dagblog - Comments for "On The Looming Deficit Of Trust"

Someone reminded me that

Peter Schwartz — Wed, 17 Aug 2011 14:28:21 +0000

Someone reminded me that there was a 100K on SS taxes, so making more wouldn't increase the money you paid into the system. But I assume EPI assumes a lifting or doing away with the cap.

Having a lot must be scary,

Red Planet — Tue, 16 Aug 2011 22:01:48 +0000

In reply to It's occurred to me more than

Having a lot must be scary, Peter. It's a long way to fall.

It's the flip side of what Kristofferson wrote: "freedom's just another word for nothing left to lose."

You know the wealthy have regular seminars in exotic locales to learn how not to lose what they've got.

And there's something to it that really is a bit scary. In a world of hyper population increase, finite resources and international chaos, the wealthy choose to study how to protect themselves if everything falls apart.

It's occurred to me more than

Peter Schwartz — Tue, 16 Aug 2011 21:04:05 +0000

In reply to Thanks, Flavius. I'm

It's occurred to me more than once that the underlying assumption behind much of what conservatives say is...scarcity.

They assume that we can't really raise revenues--not just taxes, but the underlying productivity of the economy and the income of its workers.

So we have to keep cutting and cutting. But unfortunately, this sort of cutting only produces the need to cut more. And so it goes down the drain.

VERY interesting. Hadn't

Peter Schwartz — Tue, 16 Aug 2011 20:58:02 +0000

In reply to Reply to Peter (see

VERY interesting. Hadn't thought about that. And as you said to Flavius, if only wages kept up with productivity, then...

Thanks for that article.

Reply to Peter (see

Red Planet — Tue, 16 Aug 2011 17:10:00 +0000

In reply to On The Looming Deficit Of Trust

Reply to Peter (see above),

The demographic challenge is one to take seriously.

Here's an interesting article from the Economic Policy Institute:

http://www.epi.org/publications/entry/ib208/

The article begins by quoting Geo. W. Bush, who stated the problem with his (non-)native Texas eloquence and misdirection:

"In 1950, there were 16 workers per one putting money into the system—which means that when somebody retired, there's 16 workers contributing to that person's retirement. Today there's 3.3 workers contributing for each beneficiary. And when youngsters retire, it's going to be 2.1—two workers per beneficiary. In other words, the burden of paying for retirees is increasing on workers."

I remember hearing him say this and thinking "Isn't it remarkable that 3.3 workers today can accomplish what it took 16 workers to do in 1950." But George wasn't curious enough to wonder why and that wasn't the conclusion he was trying to sell anyway.

That's what the EPI article addresses. It was written pre-GWB-financial-crisis, which certainly has been a setback, but the impact of increasing productivity on SS is important to understand.

You and Dan have pointed out, above, that in the long run, preserving and improving SS is about having the will to do. Here's the conclusion of the EPI piece:

"Looking at this broader picture tells us that the resources will be there to keep our commitment to retirees. Productivity growth will more than make up for the 8% growth in the total population that working-age people will have to support in coming decades. Political pressures, not excessive economic pressures, will determine whether our society fulfills current commitments for Social Security benefits in the future."

The Tea Party is all about the ascendance of politics over reason, of course, which is why the proposal to entertain adjustments to Social Security in the context of a fake deficit crisis is not just inappropriate, it is duplicitous.

Why would any Democrat agree to it?

Peter, so this doesn't skinny

Red Planet — Tue, 16 Aug 2011 17:06:18 +0000

In reply to Okay, I'm not bored and I've

Peter, so this doesn't skinny up on us, I've posted a reply below, full width.

Okay, I'm not bored and I've

Peter Schwartz — Tue, 16 Aug 2011 14:29:46 +0000

In reply to "The general fund would

Okay, I'm not bored and I've been following along.

I think we've established that SS obligations are debt we owe to ourselves. And we establish this as a debt to make it harder for the government--us--to weasel out of these obligations. Debt is hard to overlook.

But I think we're still overlooking the central criticism of the system, which is that fewer and fewer working will be on hand to pay this obligation and thus the obligation will be that much heavier on them.

In fact, it is for this very reason that revenues are expected NOT to cover pay outs as the boomers retire and the smaller generation steps into our shoes. So the tax burden on these folks will get heavier and heavier and crowd the other things they could be doing with this money: investing, building their future, etc.

I agree: This is not an urgent problem the way unemployment is. And if unemployment isn't fixed, the SS shortfall will become drastically worse as people are kicked out of the economy.

But it is an issue...is it not?

As I said above, one of the political issues is that "we" don't consider ourselves members of "one" body politic. So there is not consciousness of ourselves as owing this debt to ourselves or of us being members in an interdependent generational line. We have an atomized consciousness.

You're right. Ten years ago I

Red Planet — Tue, 16 Aug 2011 05:44:51 +0000

In reply to Starting with lowering the

You're right.

Ten years ago I was with friends hiking Arches National Monument. We were befriended by a German hiker (they love the American West) who, at 56, was a retired engineer with time on his hands and an inclination to wander.

He regaled us with stories of the trips he'd taken during the many 6-week vacations he'd enjoyed while still employed, and with his plans for extensive world travel over the next several decades.

In fact, after a few hours, we couldn't stand to be around him. What a softie! No self-respecting, patriotic American would accept six weeks of annual vacation and retirement at 55, nor would we respect anyone who does.

How do Germans ever expect to compete with a work ethic like that? Why, they probably take sick leave, too. And let some young person do their work for them!

No wonder they are only the most productive economy in all of Europe.

Thanks, Flavius. I'm

Red Planet — Tue, 16 Aug 2011 05:33:54 +0000

In reply to Excellent blog and

Thanks, Flavius. I'm delighted that people are interested enough to read and comment.

I do think it is important to realize that debt owed to the Trust Fund is real debt, and that the government would have borrowed that money from someone else if it hadn't borrowed from us, the workers and small businesses that contribute to the Trust Fund.

Why? Because if they can convince enough people that the Trust Fund is just worthless IOUs, it makes it that much easier to go the next level and convince voters that we just can't afford to honor those worthless IOUs. Which is what they want to do.

The argument about the changing ratio of workers to beneficiaries is, as you note, about more than just the numbers. If we had full employment and rising productivity, and if wages kept pace with productivity, there might be no problem. On the other hand, if we wring our hands and mope and moan about deficits and can think about nothing better to do than cut spending, we're all in for a heap of pain, and I'm not just talking about the Trust Fund.

All this talk about entitlements from those on the make is projection, I suspect. The psychological phenomenon, I mean. Nobody feels quite as entitled as a billionaire hedge fund manager does to his 15% federal income tax rate.

"The general fund would

Red Planet — Tue, 16 Aug 2011 05:23:04 +0000

In reply to Probably not. The general

"The general fund would probably have borrowed close to that $2.7 trillion from other creditors, if not from the Trust Fund." Agreed.

"…you can't get around the fact that the debt we owe to the trust fund is an actual debt." Agreed.

If anyone is still reading, we've probably bored them stiff, Dan, but it's clear we agree on this much:

1) the debt owed to the Trust Fund is real, and

2) the the debt owed to the Trust Fund does not represent an additional burden, over and above what the government would have borrowed if the Trust Fund did not exist.

I wish everyone understood that.

The second hypothetical describes a situation that could very well happen 25 years down the line if we don't take the steps you've described above to head the problem off at the pass. Or, perhaps, other things might happen in 25 years to make the Trust Fund healthier. Or Congress, in its infinite wisdom, could change the law, refuse to honor the debt and tell us to go play with matches.

Anyway, 25 years down the line is beyond the time frame of my argument here, which is that adjustments to Social Security should not be on the table for discussion by the Super Congress, a body charged with creating legislation by November, for up-or-down vote, the purpose of which is to reduce deficits over the next ten years. And I have qualms about the competency, or the intentions, of any public official who says the opposite.

Thanks for a thoughtful exchange.