dagblog - Comments for "A TellIng Argument on Social Security"

Trkingmomoe;, I still have a

Resistance — Sat, 24 Aug 2013 00:05:29 +0000

Trkingmomoe;, I still have a problem using the old Google when Ii search for Dagblog , I had my computer literate son, check out which program was running and we put Google Chrome on the desk top and when I use it solely for searching, everything works out fine, even the spell checker.

Hijack? Not hardly, Ed.

Michael Maiello — Wed, 21 Aug 2013 18:05:29 +0000

In reply to I enjoyed debating you as

Hijack? Not hardly, Ed. You're welcome here any time. We dig respectful disagreement and I am happy to engage with you here or elsewhere.

You have a wealth of knowledge on this topic and I have to read, reread and consider it, as well as your sources. My belief is that in a $14 trillion economy growing at 2-3% a year, on average, that we must be able to do better at providing more security and services to most people, particularly if hydraulic fracturing and new technologies brings us towards something resembling energy independence.

As to your demographic point about GDP growth slowing -- I'm not so sure. The boomers might leave the work force, though many will work longer than they think, depending on what bargain they made with their pensions. They will not, however, demand less.

The smaller, younger workers do not generally have pensions and will certainly work longer, perhaps by decades, than their parents did, our of necessity. They will also, to meet retired boomer demand, have to increase productivity.

The only alternative is immigration. Bring in new, younger workers to build out the working age population. Such an idea is outside the bounds of Simpson Bowles. Maybe that's the problem -- the budget, our obligations to our fellow citizens, our energy policy, our defense policy and our immigration policy, as well as how we provide and finance education and innovation, needs to be debated holistically, not by piecemeal commissions. Everything is linked.

I think we can do better by each other, but we need to take a wide view of the problem.

I enjoyed debating you as

Ed Lorenzen — Wed, 21 Aug 2013 16:29:54 +0000

In reply to A TellIng Argument on Social Security

I enjoyed debating you as well. It had been a while since I had debated anyone about Social Security and even longer since I had a discussion that got as deep into the substance of operations of Social Security as we did. I intended to respond to this blog earlier but haven't had a chance to do so until now.

Stronger economic growth does improve Social Security finances, just as the revisions in the economic assumptions that the actuaries made last year as economists started to reflect the expectation that the economy would take longer to return to full strength resulted in the projected shortfall becoming much larger. But economic only has a modest impact on the long term finances, and much less of an impact than demographic assumptions about life expectancy, fertility, mortality, etc., because as you note higher wages and contributions by workers leads to higher benefits (and higher program costs) when those workers retire.

The progressive replacement rate structure with a lower replacement rate for workers with higher average lifetime earnings does mean that additional contributions are not entirely offset by increased spending for higher benefits in the future, but every dollar of extra contributions is at least partially offset by higher spending later. Thus a modest impact on solvency.

This is a function of the Social Security programs design as a social insurance program with constant replacement rates which ensure benefits (and as a consequence program costs) grow in real terms along with overall wage growth.The same statement is true for an increase in real wage growth; the sensitivity analysis in the Trustees reports shows that scenarios with higher real wage growth would result in a higher income rate and a cost rate that is higher as well but not as much as the increase in income rate, for a total shortfall that is smaller but not significantly so.

In short, my statement that GDP growth only modestly affects program solvency was not a reflection about the assumptions the actuaries make regarding income inequality or how the benefits of stronger GDP would be distributed, but rather a reflection of the basic program design and social insurance nature of the program.

Having said all of that, it is undeniably true that stronger economic growth would help the trust fund, and if the actuaries are underestimating economic growth the true shortfall would be smaller than they project. But the evidence does not support the assertion the actuaries economic projections are notoriously conservative and underestimate economic growth.

If you were to go back and compare the economic assumptions in Trustees reports over the last twenty years or so with the actual economic growth you will find that they are if anything too optimistic. That was clearly true in recent years in which they underestimated the impact of the great recession and overestimated the rate at which the economy would recover, but was also the case in prior years when the economy was less volatile. The only Trustees report I'm aware of that underestimated economic growth by a meaningful amount was in 1996, when most forecasters underestimate the boom of the late 1990s. But overall there just isn't evidence that the actuaries systematically underestimate growth. Indeed, Social Security's finances are much worse today than they were projected to be in Trustees reports issued over the last couple of decades, with the system beginning to run cash shortfalls several years earlier than had been projected and the current projections of the shortfalls going forward much higher than the projections in the late 1990's and 2000's.

A lot of people make that assertion that the economic assumptions in the Trustees' report are unrealistically low because they assume economic growth will be lower in the future than it has been in the past. But if you drill down one level and look at the assumptions be. Aggregate GDP growth is a product of per capita GDP growth times workforce growth. Since workforce growth will clearly slow down with the boomers exiting the labor force, it's inevitable that aggregate GDP growth in the future will be slower than it has been in the past, unless we assume a historically unprecedented increase in per capita productivity growth. The projections of per capita GDP growth going forward is very much in line with, and actually somewhat greater than, historical averages.

Finally, I must take exception to your assertion that the Simpson-Bowles plan did nothing to address income inequality. That wasn't the primary focus of the Commission recommendations, because the Commission's mandate was to restore primary balance in the medium term and put the federal budget on a fiscally sustainable long term path. But in developing recommendations to meet that mandate, the Commission adhered to a couple of key principles which were established in part based on concerns about income inequality.

First was the principle that there should not be reductions that harm the most vulnerable in society. The plan did not include any reductions in food stamps, SSI, unemployment or other means tested benefits, and both the commission plan and the more recent plan Simpson and Bowles put forward included important benefit enhancements for low income and vulnerable populations. The protections for the disadvantaged in the most recent plan Simpson and Bowles put forward are outlined in more detail here: http://crfb.org/blogs/how-simpson-and-bowles-protect-disadvantaged

Second was the principle that tax reform should produce a tax code that was at least as progressive as CBO's alternative fiscal scenario, i.e. as progressive as a tax code in which the Bush tax cuts for those with incomes above $250K expire and the estate tax reverted to 2009 levels. That would be more progressive than the tax code we have now following the fiscal cliff deal. The Commission report included an illustrative plan which would meet that standard even while reducing the top rate to 28 percent, primarily by eliminating the tax preferences for capital gains and dividends and reforming other tax expenditures to limit their value for upper income taxpayers.

I hope you don't mind me hijacking your blog with such a lengthy comment, but since we had a substantive discussion of the issue on twitter I wanted to take the time to lay out the facts and reasoning behind my points on Social Security and the Simpson-Bowles plan so your readers can make an informed judgment on the merits.

What I am saying is the

trkingmomoe — Wed, 21 Aug 2013 02:15:28 +0000

In reply to You assume the Uber elites

What I am saying is the population in this country has begun to move on past this failed economic policy. The push back is moving forward. Who cares what the rich think? How did you fix your paragraph and paste problem? I still have mine.

You assume the Uber elites

Resistance — Tue, 20 Aug 2013 13:05:26 +0000

In reply to Well eventually the country

You assume the Uber elites and their followers give a crap about the American colonists. Work cheap or they'll just colonize another region, to do the work. They don't care if you don't have benefits. Just pay your taxes to support and defend their freedom to pillage and put on a uniform and go protect their assets around the world. if the people should balk at the idea, maybe another oil embargo would help many see the light.

Golden rule: Those who have the gold.... rule.

Well eventually the country

trkingmomoe — Tue, 20 Aug 2013 08:07:23 +0000

In reply to A TellIng Argument on Social Security

Well eventually the country will demand higher wages and more fica taxes paid by the wealthy. Also the wealthy will have to pay more taxes to get money circulating in the economy. Since the private capitalist won't generate more jobs and higher wages then the government will step in and do it. That means the uber wealthy will be giving up some of their stashed money through taxes. It could get fixed a little sooner then instead of what the cat food commision wejie board of doom predicted. RWtalk Radio has lost 50% of it's listeners this past year. The GOP has cracks in their party and some unravalling. Republican party is bleeding women. DeMint and Co. is running chicken ads against Republican Senators and House members to push them into a government shut down using ACA defunding as an issue. I call that the GOP death wish. The 50th anniversary of the March on Washington this month will probably kick off one of the largest voter registration this country has ever seen as a push back to the SCOTUS ruling on VRA. And the cherry on top is the Koch bros. are in the late 70's and will be aging out in the next decade. All the Koch kids and grandkids will be fighting over who gets what, so they probably don't give two hoots about John Bircherism. The money is there in this country. We just need the will to make sure it is working well for all of us. This younger generation coming on line has the will to do it. I don't care what Mr Paygo has to argue about. His version of economics has failed. My money is on these kids, ladies and minorities to get the ball rolling.

put differently the

jollyroger — Tue, 20 Aug 2013 02:42:12 +0000

In reply to A TellIng Argument on Social Security

put differently the productivity increases of the last 40 years have almost all been usufructed by the owners of capital. Robots pay no FICA, neither do computers pay medicare tax. to that extent, yes, GDP growth helps only modestly with social security, but for the ruling class that's a feature, not a bug.

I think I announced to the

Richard Day — Mon, 19 Aug 2013 19:23:45 +0000

In reply to A TellIng Argument on Social Security

I think I announced to the world that I received a $20.00 raise in January of this year.

I mean, if new legislation gives me ten? who gives a goddamn?

Bacon (which I should not eat anyway) has doubled in two years; coffee has doubled in four years?; bread has gone up 40% in three years?....

I can go on and on, but I don't care.

It is true that Congress and the Prez over the last 80 years have lied to us; monies might have been put in a 'fund' but the 'fund' is filled with IOU's like in Dumb & Dumber.

I really do not care!

Medicare is a different story.

But...