Andrew Biggs, writing on his blog, gives three reasons why liberals are not interested at the moment in addressing Social Security's long term financing issues. I think his third reason is the only one that really matters:
Time is on their side: If we knew the share of the Social Security deficit that must be filled with higher taxes, it would make sense to apply those tax increases immediately. Spreading a tax increase (or benefit cut) over as many people as possible lowers the necessary increase on each person. But delaying reform puts more people into the system, after which point their benefits are effectively sacrosanct, and tilts the political calculus toward tax increases and away from benefit cuts. It’s like the conservative “starve the beast” strategy in reverse.
Actually, though, the benefits are already sacrosanct. Right wingers just don't accept this well-established fact.
I don't understand the attraction in the idea of impoverishing many people to keep a very few others' taxes low. Doesn't sound sensible to me. Does it sound like a good idea to reduce the amount of money circulating in the domestic economy by the 16.5% that would come from a two-year increase in the full retirement age? Just what we need--a whole bunch of poor old people with no choice but to keep working until they die. Wow, some American dream. They sure don't make 'em like they used to. Nancy Ortiz
ReplyDeleteIf we do have "reform," I think a good starting point is agreement that SS will be funded only from payroll taxes, including the trust fund built from payroll taxes. Then let the majority decide whether they want gradual, modest tax increases (across the board - I wouldn't mind an increase in the cap, but think it's not politically feasible) or decreased benefits, if and when that becomes necessary. I think we should wait until we're within 10 years of trust fund depletion.
ReplyDeleteBenefits are not guaranteed, other than for the current year.
ReplyDeleteSS is truly pay-as-you-go, for the Congress recognizes only the next year's payments as a liability.
In fact, the gobvernment divides liabilities into 4 categories, of which debt to the public is highest, and Social Security payments (beyond the current year) is the lowest of 4 levels.
There is a disconnect behind Congress' obligation to taxpayers amd the taxpayers expectation of guaranteed benefits.
Too bad the government doesn't,legally, take the benefits as seriously as recipients would wish them to.
And, this legal "obligation" is merely followed through by thw way the trust fund is utilized.
When anonymous talks of the trust fund depleting within 10 years, what you are really saying is the trust fund's ability to withdraw from the Treasury being depleted within 10 years.
The trust fund represents a draw without appropriation, not a store of wealth.
Do you think the balance in the trust fund makes it any easier for government to pay beneficuaries than it does to build battleships?
Don Levit
Don - I am the anonymous above. I never said the trust fund is a store of wealth, but its size indicates the amount of excess payroll taxes that have been collected, and that I think should be spent by SS. Of course, the gov't can do whatever it wants, although I am glad that SS can draw on the trust fund without appropriation, since this makes it more difficult to stop or reduce SS payments. I have no doubt that the gov't has the ability to pay scheduled benefits. Sure, there are those who would like to reduce benefits and use the money freed up for something else (although more for tax cuts for themselves than battleships, I think).
ReplyDeleteI wish Mr. Biggs would just go away. He seems to just be a one trick pony--"get rid of Social Security." I agree with Ms. Ortiz--it is sad that some people would rather fill their own pockets than make sure that the elderly and disabled are cared for. Didn't they say something about how you can judge a society by the way it treats its elderly? Need I say more?
ReplyDeleteMike B and Anonymous:
ReplyDeleteAs seriously as the taxpayers take SS and Medicare, and as much as they need the benefits, then why were 2 departments, Treasury and Social Security, able to swap assets and liabilities?
When the money was loaned to the Treasury from the trust fund, this was 2 internal agencies making those decisions, not the Congress, nor the taxpayers.
The left hand simply made an "agreement" with the right hand.
The trust fund had an asset, the Treasury had a corresponding liability, and in reconciliation, it became a wash.
The trust fund makes it no easier to pay the beneficiaries than it is to pay for battleships.
The Treasury is composed of several funds, such as trust funds, special funds, revolving funds, and the general fund.
All payments come from the Treasury, which means its revenues and debt for the year.
When SS was first created, its advisory commission wanted the payroll dollars to go directly to Social Security. This was deemed unconstitutional, so the FICA dollars went into the Treasury, like income taxes, etc.and Social Security received "credits," numbers.
I have links for all this material from reputable third party governmental sources, including Social Security, if anyone is interested.
Don Levit
OK, Don, we'll pass on the links, since everything you say is pretty well known to those who pay close attention to Soc. Sec. matters and/or who work or worked for SSA. I guess my reaction to all your ... posting is, "so what?" Are you suggesting the "Treasury" is going to default on the obligations to the Soc. Sec. trust fund when SSA has to ask for the money "lent" some years ago? I suppose it is possible, but so is defaulting on other US Debt, which the Republicans will do brinksmanship with when the debt ceiling must be raised in the spring.
ReplyDeleteAnonymous:
ReplyDeleteI have a lot of excerpts and links.
I will leave you a couple.
First of all, the payroll taxes go into the Treasury, not to the Social Security fund.
In addition, these taxes are not premiums for insurance or retirement.
Rather, they are taxes like income taxes, which go to the Treasury for the general welfare.
The actual dollars can be spent on any federal expenditures.
Now, is that any way to run a pension or insurance plan? From a paper entitled "Social Security Administration's Master Earnings File: Background Information."
"Taxes are collected as are other internal revenues and are not allocated as was proposed to an Old-Age Fund, but are merged with the general funds of the Government in the Treasury."
"Benefits are paid on the status of a worker, measured by wages. Should no taxes be paid, the worker still gets his annuity. Government's obligation to the Old-Age Account is not dependent upon enough revenue from taxes to reimburse the Treasury for the appropriation to the Old-Age Account.
The original bill made the receipt of benefits contingent upon paying taxes. Under the Social Security Act, there is no interdependence between the taxing and the appropriation of benefits paid. Even if no taxes are paid, he still receives his benefits."
I don't have the link, but you can google the title of the paper.
So, if taxes aren't needed to pay benefits, what is the purpose of the trust fund?
From a paper entitled "Social Security and Medicare Trust Funds and the Federal Budget."
"These interest credits (of excess revenues)increase trust fund income exactly as much as they increase credits in the Treasury's general fund. So from the standpoint of the federal budget, these interest credtits are a wash."
"Of course, in the future, money to honor the interest credits must still be raised through taxes spending cuts, or borrowing from the public."
This is the same way government pays for all its expenses, whether they are battleships or food stamps, from Treasury revenue and debt.
The trust fund makes it no easier to pay benefits.
The trust fund merely provides the amount that can be withdrawn from the Treasury without an appropriation.
That number is in an account called "Fund Balance with the Treasury." This is useful only for accounting purposes, and is not considered a store of wealth.
www.treas.gov/offices/economic-policy/reports/budget_trust_fund_perspectives_2008.pdf.
As far as not honoring its debts, I guess Social Security is in the same boat as all other Treasury bonds.
The difference here is that the bonds are due to the trust fund, 2 internal agencies of the federal government, The Treasury and Social Security.
Marketable treasury securities are owed to specific external parties, such as infividuals or sovereign wealth funds.
When the left hand owes the right hand, the level of commitment is a bit shakier than if people and countries are pounding on your door.
Don Levit
Mr. Levit--I see you quite successfully hijacked yet another thread regarding Social Security and its solvency. Since I have already responded to your arguments at length on Angry Bear, I will spare others here the gory details. In sum: Y'all, Mr. Levit is wrong.
ReplyDeleteY'all. Feel free to disregard each and every word in Mr. Levitt's argument and the links he provided. (And my words, as well, of course.)However, Mr. Levit sells insurance and financial services and also specializes in bond trading and similar investments. Therefore, it is to his advantage to see SS abolished or privatized. FYI. Nancy Ortiz
Nancy:
ReplyDeleteI am a sinner in that I fall short of the mark, as you do, too.
Focus on the government links, not whether or not I am worthy of my opinions.
The links are there to objectify the discussion.
Once you attack the mesenger, you are demonstrating you are losing the argument.
I was banned from Angry Bear, supposedly because I was being repetitious. I was merely responding to what I and the CBO, SSA, GAO, Treasury, through my excerpts and links, consider to be untruths.
Dan Crawford, Bruce Webb, etc. just did not know how to intelligently discuss differences, particularly the links I provided. They, instead, attacked me, instead of the third party excerpts.
As I said, Nancy, I fall short of the mark. But, I still have worth and dignity as a human being. You need not think that is true to discuss the excerpts i provide.
I invite you and others to do so.
Don Levit
Social Security "trust fund".. uh, in name only folks..
ReplyDelete