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If fixing Social Security were easy, it would already be done

Discussion in 'Economics, Business, and Taxes' started by Joe Economist, May 7, 2013.

  1. Joe Economist

    Joe Economist Council Member

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    If fixing Social Security were easy, it would already be done. Politicians are paid to hide problems, not solutions from the electorate.

    Nonetheless, the mainstream media continues to say that Social Security is an easy fix. Typically the line runs something like “Social Security has become the focal point of entitlement debate because it's so easy to find different ways to address its funding problems.” Basically, the hardest part of fixing Social Security is choosing from so many different options.

    A lot of the ease comes from changing the meaning of words. The first word to lose its meaning is the word ‘fixed’. Normally, the word ‘fixed’ means that there is no problem. In the Social Security debate, the word fixed means solvent, or the cost to make our problem a problem for our children. Solvent and fixed are about 12 trillion dollars apart. So, saying that fixing Social Security is easy, essentially is comparable to saying it is easy to run a 4 minute mile without telling anyone that the mile is actually only a 100 yards long.

    The debate about fixing Social Security isn’t about fixing the system. It is about paying for it. The discussion is entirely about increasing revenue or decreasing expense. The best example of this false dichotomy is the discussion of the COLA change to Chain-CPI. Social Security is intended to be old-age insurance. Yet, we are looking at a ‘fix’ which progressively reduces benefits as one gets older. In all honesty, this is no different than fixing a broken refrigerator by calling it a doorstop.

    If we are going to increase revenue, we have to understand that there are three kinds of revenue in Social Security. The Social Security Trust Fund is funded money. Contributions are revenue financed with the promise of future benefits. Finally there are taxes, or the part of the part of payroll taxes on which there is no economic return. In terms of a house, the word ‘funded’ means that you own the house. Financed revenue is the loan from the bank. Tax revenue means that the bank bought the house for you out of the goodness of its heart.

    None of these revenue sources provides a stable solution. Today, the Trust Fund provides about a nickel or a dime per dollar of benefits, but that contribution will go away as the Trust Fund is depleted. Increasing the level of contributions only creates the promise of larger benefits in the future. This enables us to postpone our problem, but creates an even larger problem for our children.

    The only other type of money in the system is taxes which is a dangerous game for old-age insurance because taxes are subject to political priorities. FDR rejected any model for Social Security based on taxes. In 1941, he said that the contributions were vital as a means to ensure workers ‘a legal, moral, and political’ right to benefits. He understood that taxes are dependent upon shifting political priorities. FDR saw that contributions were the only way to make sure that ‘no damn politician could ever scrap' his program.

    Decreasing benefits is possible, but it is difficult to sell. The reality of decreasing benefits is that politicians would have to explain to people that they never made a contribution on which they can expect to collect benefits. They actually paid a tax on which they collect nothing. Every easy solution has a loser, and trying to convince that person that losing is winning is never easy.

    So how does the media get back to easy. We cut the benefits of future generations, and raise taxes on future generations. It is easy to say that future generations will pay taxes that we will not. It is easy to say future generations will accept benefit cuts that we will not. In that context, it is very easy to say that Social Security is easy to fix.
     
  2. OldGaffer

    OldGaffer Governor

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    Here we go with another round of Right Wing talking points against Social Security. The fix is easy, the political will to do it is hard, especially when the trust fund is good to go for the next 20-25 years as is. If the dems take the house in 2014, you will see how easy iit is to fix a lot of problems that your Wingerdom cohorts in Congress make impossible. Raise the debt ceiling, easy. generate tax revenue by closing the "carried interest" loophole easy. Raising the cap on social security tax payments to 200 grand or so, easy. Slowing down and reversing the wealth inequality that is destroying the middle class and pushing the country into a 3d world economy, easy.
     
  3. EatTheRich

    EatTheRich President

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    Most people who talk about "fixing" Social Security actually want to make it worse. If I were allowed to "fix" it, I'd make it into a cradle to grave benefits system funded solely by income tax and state capitalist enterprises. But that sort of fantasy aside, Social Security is actually a very successful program that has kept a lot of people out of poverty. I don't see where it NEEDS "fixing."
     
  4. OldGaffer

    OldGaffer Governor

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    "Fixing" in Winger World means privatization and dismantling. They have hated it since 1935.
     
  5. Days

    Days Governor

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    Joe clueless: if it is working, don't fix it.
     
  6. NightSwimmer

    NightSwimmer Senator

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    People like yourself have been desperately trying to "fix" Social Security since it's inception. Crawl back into your hole.
     
  7. Joe Economist

    Joe Economist Council Member

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    There is nothing in here that says anything against Social Security. It is under funded. That is a fact that comes from the Social Security Administration - or are they part of your right wing conspiracy?

    You have no source for this statement. The Trust Fund is good forever if you knew the law. Anytime the Trust Fund goes below 20% of funding, the Trustees are required by law to reduce payments to preserve the Trust Fund. So while the Trust Fund is good for 1,000 years, the benefits that it supports aren't.

    And the Trustees are about to lower that promise to 18 years. If that happens, Social Security will never fully serve another retiree. People aged 67 and younger will expect to outlive full benefits.
     
  8. Joe Economist

    Joe Economist Council Member

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    You seem to confuse the word working and operating. Working means that it operates successfully.

    Of course you may have some other goal than the stated function of Social Security. According to the Social Security Administration it is old-age insurance. Insurance isn't about payment today. Insurance is about fulfilling payment on a trigger event - old-age in this case. The Trustees report is due out this week, and CBO's leading indications say that it will shave another 2 years from the exhaustion point of the Trust Fund. That is down to 18 years, roughly the life expectancy of a retiree.

    If so, 2013 will be the last year in which SS is working even for current retirees.
     
  9. Joe Economist

    Joe Economist Council Member

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    As usual, your statements are simply wrong. The GOP supported Social Security between inception and well in the 80s with support reaching 8 or 9 to 1. "They have hated it since 1935." goes beyond urban myth into the range of silly. When have politicians ever objected to giving away other people's money to their voters.

    The concept of privatization is fairly recent in terms of the system. While it is called privatization - it isn't. Privatizing Social Security would mean that the government would sell the assets and liabilities to an insurance company, which would continue to serve the business. What we call privatization, isn't. It is a compete rewrite of the system which changes the concept from insurance to savings. One is risk management. The other is about accumulating wealth. These concepts are economic compliments not substitutes. The fact that there are no buyers to actually privatize the system should tell you that there is systemic problems.
     
  10. Joe Economist

    Joe Economist Council Member

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    The problem is of course that Social Security isn't an anti-poverty program - and you hate the real Social Security. Social Security is suppose to be old-age insurance, where workers can buy protection from outliving their savings.

    I love your fantasy aside which then goes head-first in to the cartoonish delusion about the system. In 2700+ rules, not one, let me repeat not one, again NOT ONE, pays a penny based on need. Social Security as a system doesn't even have visibility into need - which is why the means-test on benefits is applied by the IRS.

    Here is the fact : People like Pete Stark collect vastly more than average Americans who collect vastly more than people in need. This fact is why people like you despise Social Security and want to change it.
     
  11. EatTheRich

    EatTheRich President

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    If it is underfunded, the solution is simple: give it more money. It doesn't matter whether that money comes from payroll taxes and the "trust fund" or from the general fund (which in fact "owes" money to the fictitious trust fund). What matters is maintaining present benefit levels.
     
  12. Joe Economist

    Joe Economist Council Member

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    Actually it does. It can't come from the Trust Fund because "more" isn't there. It cannot come from contributions because that only creates more promises.

    It would have to come from taxes, and frankly if that is the source I would rather pay down the debt.

    People who call the trust fund fictitious can't explain how a fictitious economic resource enabled Social Security to pay full benefits. So it can't be all that fictitious.
     
  13. OldGaffer

    OldGaffer Governor

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    Yes, yes you would. Fortunately for seniors your Rand Cultian opinion is in the minority.
     
  14. OldGaffer

    OldGaffer Governor

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    As for me, I agree with Bernie Sanders:

    bernie1.
     
  15. Joe Economist

    Joe Economist Council Member

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    You mean today's seniors. Future seniors are screwed by your live-for-today cult.
     
  16. OldGaffer

    OldGaffer Governor

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    How so? Are you suggesting I agree with your scenario to do nothing and just cut benefits as needed until the program becomes meaningless? You keep trying to change the argument back to your premise that social security is doomed and there is no way to fix it. The fact of the matter is it is the easiest thing in the world to fix, you just dont want to assign it any priority.
     
  17. Joe Economist

    Joe Economist Council Member

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    Then you should get his more current information. He had to back off the next 75 years because it is no longer true. It is down to 50.

    The problem is the measuring stick. Two years ago the window was 2010-2085 where as today they are looking at 2012-2087. How did we lose 25 years in 2? Because the benchmark isn't the same. The '75-year solvency' window doesn't include the financing cost. By moving two years, you have added two heavy years on the end. This is why the number is a stupid number, and people who use it are either (a) not very bright (b) or deliberately trying to deceive you.

    At best... in 30 years, we will be right back where we started. We will have massive 75 year shortfalls, and future generations will be talking about how do we pay more into the greatest accomplishment in the history of government.
     
  18. OldGaffer

    OldGaffer Governor

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    Who cares? We will do whatever it takes, so be prepared to suck it up, Social Secuirty is here to stay. Your Doomsday scenarios have been debunked on here time and again, but you keep coming back with the same bullshit.
     
  19. Joe Economist

    Joe Economist Council Member

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    First, I like the concept of old-age insurance. It serves a vital part of retirement planning. The system as constructed by the government is simply a very poorly run version of it.

    Second, you can't cut benefits in any meaningful sense. Today the economic returns of the system are terrible, and if you continue to cut them, you will come to a generation that simply says no. We talk about the power of the seniors at the voting box - but the fact is that they are vastly outnumbered by working age Americans. If you ignore that fact, you run the risk that the system will implode much the way Bear Stearns did.

    Third, no one is trying to fix Social Security. They are trying to pay for a broken system. These aren't close to the same thing. Social Security is very poorly designed from an economic prospective. When you hear people talk about the efficiency of Social Security, it is done on an operational basis - not economic - against benchmarks that come from highly inefficient businesses. I am fast because I can outrun my pregnant wife type of thinking.

    Fourth, "The fact of the matter is it is the easiest thing in the world to fix, you just dont want to assign it any priority" That is a matter of opinion. As shown above, it isn't. You think it will be easy because you can say that future workers will take a deal that we won't. This is what Bernie and his like aren't telling you.
     
  20. Joe Economist

    Joe Economist Council Member

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    Debunked? You confuse personal remarks and labels for cognitive debate. I have explained to you why Bernie's promises have fallen short over the past two years. Why is that Bernie no longer claims that his proposal will fix Social Security for 50 years - 2061 actually.

    The underlying assumption to getting 2061 is that future workers will pay more and get even less back. It also assumes that there is no behavioral response to higher taxes. These are basically stupid assumptions.

    Debunk me.... Why is that Bernie Sanders no longer claims that his proposal will make Social Security solvent?
     

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