security and Medicare. Accounting for this, the share of households paying no net federal taxes falls to 28 percent.

And those aren't the only other taxes they bear. According to economic research, the corporate income tax discourages domestic investment; that depresses wages, so workers are effectively paying some of the corporate tax. More directly, many households pay federal taxes on gasoline, beer and cigarettes. And then there are state and local sales, property and income taxes — all of which are often less progressive than the federal income tax. Putting all these together, a family of three with an income of $30,000 would owe no federal income tax (in fact, they would get money back). But they could easily pay more than $4,500, or 15 percent of their income, in taxes."

Five Myths About the 47 Percent

Most people that you come into contact with are other patients.

Payroll taxes are collected by the Treasury under the power to tax. The money is then distributed to beneficiaries. If anything is left over, the money is used to buy government securities. The terms of the purchase are better than your private pension gets. Where is all the hoopla about private pensions being raided, and merged with the general fund. You don't hear about it because it isn't happening. Social Security is a financial system not much different from your private pension. It owns government securities with which to pay benefits when those benefits are due. In the case of Social Security it is underfunded.

It is very difficult to call payroll taxes actually taxes. The payroll tax is collected in exchange for a promise to pay future benefits. Giving money in exchange for future payments isn't a tax. That is what people call a loan. That means that you have an asset - one that is very low-grade - on your books in exchange for payroll taxes. In the case of low-wage workers, ie your 47%, SS actually pays a positive return. So if Social Security is pays him, it is actually a decent investment - not a tax at all.

 

[dad2three2001]

Of course its not an answer. There isnt going to be an answer until congress is replaced. Republicans arent allowed to touch it, and Democrats dont want to, dont think there is problem, and in any case would just raise taxes to cover it. So, nothing will change until Democrats care enough to put in writing a serious proposal.

Ideally we would get enough people in congress to at least let us opt out.

The fairy tales and myths libertarians 'believe in' *shaking head*

There was a reason SS was created, like Medicare, labor laws, environmental laws, etc... Wishful thinking and holding onto failed policies, as libertarians/CONservative do, is just burying your head to history!

 

[JoeTheEconomist]

The usual right wing talking point. I'm shocked

Of course we couldn't just take the cap off of the limit right? Solves the problem 100%

There is NOTHING really wrong with SS except the GOP hate for a social program. Germany has had it for nearly 150 years. SS keeps half of seniors out of poverty, in fact the nest anti poverty program the US has ever come up with. Solutions are easy, your myth of $23 (?) trillion in unfunded obligations is over 75 years, lol

You really need to spend some time researching your opinion.

Completely eliminating the cap does not solve the problem. It doesn't even make Social Security solvent. You need to look at current research. Material from 2011 is woefully out of date. This isn't the type of problem that you try to solve in the fewest number of words.

There is no evidence that the GOP dislikes the program. In fact... They had control of the Presidency and Senate at the time of the last rescue - which they supported 4 or 5 to 1.

"SS keeps half of seniors out of poverty, in fact the nest anti poverty program the US has ever come up with"

This is silly. It is based on the idea that poverty is measured by income rather than net-worth. Seniors according to the Federal Reserve have the largest net-worths of any age demographic. Social Security is a subsidy from people who are in poverty to people who aren't. Sorry you can't stand facts on their head.

It is a completely dishonest representation of the system because it ignores the cost to participate in the system. Someone who retires 2010 and later gets back less than they on contribute - that is on average. So Social Security can't lift anyone out of poverty that Social Security did not put into poverty in the first place.

The $23 trillion shortfall is not my myth. It is a myth propagated by the Trustees of the system.

 

[dad2three2001]

Most people that you come into contact with are other patients.

Payroll taxes are collected by the Treasury under the power to tax. The money is then distributed to beneficiaries. If anything is left over, the money is used to buy government securities. The terms of the purchase are better than your private pension gets. Where is all the hoopla about private pensions being raided, and merged with the general fund. You don't hear about it because it isn't happening. Social Security is a financial system not much different from your private pension. It owns government securities with which to pay benefits when those benefits are due. In the case of Social Security it is underfunded.

It is very difficult to call payroll taxes actually taxes. The payroll tax is collected in exchange for a promise to pay future benefits. Giving money in exchange for future payments isn't a tax. That is what people call a loan. That means that you have an asset - one that is very low-grade - on your books in exchange for payroll taxes. In the case of low-wage workers, ie your 47%, SS actually pays a positive return. So if Social Security is pays him, it is actually a decent investment - not a tax at all.

Got it, start out with an ad hom, then go into false premises, distortions and lies, the usual CONservative (centrists, lol) mode

SS IS INSURANCE. They collect taxes to fund it. Pretty simple really. The Gov't takes in TAXES to fund current beneficiary's, it's just ACCOUNTING you are speaking of. The usual right wing nonsense. I'm shocked

Let's go through your reasoning, Gov't collects taxes for SS BUT SS isn't a tax? lol



Thanks for addressing the link, BTW

 

[JoeTheEconomist]

Budget of the Congressional Progressive Caucus Fiscal Year 2012

Our Budget Safeguards Social Security for the Next 75 Years

• Eliminates the individual Social Security payroll cap to make sure upper income earners pay their fair share
• Increases benefits based on higher contributions on the employee side


Congressional Progressive Caucus : The People's Budget

Wow what a reliable source !!!!

Here is where the SSA administration says that they are wrong. Not even Bernie Sanders stands by your claim anymore.

Raising maximum benefits yields a 2061 solvency date.

Long Range Solvency Provisions

 

[JoeTheEconomist]

SS IS INSURANCE. They collect taxes to fund it. Pretty simple really. The Gov't takes in TAXES to fund current beneficiary's, it's just ACCOUNTING you are speaking of. The usual right wing nonsense. I'm shocked

Thanks for addressing the link, BTW

I am guessing that you don't know the mean of words. Social Security is financed, not funded. That means that Social Security collects 'payroll taxes' and in exchange issues promises of future benefits. Note, the Trustees refer to a financing gap, not a funding gap. That means that Social Security will be unable to borrow sufficiently given the current laws.

Your link doesn't deserve much comment : "But they could easily pay more than $4,500, or 15 percent of their income, in taxes."

Well except that they would qualify for the EITC which is a rebate on the payroll taxes. It isn't that 47% of the public pay zero. It is that 47% don't have a income tax obligation. Many of these people get a refund based on tax credits. But let's say your representation were true. In exchange for the $4,500 in 'taxes', the worker gets a promise of future benefits which is valued somewhere between $4,200 and $5,000. So your myth buster isn't being completely honest.

 

[joG]

There are some other papers that claim to show a correlation, and there are some other papers that claim there is no correlation, and there are papers that claim to show that higher deficits are a result of slower GDP growth, mostly due to lower tax receipts. To me, the last explanation is the only one that makes logical sense. If I'm going to trumpet a theory that isn't solidly supported by data, I at least want it to be the most sensible explanation.

I am not sure to which extent your exposure to Debt, growth and investment is. It cannot really be very large. There is very little doubt out there, that large public debt (above the optimal level) lowers the long term growth trajectory. Now you might understand the studies that find little correlation to falsify this. But I honestly know not one economist, that thinks that die debt can be let grow indefinitely while the economy grows on.

But a government can always "cope" with interest payments paid with fiat dollars, because the dollars themselves cost the government nothing to make. This is a point that people are not catching on to - I'm not saying that all spending is good, or that you cannot spend too much, or that it won't lead to inflation, I'm saying that the government can create all of the dollars it needs to pay any bills denominated in dollars. They can do this without spending any real resources. With a change in the laws (or by using the platinum coin), they could even do this without issuing bonds at all. That makes the risk of default zero (save for political stupidity, like choosing to default), which was not true when the govt. was promising to procure more gold for bondholders.

When you apply Keynes, you have to remember that Keynes' theories (which I agree with) were designed for a gold-convertible currency. Bonds represented real debt, because the govt. had to come up with gold, not just more paper. So back then, running a surplus actually did affect the govt.'s ability to create more dollars in the future, because that surplus meant the govt. got some of their gold back (or owed less).

These theories haven't changed since before we went off the gold standard, but they need to be re-examined, because going fiat was a fundamental change. Interest rates work differently, money creation works differently, trade deficits work differently - lots of things changed.

As I tried to explain to you, the creation of "fiat money" is not going to be a pain free solution to large and growing debt, as we have seen in many countries and under very differing situations in the past. You inevitably run into the situation, where inflation picks up. And btw, I never found a passage in Keynes, where he was so stupid as to say that fiscal and monetary policy could remain expansionary into a period of strong growth, the results of which, we are presently confronted with. It was quite clear at that time that that would bring about the bubbles we have learned are one hazard to economic growth. And I know there is a lot of concern about "fiat money". But that has been around since the Fuggers and Medici. So don't kid yourself. There are changes going on all the time and shifts in the economic relationships between the players. But the major changes are not there. At least you have not convinced me that they are.