WE Blog

Ditto that phantom.

These programs are important. Reinstate the estate tax and the capital gains tax.

“Reinstate the estate tax and the capital gains tax.”

Not nearly enough. I have to find the sources again, but I read somewhere on a Treasury related web link, that even if you took all the wages from
the top 5% of income earners (the very rich), it would not be enough to pay off the debt. That means taking EVERYTHING the rich earn.

It still is not enough. Someone is going to have to compromise and (here goes) do what every one of us do when we don’t have money in our bank account (ready for this). We are going to have to
(don’t faint) cut spending.

Our nation has spent itself sick.

Suddenly, Bush’s plan for privatizing Social Security looks viable eh?

Social Security and Medicare isn’t the 800 pound gorilla, it’s more like an entire herd of 800 pound gorillas ready and willing to wreak havoc.

SD,

SolDevVB
Posted March 27, 2008 at 7:17 am | Permalink

http://blogs.kansas.com/weblog/2008/03/heed-warning-call-on-social-security-medicare/#comment-320628

Steven,

You don’t have to get personal. Why should I make
a sacrifice?

The current generation of old farts (greatest generation) have been unwilling to have ONE DIME cut from their SS benefits. They and AARP whine and cry if someone even sneezes at their COLA. They also cried (with libs) about WE NEED FREE PRESCRIPTION DRUGS! So Bush and all opened up the entitlements for that to the tune of Billions THEIR OWN CHILDREN WILL HAVE TO PAY.

Further, raising the retirement age is not just a LOST BENEFIT – it is a step backward from your socialist society. We SHOULD be able to retire earlier in life in utopia.

And why should WE have to work more years, blue collar workers (the rich retire whenever they want)? Old men and women doing manual labor? Painting houses, working construction, cleaning homes? Who do democrats represent?

Why SHOULD WE HAVE A LOWER STANDARD OF LIVING THAN OUR PARENTS HAD?????

Don’t give me that “we are living longer” crap. Look at the actuary tables, I have posted links many times. Look at the expected life expectancy based upon YOUR year of BIRTH. Yes, we are living longer. Yes babies born TODAY will live even longer. BUT LOOK AT SAY 1955 DOB. Averages are based upon sex and race. Medium gets confused with averages – but the point is many will DIE before they even REACH the retirement age.

Some solution that is.

Further, if I was twenty again, I would have TIME (compounding of interest) to recover and make plans.

For someone in their fifties today, who has done everything right: Saved, crimped, and invested to make a retirement date based upon life expectancy and investment portfolio -

I don’t have time to recover and readjust for a LOSS of SS. (unless I hit the Powerball, but that ain’t a gonna happen).

In other words, it is much too late to jerk the PROMISE away from those in nearing retirement.
And those nearing = 77 million baby boomers.

I have an idea on how to be part of the solution, but that does not involve raising the retirement age which is a loss of benefits for ALL Americans.

What Social Security Crisis? There is no crisis! All we have to do is raise taxes! The Democrat solution to EVERYTHING!

http://www.truthout.org/docs_05/011805E.shtml

Sen. Kennedy: Well, there’s a number of reactions. First of all, it seems that this administration tries to make a crisis on any political problem. We’ve got a crisis in Social Security, in the funding and the financing which we don’t. We have a crisis in the medical malpractice as the cost for health care and it’s not there. If the president wanted to really do something in terms of the health care, they could have signed the Patients Bill of Rights and provided more protection for people and to deal with this other kind of malpractices unless it’s $2 out of every health dollar.

So now we have the crisis in terms of the funding of Social Security that is non-existent. It’s solid till 2042. And without any help, it’ll be able to continue to 2075 with three-quarters of the benefits if there was going to be no help and assistance to it. All you have to do is raise the payroll tax on that and that would solve most of the kind of a problem that you’d have, other kinds of ways to dealing with it. And that is certainly something we ought to think about.

There is Not a Social Security Crisis!

(Deny, Deny, Deny! Put your head in the sand!)

Sen. Kennedy: Well, there’s a number of reactions. First of all, it seems that this administration tries to make a crisis on any political problem. We’ve got a crisis in Social Security, in the funding and the financing which we don’t.

Hope

Change

Hope

Change

God D*mn America!

Freedom in America? Forget about it….

We will tax the mean nasty rich Republicans to death until we get what we want!

Personally I’ve never trusted the social security system to be there when I’m finally allowed to retire, and it won’t be at age 65 now. The rules keep changing and I really feel for those who don’t think of making a viable retirement plan to lean on in their old age because they’re counting on social security to take care of them….better think again.

GASP! Mary, I thought you were a good Democrat!

Social Security will be there for you, in fact, it will last forever!

How could you think otherwise?

Thank God for FDR!

US Headed for Financial Disaster

(CBS) This segment was originally broadcast on March 4, 2007. It was updated on July 8, 2007. (can’t get any more liberal than that)

When the stock market soars or plunges, everyone pays attention. But short term results aren’t that important to the man you’re about to meet. David Walker thinks the biggest economic peril facing the nation is being ignored, and for nearly two years now he has been traveling the country like an Old Testament prophet, urging people to wake up before its too late. Who is David Walker and why should we care?

As correspondent Steve Kroft first reported earlier this year, he is the nation’s top accountant, the comptroller general of the United States. He’s totaled up our government’s income, liabilities, and future obligations and concluded that our current standard of living is unsustainable unless some drastic action is taken. And he’s not alone. It’s been called the “dirty little secret everyone in Washington knows” – a set of financial truths so inconvenient that most elected officials don’t even want to talk about them, which is exactly why David Walker does.
“I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility,” Walker tells Kroft.

David Walker is a prudent man and a highly respected public official. As comptroller general of the United States he runs he Government Accountability Office, the GAO, which audits the government’s books and serves as the investigative arm of the U.S. Congress. He has more than 3,000 employees, a budget of a half a billion dollars, and a message he considers urgent.

“I’m going to show you some numbers…they’re all big and they’re all bad,” he says.

So bad, that Walker has given up on elected officials and taken his message directly to taxpayers and opinion makers, hoping to shape the debate in the next presidential election.

“You know the American people, I tell you, they are absolutely starved for two things: the truth, and leadership,” Walker says.

He calls it a fiscal wake up tour, and he is telling civic groups, university forums and newspaper editorial boards that the U.S. has spent, promised, and borrowed itself into such a deep hole it will be unable to climb out if it doesn’t act now. As Walker sees it, the survival of the republic is at stake.

“What’s going on right now is we’re spending more money than we make…we’re charging it to credit card…and expecting our grandchildren to pay for it. And that’s absolutely outrageous,” he told the editorial board of the Seattle Post Intelligencer.

You have heard this before, from Ross Perot 15 years ago. You might have even thought the problem had been solved, when President Clinton announced, “Tonight, I come before you to announce that the federal deficit … will be simply zero.”

“Well, those days are gone. We’ve gone from surpluses to huge deficits and our long range situation is much worse,” Walker says.

“President Bush would argue that the economy is in pretty good shape, unemployment is down, the deficit is actually less than expected,” Kroft remarks.

“The fact is, is that we don’t face an immediate crisis. And, so people say, ‘What’s the problem?’ The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country,” Walker replies.

The cancer, Walker says, are massive entitlement programs we can no longer afford, exacerbated by a demographic glitch that began more than 60 years ago, a dramatic spike in the fertility rate called the “baby boom.”

Beginning next year, and for 20 years thereafter, 78 million Americans will become pensioners and medical dependents of the U.S. taxpayer.

“The first baby boomer will reach 62 and be eligible for early retirement of Social Security January 1, 2008. They’ll be eligible for Medicare just three years later. And when those boomers start retiring in mass, then that will be a tsunami of spending that could swamp our ship of state if we don’t get serious,” Walker explains.

To illustrate their impact, he uses a power point presentation to show what would happen in 30 years if the U.S. maintains its current course and fulfills all of the promises politicians have made to the public on things like Social Security and Medicare.

What would happen in 2040 if nothing changes?

“If nothing changes, the federal government’s not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won’t have money left for anything else – national defense, homeland security, education, you name it,” Walker warns.

Walker says you could eliminate all waste and fraud and the entire Pentagon budget and the long-range financial problem still wouldn’t go away, in what’s shaping up as an actuarial nightmare.

Part of the problem, Walker acknowledges, is that there won’t be enough wage earners to support the benefits of the baby boomers. “But the real problem, Steve, is health care costs. Our health care problem is much more significant than Social Security,” he says.

Asked what he means by that, Walker tells Kroft, “By that I mean that the Medicare problem is five times greater than the Social Security problem.”

The problem with Medicare, Walker says, is people keep living longer, and medical costs keep rising at twice the rate of inflation. But instead of dealing with the problem, he says, the president and the Congress made things much worse in Dec. 2003, when they expanded the Medicare program to include prescription drug coverage.

“The prescription drug bill was probably the most fiscally irresponsible piece of legislation since the 1960s,” Walker argues.

Asked why, Walker says, “Well, because we promise way more than we can afford to keep. Eight trillion dollars added to what was already a 15 to $20 trillion under-funding. We’re not being realistic. We can’t afford the promises we’ve already made, much less to be able, piling on top of ‘em.”

With one stroke of the pen, Walker says, the federal government increased existing Medicare obligations nearly 40 percent over the next 75 years.

“We’d have to have eight trillion dollars today, invested in treasury rates, to deliver on that promise,” Walker explains.

Asked how much we actually have, Walker says, “Zip.”

So where’s that money going to come from?

“Well it’s gonna come from additional taxes, or it’s gonna come from restructuring these promises, or it’s gonna come from cutting other spending,” Walker says.

He is not suggesting that the nation do away with Medicare or prescription drug benefits. He does believe the current health care system is way too expensive, and overrated.

“On cost we’re number one in the world. We spend 50 percent more of our economy on health care than any nation on earth,” he says.

“We have the largest uninsured population of any major industrialized nation. We have above average infant mortality, below average life expectancy, and much higher than average medical error rates for an industrialized nation,” Walker points out.

Walker says we have promised almost unlimited healthcare to senior citizens who never see the bills, and the government already is borrowing money to pay them. He says the system is unsustainable.

“It’s the number one fiscal challenge for the federal government, it’s the number one fiscal challenge for state governments and it’s the number one competitive challenge for American business. We’re gonna have to dramatically and fundamentally reform our health care system in installments over the next 20 years,” Walker tells Kroft.

And if we don’t?

“And if we don’t, it could bankrupt America,” Walker argues.

You’re probably expecting to hear from someone who disagrees with the comptroller general’s numbers, projections, and analysis. But hardly anyone does. He is accompanied on the wake-up tour by economists from the conservative Heritage Foundation, the left-leaning Brookings Institution, and the non-partisan Concord Coalition. The only dissenters seem to be a small minority of economists who believe either that the U.S. can grow its way out of the problem, or that Walker is over-stating it.

“The Wall Street Journal for example calls you ‘Chicken Little,’ running around saying that the ’sky is falling, the sky is falling,’” Kroft remarks.

“Unfortunately they don’t get it. I don’t know anybody who has done their homework, has researched history, and who’s good at math who would tell you that we can grow our way out of this problem,” Walker replies.

Federal Reserve Chairman Ben Bernanke validated much of Walker’s take on the situation at congressional hearings this year, and so did ranking Republicans and Democrats on the Senate Budget Committee. Senator Kent Conrad of North Dakota is the chairman.

Sen. Conrad thinks David Walker is “providing an enormous public service.”

Asked if he agrees with Walker’s figures and his projections, Sen. Conrad says, “I do. You know, I mean we could always question the precise nature of this projection or that projection. But, that misses the point. The larger story that he is telling is exactly correct.”

Conrad acknowledges that most people in Washington are aware how bad the situation is. “They know in large measure here, Republicans and Democrats, that we are on a course that doesn’t add up,” the senator tells Kroft.

“Why doesn’t somebody do something about it?” Kroft asks.

“Because it’s always easier not to. ‘Cause it’s always easier to defer, to kick the can down the road to avoid making choices. You know, you get in trouble in politics when you make choices,” Sen. Conrad says.

Asked if he thinks taxes should be raised, the senator says, “I believe first of all, we need more revenue. We need to be tough on spending. And we need to reform the entitlement programs … we need to do all of it.”

But he admits he doesn’t think there’s a consensus for raising taxes.

“Any politician who tells you that we can solve our problem without reforming Social Security, Medicare, and Medicaid is not telling you the truth,” Walker told an audience at the University of Denver.

Over the next year, the nation’s top accountant will be traveling to the early primary states, telling voters that we need to begin raising taxes or government revenues and put a cap on federal spending if we want to maintain our economic security and standard of living.

“If you tell them the truth, if you give them the facts, if you explain this in terms of not just numbers but values and people, they will get it and empower their elected officials to make tough choices,” Walker argues.

Asked if he knows any politicians willing to raise taxes or cut back benefits, Walker says, “I don’t know politicians that like to raise taxes. I don’t know politicians that like to cut spending, but I think what we have to recognize is this is not just about numbers. We are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility, it’s an issue of immorality.”

(The money tree is empty)

“Should be a good show to watch. Course the current retirees today are safe and sound in not sharing in any part of the solution to the problem which THEIR generation created.”

Maybe that’s why the book is called “Americans Greatest Generation”. They were smart enough to screw all their children and grandchildren.

As an example, even though the old farts have ZERO income for 2007, and are only living off SS, they were included in the Economic Stimulous Package FREE MONEY!!!

Yep, my parents, who haven’t paid income taxes in years are getting a $1,200 FREE CHECK from the government. But they are not alone. If you paid zero taxes, and have lot’s of kids, you could get even MORE FREE MONEY.

Our nation, as we know it, is doomed.

AmWay,

Yup and they spent $42 million to mail you a notice that told you you might get free money. Where did that 42 million come from.

Max,
Great post, but IMHO, we DO have a “means test” on Social Security benefits.
Look at Line 20 on Form 1040, “Social Security Benefits” and you will see what I mean.

It is a complicated formula, but single people making more than $25,000.00 might see 50% of their Social Security benefits included in taxable income.

Single people above $34,000.00 in income might see 85% of their Social Security benefits included in taxable income.

For married people, the thresholds are at $32,000.00 and $44,000.00. I am using the 2008 tax year tables.

I use clumsy wording because, well, it is awkward to explain. The Social Security income, itself, is added into the caculation, along with things like Municipal Bond interest, which is usually tax free.

Anyway, this was a very sneaky way to “means test” Social Security, and a large number of retired people do not even know that it happened to them.

In the “tax shelter” business, it is fun to find such people and reduce their tax bills dramatically. If they have large amounts of interest income, it is rather easy to help them.

IMMIGRATION AND SOCIAL SECURITY….Paul Krugman points out that in the 2008 report of the Social Security Trustees released today the “actuarial balance” of the system is better than it’s been since 1993. Interesting! But how much better?
Click here for the answer: last year the trustees estimated that Social Security had an overall 75-year deficit of 1.95% of taxable payroll. This year it’s 1.70%. That’s a pretty substantial improvement. What caused it?
Click here for the answer: Table IV.B9 has only one significant change from 2007: “Methods and programmatic data.” And what might that entail?
Scroll down for the answer: immigrants. To be specific, better estimates of the taxes and benefits received by illegal immigrants — or, as the trustees refer to them, “other-immigrants”:
In previous reports, the other-immigrant population was projected using assumed annual numbers of net other immigrants with a static age-sex distribution. For this year’s report, the annual numbers of net other immigrants are projected by explicitly modeling other immigrants and other emigrants separately.
Translation: instead of just pulling a net number out of a hat, the trustees built a model that estimated the actual demographic characteristics of both immigrants and emigrants. And guess what?
· Illegal immigrants tend to skew young. This benefits the system.
· Young people have more children than older people. This benefits the system.
· Some illegal immigrants pay taxes for a few years and then leave. This benefits the system.
Bottom line: “This year’s report results in […] a substantial increase in the number of working-age individuals contributing payroll taxes, but a relatively smaller increase in the number of retirement-age individuals receiving benefits in the latter half of the long-range period.” Give or take a bit, it turns out that this shores up the Social Security system to the tune of around $13 billion per year. Thanks, illegal immigrants.

http://www.washingtonmonthly.com/

Illegal immigrants are the solution?

“In the “tax shelter” business, it is fun to find such people and reduce their tax bills dramatically. If they have large amounts of interest income, it is rather easy to help them.” — Econ 101

Yep; transfer the interest income to the tax shelter accountant; poof, no more problem.

Door King
Close, but not exactly.
Transfer a large chunk of the money PRODUCING the interest, into a tax shelter, then POOF!

Focus folks!

Those who want to argue about funding priorities and the “coulda shoulda” stuff are just way off the mark.

It is NOT possible for the Federal Government to have a “rainy day fund” of any type. Where will the government “invest” its funds? In Treasury Bonds, of course. Where does money go, once “invested” in Treasury Bonds? Into the General Fund, of course.
—–
Try this: Type this Form into your Microsoft Word program:

I ________________ Do hereby agree that I owe

$1,000,000.00 to ________________.

Signed ________________.

—–

Now, sign YOUR name, ON ALL THREE LINES!

This is how the Social Security “Trust Fund” works.

It is NOT POSSIBLE for the government to “save for the future” in any way shape or form.

The Social Security Trust Fund is simply a way to transfer money from the Social Security Flat Tax to the General Fund, when there is a surplus.

The Social Security Trust Fund is also simply a way to transfer money from the General Fund, to the Social Security Fund, when the Social Security Payroll Flat Tax is not enough to cover current benefits. This is done by “cashing out” the “Bonds” in the “Trust Fund”.

Therefore, NOTHING we could have done, prior to this date, would have made one bit of difference.

Social Security has always been, at its core, a “pay as you go” system, with only a small amount of money transfered to the mirage of a “Trust Fund” every year, over and above current needs.

People ARE living longer. More to the point, the “over 85″ age group is one of the fastest growing age groups in the country.

Social Security problems are, for the most part, a sign of our success in fighting disease and poverty. If mortality tables had stayed the same, since the days of FDR or even LBJ, we would not have a Social Security or Medicare funding problem:

http://www.ssab.gov/documents/mort.projection.ssab.pdf

A few other points.

Capitalist that I am, I must admit the bias of Social Security towards those who live the longest.

Social Security would not work at all if the government did not count on lots of people dying before they ever get a dime out of the program.

Poor people do not live as long as the rest of us.

Black people have much higher rates of heart disease and other illnesses, and do not live as long as the general population, on average.

Having said that, “poor people” can get back a large chunk of the Social Security Payroll Tax in the form of the “Earned Income Credit”.

Also, the “rich” pay taxes on their Social Security benefits, and the “poor” do not pay such taxes.

The rules keep changing and I really feel for those who don’t think of making a viable retirement plan to lean on in their old age

Mary, isn’t everyone’s vialble retirement plan to just die on the job?

VT
Agreed!
I have met people who do not need Social Security at age 62, but do not want to work.
Take that SS income, at age 62, and stick it in the most boring money market type account that you can find, earning even 2% or 3% interest.

At age 66, they can draw interest on that money saved over that 4 year period, which has compounded.

Often times, even at piss poor earnings growth, the earnings on this investment, added to current Social Security earnings, MIGHT well be more than the monthly benefit, had that person decided to WAIT until age 66 to draw SS.

Now, adjust the “rate of return” on the “side fund” up or down to hit the “break even point” and decide if you want to take the “risk” involved.

In other words, what if it takes a 7% rate of return to “beat” waiting for your benefit?

Look at market averages for various invesments, and decide. Taking the benefit early usually wins, for the person NOT expecting any payroll or “earned income” (The Earned Income SS Penalty kills the idea for such person.)

Keep in mind, too, that the “side fund” I suggest can be passed on to your heirs. It is YOURS to do as you wish.

What if you decide, for instance, to WAIT for your “FULL Benefit” at age 66 —

And you die one month after your 66th birthday?

Heil Hillary!

Hey Nazi–glad to see you’re affirming that a Democrat will be your next President.

All the usual dishonesty and fearmongering from slavering Republicans who want to burn up Social Security monies in the stock market. You’ll never quit? Neither will we.

Here’s a nice Krugman column from 2005 thsy unmasks Bush’s effort to “save” Social Security–still as relevant as when Krugman first ran it.

http://www.nytimes.com/2005/08/15/opinion/15krugman.html

And here’s a nice-takedown of the privatizers’ meta-hysteria about the “crisis” of Social Security. I post it in full because of all the smug bleating from GMC70, Econ101, and their ilk.

“Privatizers believe that privatization can improve the government’s long-term finances without requiring any sacrifice by anyone – no new taxes, no net benefit cuts (guaranteed benefits will be cut, but people will make it up with the returns on their accounts.) How is this possible?

The answer is that they assume that stocks, which will make up part of those private accounts, will yield a much higher return than bonds, with minimal long-term risk.

Now it’s true that in the past stocks have yielded a very good return, around 7 percent in real terms – more than enough to compensate for additional risk. But a weird thing has happened in the debate: proposals by erstwhile serious economists such as Martin Feldstein appear to be based on the assertion that it’s a sort of economic law that stocks will always yield a much higher rate of return than bonds. They seem to treat that 7 percent rate of return as if it were a natural constant, like the speed of light.

What ordinary economics tells us is just the opposite: if there is a natural law here, it’s that easy returns get competed away, and there’s no such thing as a free lunch. If, as Jeremy Siegel tells us, stocks have yielded a high rate of return with relatively little risk for long-run investors, that doesn’t tell us that they will always do so in the future. It tells us that in the past stocks were underpriced. And we can expect the market to correct that.

In fact, a major correction has already taken place. Historically, the price-earnings ratio averaged about 14. Now, it’s about 20. Siegel tells us that the real rate of return tends to be equal to the inverse of the price-earnings ratio, which makes a lot of sense.[1] More generally, if people are paying more for an asset, the rate of return is lower. So now that a typical price- earnings ratio is 20, a good estimate of the real rate of return on stocks in the future is 5 percent, not 7 percent.

Here’s another way to arrive at the same result. Suppose that dividends are 3 percent of stock prices, and that the economy grows at 3 percent (enough, by the way, to make the trust fund more or less perpetual.) Not all of that 3 percent growth accrues to existing firms; the Dow of today is a very different set of firms than the Dow of 50 years ago. So at best, 3 percent economic growth is 2 percent growth for the set of existing firms; add to dividend yield, and we’ve got 5 percent again.

That’s still not bad, you may say. But now let’s do the arithmetic of private accounts.

These accounts won’t be 100 percent in stocks; more like 60 percent. With a 2 percent real rate on bonds, we’re down to 3.8 percent.

Then there are management fees. In Britain, they’re about 1.1 percent. So now we’re down to 2.7 percent on personal accounts – barely above the implicit return on Social Security right now, but with lots of added risk. Except for Wall Street firms collecting fees, this is a formula to make everyone worse off. Privatizers say that they’ll keep fees very low by restricting choice to a few index funds. Two points.

First, I don’t believe it. In the December 21 New York Times story on the subject, there was a crucial giveaway: “At first, individuals would be offered a limited range of investment vehicles, mostly low-cost indexed funds. After a time, account holders would be given the option to upgrade to actively managed funds, which would invest in a more diverse range of assets with higher risk and potentially larger fees.” (My emphasis.)

At first? Hmm. So the low-fee thing wouldn’t be a permanent commitment. Within months, not years, the agitation to allow “choice” would begin. And the British experience shows that this would quickly lead to substantial dissipation on management fees.

Second point: if you’re requiring that private accounts be invested in index funds chosen by government officials, what’s the point of calling them private accounts? We’re back where we were above, with the trust fund investing in the market via an index.

Now I know that the privatizers have one more trick up their sleeve: they claim that because these are called private accounts, the mass of account holders will rise up and cry foul if the government tries to politicize investments. Just like large numbers of small stockholders police governance problems at corporations, right? (That’s a joke, by the way.)

If we are going to invest Social Security funds in stocks, keeping those investments as part of a government-run trust fund protects against a much clearer political economy danger than politicization of investments: the risk that Wall Street lobbyists will turn this into a giant fee-generating scheme.

To sum up: claims that stocks will always yield high, low-risk returns are just bad economics. And tens of millions of small private accounts are a bad way to take advantage of whatever the stock market does have to offer. There is no free lunch, and certainly not from private accounts.

The Distant Future

The distant future plays a strangely large role in the current discussion. To convince us of the direness of our plight, privatizers invoke the vast combined infinite-horizon unfunded liabilities of Social Security and Medicare. Their answer to that supposed danger is to borrow trillions of dollars to pay for private accounts, which supposedly will solve the problem through the magic of high stock returns (a supposition I’ve just debunked.) And all that borrowing will be harmless, say the privatizers, because the long-run budget position of the federal government won’t be affected: payments 30, 40, 50 years from now will be reduced, and in present value terms that will offset the borrowing over the nearer term.

I’m all for looking ahead. But most of this is just wrong-headed, on multiple levels.

Let me start with the easiest piece: why the distant future of Medicare is something we really should ignore. And bear in mind that most of those huge numbers you hear about implicit liabilities come from Medicare, not Social Security; more to the point, they mostly come from projected increases in medical costs, not demography.

Now the main reason medical costs keep rising is that the range of things medicine can do keeps increasing. In the last few years my father and mother-inlaw have both had life-saving and life-enhancing medical procedures that didn’t exist a decade or two ago; it’s procedures like those that account for the rising cost of Medicare.

Long-run projections assume, perhaps correctly, that this trend will continue. In 2100 Medicare may be paying for rejuvenation techniques or prosthetic brain replacements, and that will cost a lot of money.

But does it make any sense to worry now about how to pay for all that? Intergenerational responsibility is a fine thing, but I can’t see why the cost of medical treatments that have not yet been invented, applied to people who have not yet been born, should play any role in shaping today’s policy.

Social Security’s distant future isn’t quite as speculative, but it’s still pretty uncertain. What do you think the world will look like in 2105? My guess is that by then the computers will be smarter than we are, and we can let them deal with things; but the truth is that we haven’t the faintest idea. I doubt that anyone really believes that it’s important to look beyond the traditional 75-year window. It has only become fashionable lately because it’s a way to make the situation look more dire.

Now let’s return slightly more to the world outside science fiction, and ask the question: can we really count purported savings several decades out as an offset to huge borrowing today?

The answer should be a clear no, for one simple reason: a bond issue is a true commitment to repay, while a purported change in future benefits is just a suggestion to whoever is running the country decades from now.

If the Bush plan cuts guaranteed benefits 30 years out, what does that mean?

Maybe benefits will actually be cut on schedule, but then again maybe they won’t – remember, the over-65 voting bloc will be even bigger then than it is now. Or maybe, under budgetary pressure, benefits would have been cut regardless of what Bush does now, in which case his plan doesn’t really save money in the out years.

Financial markets, we can be sure, will pay very little attention to projections about how today’s policies will affect the budget 30 years ahead. In fact, we’ve just had a demonstration of how little attention they will pay: the prescription drug plan.

As has been widely noted, last year’s prescription drug law, if it really goes into effect as promised, worsens the long-run federal budget by much more than the entire accounting deficit of Social Security. If markets really looked far ahead, the passage of that law should have caused a sharp rise in interest rates, maybe even a crisis of confidence in federal solvency. In fact, everyone pretty much ignored the thing – just as they’ll ignore the putative future savings in the Bush plan. What markets will pay attention to, just as they did in Argentina, is the surge in good old-fashioned debt.

Privatization Is a Solution in Search of a Problem

As I’ve described it, the case for privatization is a mix of strange and inconsistent budget doctrines, bad economics, dubious political economy, and science fiction.

What’s wrong with these people?

The answer is definitely not that they are stupid. In fact, the case made by the privatizers is fiendishly ingenious in its Jesuitical logic, its persuasiveness to the unprepared mind.

But many of the people supporting privatization have to know better. Why, then, don’t they say so? Because Social Security privatization is a solution in search of a problem. The right has always disliked Social Security; it has always been looking for some reason to dismantle it. Now, with a window of opportunity created by the public’s rally-around-the-flag response after 9/11, the Republican leadership is making a full-court press for privatization, using any arguments at hand.

There are both crude and subtle reasons why economists who know better don’t take a stand against the illogic of many of the privatizers’ positions. The crude reason is that a conservative economist who doesn’t support every twist and turn of the push for privatization faces political exile. Any hint of intellectual unease would, for example, kill the chances of anyone hoping to be appointed as Greenspan’s successor. The subtle reason is that many economists hold the defensible position that a pay-as-you-go system is bad for savings and long-run growth. And they hope that a bad privatization plan may nonetheless be the start of a reform that eventually creates a better system.

But those hopes are surely misplaced. So far, everyone – and I mean everyone – who has signed on to Bush administration plans in the hope that they can be converted into something better has ended up used, abused, and discarded. It happened to John DiIulio, it happened to Colin Powell, it happened to Greg Mankiw, and it’s a safe prediction that those who think they can turn the Bush drive to dismantle Social Security into something good will suffer the same fate.”

http://www.truthout.org/docs_05/010305F.shtml

All the usual dishonesty and fearmongering from slavering Republicans who want to burn up Social Security monies in the stock market.
-CF2K

According to CF2K, having options regarding social security monies alloted to US citizens means burning it up on the stock market. I guess I won’t be asking him for stock tips.

My portfolio is really burned UP. The stocks I bought last summer are UP an average of 20%. and what has the dollar done since that period?

Is “slavering” the left’s word of the week? How many points does CF2K get for throwing it into his opening sentence even when it has no context?

“slavering Republicans” slavering over what? Social Security reform? Isn’t working out political and fiscal solutions to problematic federal programs something politicians are paid and elected to do? Is this now a synonym for slavering? Only when you are a lexicon endowed liberal who’s only strategy to debate issues is to use feckless ad homenimum slander.

The reason that Social Security works is because it is mandatory.

It couldn’t possibly work if it were a “choice” of many choices.

It has never missed a paycheck for over 70 years. It reduced poverty among the elderly from 40 percent to less than 10 percent. Without it, the poverty rate would be the same 40 percent that it was during the depression.

Despite rfl’s good luck, most people have seen their stocks and mutual funds fall sharply in the last year, thanks to Bush’s toothless regulators.

This is the same volitile maelstrom that free-marketeers want to put the widow’s and orphan’s funds.

No thanks. Not gonna happen.

Oh, and rfl? My ‘context’ was watching the Wingnuts on the boardly drooling over the prospect of getting to gut Social Security on the pretext of “saving” it.

Changing the meaning of words is a chief pleasure for the perverse sensibility on the Right.

And let’s even take this a step further: who are the Trustees? Four Bush appointees and what appears to be a career civil servant. Two of the Trustee positions are unfilled, by the way.

http://www.socialsecurity.gov/OACT/TR/trustees.html

Sorry: I don’t believe for a second that the tenor and predictions of the report are anything more than wish-fulfillment agitprop for the man who appointed the Trustees to their positions: George W. Bush.

CF – You’ve made our point. And your answer is just as I expected; deny, bury, blame.

Deny there is a problem. Bury your head in the sand. Blame those eeeeeeeeeeeevil Republicans. You’ve quoted the playbook. Congratulations.

You’re forgetting, of course, that the SS trust fund is an illusion. It doesn’t exist. It never existed. It’s a promise to pay, to be funded out of general tax revenues. IT ALWAY WAS.

Al Gore spoke of the “lockbox.” At least he recognized that there was a problem, but the lockbox was itself an illusion. As long as what is in the lockbox is T-bills, it is an illusion. T-bills are simply IOUs. If instead of T-bills, the SSA invests those dollars in the larger economy to pay for future obligations, what you have is, in effect, privatization, except the State will decide what do with my money, rather than me. I know you have no problem with that, as you are a believer in the State implicitly. I am not.

Any solution that has a chance of being a solution will include, at least in part, some form of privatization. Your precious Krugman doesn’t explain why privatization can’t work; he doesn’t even try. He just quotes the playbook – it’s just a way for those eeeeeeeeeeeeevil Republicans to do what they’ve always wanted to do – starve widows and orphans. His approach is “don’t worry, be happy. It’ll all work out.”

Still pathetic.

“Sorry: I don’t believe for a second that the tenor and predictions”

So which little pig are you? Did you build your house of sticks?

Since 1970, congress/president have been spending the Social Security Trust Fund to augment the general fund, and avoid either cuts to spending or increases to taxes.

This should not be a partisan issue! It’s an American issue.

Phil says, “though his approach was too partisan.”

Like what does THAT mean? Wasn’t the democratic response of “don’t worry, be happy”, a partisan response. Hell, they are all partisan!!!

That’s why nothing gets done.

Have a happy retirement, CF2K.

Hope your non-inflation adjusted (on a real world basis) social security dollars are enough to pay for $8/gallon gasoline. The government has been excluding such commodites as gasoline from the CPI as a means of calculating “core inflation”.

Core inflation is nothing more than a smokescreen to hide real inflation. The government adjusts social security payments only for what they calculate as core inflation. However, if many of the high flying commodities and energy prices that consumers on fixed incomes (such as retiree’s depending on social security payments) depend on are excluded from the CPI, retirees are not being fully compensated.

The US government is not honest regarding the true level of inflation and this policy bites the retirees the most.

Evidentally, It’s your own choice to let the government control what should be up to your own financial discretion. So I hope you have a blast feeding the beast of a fiat currency based bureaucracy with the last morsels of your expendable income.

It certainly will be interesting watching team America downsize. With new focus on rugged self suficency will the consumer driven economy exist? How small will the military shrink too. How high will interest rates go? How many government agencies will be eliminated to match the new fiscal reality?

http://money.cnn.com/galleries/2008/news/0803/gallery.real_stories/

How do you think changing rules would affect this group of people?

CF
Your Krugman post talks about 7% vs 5% growth in historical terms, for the stock market.

HUH? Check the numbers. I am 50. Even if I live to 75, my “returns” will be in NEGATIVE territory, under the current system.

Maybe we do not have “privatization” exactly right, just yet, but the current system really sucks.

We will not be able to change the current system until those who view FDR as some kind of saint no longer have much electoral clout.

Doug
IT IS IMPOSSIBLE FOR THE GOVERNMENT TO DO ANYTHING OTHER THAN USE SOCIAL SECURITY MONEY FOR GENERAL FUND PURPOSES — under current law.

What do you think should be done with “trust fund” money Doug?

How would you accomplish that, under the law?

“HUH? Check the numbers. I am 50. Even if I live to 75, my “returns” will be in NEGATIVE territory, under the current system.”

Paul – I don’t have my figures here but I seem to recall 10 years (66-75) as resulting in a positive return. Add to that some ‘value’ for the insurance portion and it becomes more positive.

Any talk of privatizing Social Security has to begin with a discussion of the debt and deficits. When Bush tried to sell his program, he CONveniently failed to note the shortfall of SS receipts in the Federal Budget.

If you allow a portion of SS receipts to go to private accounts, that money will be directly contributing to the deficits and debt.

If $250 billion per year is set aside for private accounts, $250 billion will be added to the deficit and debt.

We are already looking at a $600 billion deficit for fiscal 2009 and the debt already exceeds $9.2 trillion and is projected to be $11 plus trillion by 2012.

Before too long, we will not be able to afford even the most basic of Federal programs.

Several on the right yesterday criticized efforts to remove us from Iraq and condemned the withdrawal from Viet Nam.

The simple fact is that we can no longer afford to be the world’s policeman and protector of all things and all countries.

We just do not have the money to continue down this path.

Social Security depends on the stock market, already.

They just have not been directly linked in the law.

If the stock market tanked, over a long period of time, the government would not be able to raise enough tax revenues to pay interest on government bonds.

Well, lets put it another way, both the stock market and federal revenues are economic indicators.

Those indicators tend to move in the same direction, for a very good reason:

They BOTH depend on the SAME thing: Economic Growth!

WS
It is not possible to perfectly balance the budget.
That will never happen.

Also, conservatives do realize that those who fuss, constantly, about deficits just want to raise taxes.

Those same people rarely want to cut much of anything, other than national defense.

Maybe we want to cut national defense, eCON, because it’s the biggest pig trough of all the pork CONgress doles out to its special interests.

WSClark is exactly right.

The national debt was at an all-time low (as a percentage of the GDP) when Carter left office. Reagan quickly expanded military spending and sent the debt soaring.

http://zfacts.com/p/318.html

Let me repost everything WSClark just posted.
But first substitute republican for conservatives
(the two are not the same anymore).

Then substitute the word, “democrat” for “republican”.

Both parties are spending us to death. Finger pointing will lead to more of the same.

Those of you who keep posting TODAY’s revenue receipts in FICA taxes to support taking no action need to go buy the biggest house and biggest car you can afford.

Afterall, the money you have today, should be enough to make payments forever, right?

Of course NOT!

This entire thread is on: “critical warning this week that both programs are headed for insolvency. Without reforms…”

Not today. Not tomorrow.

But in the near future.

It is prudent to make changes TODAY, to protect the entitlement programs for the future.

Denial will get us nowhere.

“Maybe we want to cut national defense, eCON, because it’s the biggest pig trough of all the pork CONgress doles out to its special interests.”

Agree completely Capn.

We still don’t have enough cuts in spending.
So what can we cut next? Corporate Welfare?

National Defense is the primary, most important job of the National Government.

National Defense is also the only area that liberals ever want to cut.

“National Defense is also the only area that liberals ever want to cut.”

You should be saying “International Defense.” Most of the dollars spent are spent for foreign misadventures, not on the defense of this country.

What did Iraq reasonably have to do with NATIONAL Defense?

Zip.

Econ, I agree defense is primary importance. But I don’t find that blanket flag waving as an EXCUSE to not EVER consider finding cost savings and reductions. Perhaps you are assuming this is the one and only Federal appropriation where EVERY penny is invested wisely?

That doesn’t sound like you.

And I agree, it is the one libs target the most. But it certainly is the biggest target.

This sounds like another Wall Street pyramid scheme. Boomers are starting to retire and draw down their accounts. Opps big loss of fees, add that to losses from subprime meltdown. The result the politically connected investment bankers start passing the hat again. These guys have lost billions and possibly trillions of dollars. Do you really want them to handle your money?

You’re exactly right, annie.

The only sure gainers in “piratizing” Social Security are the brokers.

Win or lose, they get their cut.

“And since when does that bother you? Bill Clinton lied. And now Hillary lied.”

Bill parsed his answer regarding sexual relations with Monica Lewinsky. Hillary lied about sniper fire.

Since the beginning, I have been a supporter of Barack Obama.

No, it’s not your money, AmWay.

Social Security is a contract that we citizens have made with our gov’t.

If you live and work in this society, you are subject to this contract.

The only way we could let you out of the contract is if we agreed to let you starve in the street like a rat if your retirement plans didn’t work out.

A civilized society can’t do that, so you gotta join the program, whether you want to or not.

“Is that what you call telling a lie under oath?”

Sigh……………….. for the fiftieth time…. the judge defined “SEX” as genital intercourse, so Bill as technically correct in saying that he did not have sex with that woman, Ms. Lewinsky.

Sigh………………..

Also Annie

It is entirley possible, in fact likely, that someone can start drawing on their investments at age 67 or later, and still see those investments grow substantially.

In fact, if you draw on those investments at 4% or less, they will probably never run out, and will continue to grow.

Yup, Econ’s right.

It’s what I’ve been saying for years.

BJ Clinton was the best Republican president we’ve ever had.

The CONs were idiots to rag on him so bad.

He delivered NAFTA, de-regulated energy, created the DLC (republican wanna-be’s), cut welfare benefits.

If it hadn’t been for the assualt weapon ban — which did nothing except piss off the gun nuts — and cutting the military budget, he was a Republican’s Republican.

eCon writes, “Conservatives would prefer to make the entire pie bigger.”

Oh, lordie, that’s rich.

The entire pie has gotten bigger, a helluva lot bigger.

And all the extra productivity (wealth) went right into the pockets of the rich — not a bit of increase for the people earning it.

Thanks for proving that you are truly full of it.

Well, put it this way, those who agree that the debt, and the deficit, should be measured against GDP:

If the pie (Size of the economy) had NOT grown, the negative impact of the deficit and the debt would be MUCH worse, in percentage terms and real terms.

(A growing economy produces more tax revenues)

That was .6 percent growth in ONE QUARTER, a quarter than many of you thought would be negative.

Higher tax rates will only make the deficits worse.

If you kill growth, you kill revenue production.

“That was .6 percent growth in ONE QUARTER, a quarter than many of you thought would be negative.”

And this quarter is expect to be EVEN lower.

econ(flunked) posted March 27, 2008 at 3:19 pm

“Higher tax rates will only make the deficits worse.”

Maximize tax revenues, by setting tax rates to ZERO!! /sarcasm OFF

“Higher tax rates will only make the deficits worse.”

That explains why deficits sky-rocketed under Clinton after falling under Bush 1 and why they have now fallen to zero and surplus ubder Bush 2.

And remember how the CONs love to crow about how much of a percentage of income tax the rich pay (since they of course make a helluva lot of income)?

That’s very misleading:

Even in the United States, the rich pay a disproportionate share of the federal income tax, which mildly reduces inequality. Other taxes, however, like Social Security, are regressive: the rich pay a lesser share. Thus, the upper tenth of households pay 70 percent of the income tax, but only 52 percent of all federal taxes. State sales taxes make the system even more regressive, because poorer people spend a higher share of their total income on them. Kevin Hassett, of the American Enterprise Institute, estimates that a family of four earning $50,000 pays exactly the same share of its income (30 percent) on taxes as one earning $150,000.

Capn
Start your own business.
Anybody can do it.
Then pay yourself what ever you can afford.

That was .6 percent growth in ONE QUARTER, a quarter than many of you thought would be negative.

Except no figures published by the Bush Administration can be trusted. Traffic on the interstate is slowing down.

we agreed to let you starve in the street like a rat if

Rats seldom starve.

Doug
You are making the logical mistake of mixing coincidence with causality, on several levels.

As I have stated, repeatedly, Presidents have very little to do with the economy.

A President can make a good economy better.

A President can make a bad economy worse.

However, there is not much a President can really do, directly.

Democrats want the public to behave as if the President were the CEO of a company called America.

It just does not work that way.

We will always have economic cycles no matter who is in the White House.

However, keep in mind:

The economy has been BOOMING for the last several years, and NOW we hear all of this “doom and gloom”?? We have had better than 6 years of economic growth. This has been one of the longest periods of expansion in American HISTORY!

Clinton left office with a recession just starting, and in the middle of the dotcom bust. That technology bubble burst when Clinton sued Microsoft, remember?

Anyway, the economy is a battleship, it takes years for most government actions to have any real effect.

Even then, most of what happens is due to demographics and individual decisions by millions of individual Americans.

Government’s primary role is to provide incentives, and to enforce contracts, and to protect against fraud and illegal activity.

Once again you managed to contradict yourself in the same post. Coherent thought might be a thing you’d like to practice.

If he can squeak by with a fractional of a percent growth rate until he gets out of office, maybe the repubs. can claim “the recession started under clinton”.

And Rossell, who proposes the budget, the baseline from which all Federal budgets are developed?

One hint: It ain’t Congress.

If Bush the Dumber was interested in balancing the budget, he would have proposed a balanced budget, not one that would result in a $600 billion deficit.

At 9 PM PBS is showing (from the Cox Header):

Unnatural Causes : Is Inequality making us sick?
In sickness and in health . The connections between healthy bodies and healthy bank accounts in the US. Some residents of poorer coutries live long and healthy lives.

Could be revealing to both sides of the health care issue here in the US

Brilliant post, Pedant.

Regulation is good for markets. It’s the Enron and the Bear Stearns that are crashing the party.

Talk about an incremental loss of Freedom, taking your property from you 1 percentage point at a time, until nothing is left that The People control.

You never hear the Socialist Liberal Democrats talk about Freedom, because they don’t believe in Freedom. They want Government to control everything, and redistribute Wealth and Assets as Government sees fit.

The United Socialist States of America is what they want.

They never expect the best, do they Econ?

The press is always expecting everything to get worse. Bad news is good news.