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John McCain pisses on the third rail.--

John McCain recently called Social Security an "absolute disgrace." It is, of course, but politicians aren't supposed to say so.

Josh Marshall is on the case (tip to Kaus):

Okay, when last we checked in on the McCain Social Security is an "absolute disgrace" front, we asked you let us know if any journalist got a chance to put the question to McCain. And TPM Reader DB just flagged for me the fact that ABC's Jake Tapper managed to get an answer.

Jake runs through the play-by-play to this point and then puts the question to McCain spokesman Brian Rogers.

Remember, here's the quote.

"Americans have got to understand that. Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace. It's an absolute disgrace and it's got to be fixed." . . .

And here's the explanation from McCain's guy Rogers, as elicited by Tapper ...

McCain spox Brian Rogers says that "the disgrace is our failure to fix the long-run imbalance in Social Security — a failure of leadership evidenced by our willingness to kick to problem to the next generation of leaders. He's also describing the looming and increasing demographic pressures confronting the Social Security system and Washington's utter failure to address it."

Now, this goes against the plain meaning of the words. But everybody has words come out the wrong way sometimes, or they say things they don't really quite mean. IN other words, if it's just tripping over your words, who cares. But digital video recording is a wonderful thing. And that's why we can know pretty clearly that Rogers' explanation is bogus and that this is precisely what McCain meant.

The townhall meeting where McCain said Social Security was "an absolute disgrace" was on Monday in Denver. Just yesterday McCain went on CNN and said more or less exactly the same thing on CNN.

In response to a question from CNN's John Roberts, McCain said,

"Let's describe it [i.e. Social Security] for what it is. They pay their taxes and right now their taxes are going to pay the retirement of present-day retirees. That's why it's broken, that's why we can fix it."

Social Security is in some respects a disgrace (it should become more of a pension system and less of a welfare system), but whether it will go bankrupt in a few decades depends highly on the assumed growth rate of the US economy. With much of Asia, South America, and Eastern Europe on a long-term upward trend, I'm getting increasingly less pessimistic about the financial future of Social Security.

Merits aside, I consider McCain's statement to be a political gaffe, because by pissing on the third rail of politics, McCain gives his opponents ammunition for future attacks.

therut:
I agree with him. SS is a disgrace. It is one of my top 3 most hated government programs.
7.11.2008 12:13am
Laura S.:
Jim,

I'm just not following your argument that McCain tried to retract his statement. Both the spokesman's statement and McCain's statement (both times) seem entirely consistent.

Do explain. Also please describe which quote would be used against McCain.
7.11.2008 12:30am
Jon Rowe (mail) (www):
Ha. Good for him in being courageous. This makes him all the more favorable in my eyes. I'd love to do a campaign commercial where I said, finger pointing right at the camera, something along the lines of "I'm not just going to touch the third rail of politics; I'm going to piss on it."
7.11.2008 12:33am
Snarky:

Social Security is in some respects a disgrace (it should become more of a pension system and less of a welfare system)


Isn't calling the program a "disgrace" because you disagree with an implementation detail just a tad bit strong?

I definitely think your "of course" as if it is obvious that one of the most important programs of the last century is a disgrace is a bit to nonchalant.
7.11.2008 12:37am
Caliban Darklock (www):
I've always considered it rather a damning curiosity that the Social Security Administration has historically found it necessary to explain why social security is not a Ponzi scheme.
7.11.2008 12:40am
Snarky:
Oh, by the way, which government program is more financially secure? Medicare or Social Security?

I would like McCain to call Medicare a disgrace too. It would make it pretty clear where he stands and pretty much ensure a double digit loss.
7.11.2008 12:41am
Snarky:

I've always considered it rather a damning curiosity that the Social Security Administration has historically found it necessary to explain why social security is not a Ponzi scheme.


Oh, how shocking. When the Bush administration controls administrative agencies, they post self-discrediting things on the web.

This is not surprising.

Just another argument why you shouldn't give a Republican a key to your Porsche. It turns out that Republicans hate Porsches and will drive as negligently as possible.

And they will give way too many drives to their friends without your permission. (i.e. no bid contracts for Bush administration cronies.) All I am saying is that if you give a Republican a key to your Porsche, don't expect it to come back in good condition.

By the way, what has Republican rule done for the economy? If you want to increase economic growth rates, keep Republicans as far as possible from having any influence on economic policy as possible.
7.11.2008 12:47am
cboldt (mail):
McCain is just kicking the issue past his lifetime with a combination of loose immigration and tightened payout rules.
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Social Security is now an international PONZI scheme, what with all the totalization agreements. Government sponsored "your kids pay for your retirement."
7.11.2008 12:49am
Laura S.:
Snarky, I call bull on your remarks.

You're using a bit of Newspeak by promulgating the myth that thinking Social Security is a disgrace means a person thinks that social security is a disgrace.

Shame on you.
7.11.2008 12:50am
Snarky:
Laura S,

Actually, did I say "disgrace." Actually, Lindgren is now on record asserting that Social Security is an "absolute disgrace."

That is a pretty extreme sentiment.
7.11.2008 12:53am
cboldt (mail):
-- I would like McCain to call Medicare a disgrace too. --
.
While we're at it, I wish McCain to declare the collectivist policies of the Democratic Party a disgrace too.
.
I still won't vote for him - but he's a tenth the risk of the Democrat's messiah.
.
In case anybody wonders, I wrote the Republic off years ago. I'm on my own, and you are too.
7.11.2008 12:54am
Snarky:

In case anybody wonders, I wrote the Republic off years ago. I'm on my own, and you are too.


I hope you have stored up a lot of bottled water and canned food in your bomb shelter. I know I have.
7.11.2008 12:56am
cboldt (mail):
-- I hope you have stored up a lot of bottled water and canned food in your bomb shelter. I know I have. --
.
LOL. Nope. No shelter, no stored water or food. No guns, no ammo. I'm counting on the Democrats to rescue me.
7.11.2008 12:57am
Snarky:

While we're at it, I wish McCain to declare the collectivist policies of the Democratic Party a disgrace too.


Actually, collectivist programs like Social Security, public schools, fire departments, and sewage systems are only the beginning of the Democratic collectivist fantasy. You see, the Democratic Party now has secret labs where mad and evil scientists are studying technologies to physically merge multiple humans into a single, collective organism.

Mwahahahahaha!

Its all about collectivism, baby. We shall merge. We must merge.
7.11.2008 1:00am
Oren:
I find myself conflicted (as usual lately) on Social Security and social security. On the one hand, I know I could invest my 14% (or whatever) much more efficiently than the government and, as a responsible person, I resent the government making that choice. Of course, as a responsible person, I also get the shaft -- that's moral hazard for you.

On the other hand, I don't think I can stomach letting old people go homeless or hungry, even if they made poor choices that led to that outcome. Most Americans probably agree with this viscerally -- it's one thing to abstractly talk about responsibility and self-reliance but it's quite another to actually implement policy that leads to seniors in poverty (again, even if it's their own fault and even if you think it's the only moral solution).

So I'm paralyzed . . .
7.11.2008 1:02am
cboldt (mail):
-- Actually, collectivist programs like Social Security, public schools, fire departments, and sewage systems are only the beginning of the Democratic collectivist --

.
No shit Sherlock.
.
BTW, I need more $$, please send stat. Low on fuel oil, can't get the kids in daycare, need doctors care, and nobody should be in the spot I'm in.
.
P.S. skip the shipment of rubbers. They interfere with my rightful pleasure.
7.11.2008 1:05am
Oren:
cbolt, certainly in a Republic, the People can vote and implement collectivist policies if that's what they want. You and I might not like it (I certainly don't), but I find it quite hard to believe that any such policy represents the death of the Republic.
7.11.2008 1:05am
Oren:
Wait, I thought collectivists were pro-birth-control. One-child policies, very strict birthing rights that are allocated only to the 'right sort', etc . . .
7.11.2008 1:06am
cboldt (mail):
-- the People can vote and implement collectivist policies if that's what they want -- but I find it quite hard to believe that any such policy represents the death of the Republic --
.

Dissonance squared.

.

Democracy = death of Republic

.

Meanwhile, being the lazy ass that I am, I'll scam whatever I can out of a dumbass electorate. Can't beat 'em? Join 'em! Life is too short to fight on principle.
7.11.2008 1:13am
Snarky:

On the other hand, I don't think I can stomach letting old people go homeless or hungry, even if they made poor choices that led to that outcome. Most Americans probably agree with this viscerally -- it's one thing to abstractly talk about responsibility and self-reliance but it's quite another to actually implement policy that leads to seniors in poverty


What! Less than perfect people shouldn't just roll over and die? I think this must be a knew sentiment, coming from a Republican.
7.11.2008 1:26am
Snarky:
knew = new

I prefer to post first, think later.
7.11.2008 1:28am
Fub:
Jon Rowe wrote at 7.10.2008 11:33pm:
I'd love to do a campaign commercial where I said, finger pointing right at the camera, something along the lines of "I'm not just going to touch the third rail of politics; I'm going to piss on it."
I'd like to see a candidate do that on prime time TV too, but not for the same reason.

I want to see what the FCC and the courts would do with unequivocally political speech that is also "indecent".

The best scenario would be if the candidate who made the statement on prime time TV was elected POTUS about the same time the commission is considering the complaint.

The tap dance would make Busby Berkeley look like a piker.
7.11.2008 2:08am
lpcowboy:
Social secutiry needs to be retired. Any defined benifit scheme will fail as lifespans increase.

While it may have been difficult for old people to work in 1940, that isn't the case anymore. I plan to work until I die.

In any case, just because some people make poor decisions is no reason to impose this scheme on society as a whole. proof of saving should be enough to exempt anyone if the government were concerned about poverty, and a poor capitalist wouldn't take the money anyway. The only reason for it is socialists like to tell people what to do.

I don't think comments will effect the election; all socialists will vote for socialist cantidates anyway. Further, I doubt McCain is serious about reform.
7.11.2008 2:20am
Uthaw:
I prefer to post first, think later.

A superfluous statement if there ever was one.

Value added of your posts in this thread = zero or negative.
7.11.2008 2:29am
Raymo Smookels:
Morality of taxation aside, I always thought the elegant solution to Social Security's economic viability would be to push back the cutoff age for eligibility; it could be re-pegged every decade or so based on sociological and medical projections.

The obvious problem with this idea, though, is that there are considerable discrepancies in different populations' life expectancies, with less privileged groups tending not to live as long. Reforming a social security program in a way that screws over the less privileged seems, to me, disingenuous at the least.
7.11.2008 2:46am
LM (mail):
Social Security certainly is a disgrace. It's a disgrace that in order to humor some ideologues, Social Security forswore any chance of participation in equity markets. How would the old Ponzi Scheme look today if our excess payroll tax receipts had been invested in even a conservative mix of blue chip stocks?
7.11.2008 2:56am
LM (mail):
lpcowboy:

and a poor capitalist wouldn't take the money anyway.

How many people over 65 do you know who send the checks back?

The only reason for it is socialists like to tell people what to do.

Strange then, isn't it, that socialism is held in such low popular regard, yet Social Security not so much?
7.11.2008 3:03am
EH (mail):
So I'm paralyzed . . .

The answer is simple: eat your spinach. Do the right thing.
7.11.2008 3:52am
A. Zarkov (mail):
Whatever you want to call Social Security, one thing is plain: the US Government does not properly report its true effect on the federal deficit. If the feds used accrual accounting as every business with revenues in excess of $1 million must, Social Security and Medicare would drive the deficit to $3.5 trillion! So says this USA Today article.

Then there is the problem of how the SS Trust Funds invests the surplus. It buys special issue, non-tradable Treasury bonds. In other words, the federal government spends the surplus for current expenses thereby making the deficit look smaller. Some economists like Paul Krugman deride critics saying those Treasury Bonds are not "worthless paper." But that's not the point; those bonds are a claim on future tax revenues. If the Trust Fund actually owned tradable securities it could sell them in the secondary market. But it can't so the SS system is and will be paid out of current tax receipts and future generations will bear the burden. Let's say the Trust Fund owned foreign bonds. Then foreign tax payers would be paying for the future benefits of US SS beneficiaries.

If placing a severe burden on future generations is disgraceful then McCain is correct.
7.11.2008 4:02am
A. Zarkov (mail):
Oren:

"So I'm paralyzed . . ."

A few points to ponder here. How did old people survive before 1937 when there was no SS? Answer: they saved for their retirement and their families took care of them. They also didn't live as long. Asian workers have large savings rates compared to the US. Do you suppose SS has anything to do with that? I believe most Asian countries like China and perhaps Japan have no government mandated pension system like SS.

Another problem. Low paid, low skilled foreign immigrants sponsor their relatives and then have them go on SSI further draining the system. Why should US tax payers pay for other countries old people? Ask McCain and Obama that. They both support open borders which means open season on your pocketbook. How do you feel about that?
7.11.2008 4:15am
Ricardo (mail):
A few points to ponder here. How did old people survive before 1937 when there was no SS? Answer: they saved for their retirement and their families took care of them. They also didn't live as long. Asian workers have large savings rates compared to the US. Do you suppose SS has anything to do with that? I believe most Asian countries like China and perhaps Japan have no government mandated pension system like SS.

Zarkov,

Asians are much more likely to live in extended families than Americans. There is likewise a very strong social norm that adult children should take care of the elderly parents. In Korea, I believe this is even law. As for savings rates, consumer credit is harder to come by in some Asian countries and interest rates are higher. My understanding is that down-payments in Japan are higher than in the U.S. -- combine that with expensive real estate and you have no choice but to scrimp and save. We're talking about two different cultures: most Asians don't get apartments of their own at age 22 or 23 and don't put their parents in nursing homes when they get old.

The broader point is that McCain is attacking a part of the U.S. government budget that is in surplus right now. The non-SS, non-Medicare part of the budget is in deep deficit and it isn't going to magically right itself anytime soon. All those retired people who won't be paying payroll taxes in a few years also won't be contributing much in income tax revenue either. It is a distortion of priorities to worry about a part of the budget that will start running deficits in the future while not doing anything realistic to stop the rest of the budget from running deficits now.
7.11.2008 5:01am
Grover Gardner (mail):

Answer: they saved for their retirement and their families took care of them.


Actually, the majority of people worked until they no longer could. But the Depression effectively eliminated the job market for older workers, and those who did have pensions or savings saw them wiped out. The idea behind SS was to create some sort of minimal retirement benefit that was not subject to the swings of the financial markets, as well as to relieve younger workers of the burden of supporting their parents.
7.11.2008 5:19am
David M. Nieporent (www):
I prefer to post first, think later.
I think we're all just waiting with bated breath for that "later" to actually come. Can you give us an idea which year it will be?
7.11.2008 5:35am
David M. Nieporent (www):
Actually, the majority of people worked until they no longer could. But the Depression effectively eliminated the job market for older workers,
Well, that's not really right; rather, Social Security eliminated the demand for jobs among older workers. And that was the point. All the "progressive" legislation -- minimum wage, overtime, etc. -- was about driving people out of the job market in order to create job openings for others.
7.11.2008 5:38am
A. Zarkov (mail):
"But the Depression effectively eliminated the job market for older workers, and those who did have pensions or savings saw them wiped out."

Wouldn't it have been better to create a means tested program to help the indigent elderly directly? Surely after WWII started the job market for workers over 45 boomed. It must have because women went to work in factories to help alieve the labor shortage. Instead FDR created a pay-as-you go system to provide benefits for people who never paid into the system during their working years. In other words, aside from the Depression, (which went away) what was so special about people over 65 in 1937 that they deserved a free lunch? The prior generations got no SS and subsequent generations had to pay for it.
7.11.2008 5:45am
smitty1e:
The Amish need no emancipation from Social Security:
http://slashdot.org/~smitty_one_each/journal/200708
Their point is one well taken.
I'm also surprised that the 10th Amendment is not invoked against Social Security.
7.11.2008 7:39am
Snarky:
David M. Nieporent,

I wish you would hold your breath a little longer. Actually, really, something like forever.

I can dream, can't I?
7.11.2008 7:54am
Snarky:

Value added of your posts in this thread = zero or negative.


Given what I predict your f*cked up ideology to be, negative value to you is positive value to me.
7.11.2008 7:55am
Wayne Jarvis:
Snarky, I hope you are about 50 years old. Otherwise you are a f______g idiot. I'm under the age of 35 and I'm not going to see a dime of my Social Security "retirement." I know it. Everyone knows it.

But I have to pay in anyhow. Does any else recall the Enron scandal? How those courageous Senators took those evil corporate thieves to task for leaving all of their workers without retirement funds? How is Social Security any different? (Other than young(er) workers generally knowing it is a scam and not depending on its being around in 30 years.) Social Security affects a hell of a lot more people. Is it morally superior to steal for the sake of political gain rather than financial gain. Anyone?

Given that Social Security is stealing from the pockets of millions of Americans, I'd say that it is indeed a disgrace.
7.11.2008 8:23am
Wayne Jarvis:

On the other hand, I don't think I can stomach letting old people go homeless or hungry, even if they made poor choices that led to that outcome.


This sounds like a problem that can be fixed with a welfare program. A nationwide "retirement plan" does not seem to be the most sensible option.
7.11.2008 8:29am
Joshua:
Fub: Jon Rowe wrote at 7.10.2008 11:33pm:

I'd love to do a campaign commercial where I said, finger pointing right at the camera, something along the lines of "I'm not just going to touch the third rail of politics; I'm going to piss on it."

I'd like to see a candidate do that on prime time TV too, but not for the same reason.


Me, I'd like to see a candidate skip the talk and actually piss on a third rail (a live one, natch). It doesn't even have to be on prime-time TV - a simple YouTube video will suffice. Or they could even put it in the next Jackass movie.
7.11.2008 8:49am
SteveW:
There seems to be a philosophical split among those who want to make SS into a defined contribution system and those who want to keep it as a defined benefit system. Because so many private employer-sponsored retirement plans are becoming defined contribution plans, I favor keeping SS a defined benefit system. Having two types of retirement plans reduces risk.

Obama wants to keep SS as a defined benefit system. So far as I can tell, McCain wants to turn it into a defined contribution system for young workers and keep it as a defined benefit system for current retirees, which raises a difficult financing question.

If you allow young workers to divert their SS taxes into a private account that, instead of using those taxes to pay current retirees, then where do you get the money to pay current retirees?
7.11.2008 9:04am
alkali (mail):
Other than general grumpiness, what could possibly merit calling a government old-age pension arrangement susbtantially similar to what exists in every industrialized country on the planet "an absolute disgrace"?

Don't hold back, though. Tell us how you feel about flouridated water next.
7.11.2008 9:10am
anon.:
I've always considered it rather a damning curiosity that the Social Security Administration has historically found it necessary to explain why social security is not a Ponzi scheme.
If Charles Ponzi had had the same foresight as the federal government and just forced people to join, it would have worked!
7.11.2008 9:13am
Snarky:

I'm under the age of 35 and I'm not going to see a dime of my Social Security "retirement." I know it. Everyone knows it.


That is interesting that everyone knows it.

This everyone person, he sure doesn't know much. People actually familiar with the facts, know that social security is very much solvent.

It is not Social Security that is the problem. It is the rise in per capita medical costs. If Republicans want to attack Medicare, have at it.
7.11.2008 9:14am
byomtov (mail):
but whether it will go bankrupt in a few decades depends highly on the assumed growth rate of the US economy.

Well, technically that's true, but the growth rate would have to be dismally low, probably negative, by historical standards. The growth rate assumed by the middle scenario is actually quite conservative.

If the economy is bad enough to sink SS all the investment geniuses commenting here who claim they would earn such wonderful returns will (a) be unemployed anyway (b) be living on their savings rather than investingthem, and (c) discover that the equity markets are down about 99% also.

I'm under the age of 35 and I'm not going to see a dime of my Social Security "retirement." I know it. Everyone knows it.

No. You imagine it because you've been fed a bunch of lies.
7.11.2008 9:20am
byomtov (mail):
If the Trust Fund actually owned tradable securities it could sell them in the secondary market. But it can't so the SS system is and will be paid out of current tax receipts and future generations will bear the burden. Let's say the Trust Fund owned foreign bonds. Then foreign tax payers would be paying for the future benefits of US SS beneficiaries.

This is utter nonsense. If the securities were traded they wouldn't disappear. The Treasury would still have to make the payments due. They would just go to the new holders.

If I own a Treasury bond and sell it to you the only thing that changes is that the Treasury pays you instead of me. It still pays.

And if SS had bought foreign bonds then the Treasury would have had to borrow the money it borrowed from SS elsewhere, and would still have the debt.
7.11.2008 9:24am
Wayne Jarvis:

This everyone person, he sure doesn't know much. People actually familiar with the facts, know that social security is very much solvent.


For how long? Stay gold, Ponyboy.
7.11.2008 9:27am
Anon321:
The thing that troubles me about McCain's comments is that they seem to suggest that he doesn't understand how Social Security was designed to work. The impression I get from it is that he's saying, "Hey folks, I just checked and it turns out that the money you pay in Social Security taxes is going to current retirees, not into you some savings account that you'll get to draw from later, as it's supposed to!"

But the problem is that this is exactly how Social Security was designed to work and how it's worked all along -- the first beneficiaries collected Social Security without having paid Social Security taxes; today's beneficiaries' taxes went to their parents' generation; we pay for today's beneficiaries; and when we retire younger workers will pay for us.

It's perfectly reasonable to conclude that this was a crummy way to set the system up. It's even reasonable to compare it to a Ponzi scheme, although the likelihood of a future generation that will retire at a time when there are no then-current workers seems rather low (and if it happens, they'll presumably have much more significant problems to worry about -- like Armageddon).

But when McCain calls it a disgrace, it seems like he's saying that Social Security was set up as some private-savings-account system but that the government is pulling a bait-and-switch by sending your taxes to current retirees. Which, again, is how it's always been. It may need fixing and it may be a bad system, but I don't see it as a disgrace.
7.11.2008 9:35am
Sarcastro (www):
Old people should work or starve! Historically, societies never helped their elderly! Society isn't about banding together to help each other, it's about protecting private property ONLY. And a little bit bombing other societies too.

cboldt is quite perceptive in his point that anything less than laissez faire economics means death for the Republic. Ah, Hoover, you unsung hero of the people, you!

Indeed, it's totally a pryamid scheme, cause people totally get out a lot more than thay put in. The only way to fix it is to give all the money to the stock market in a well thought out scheme that is sure to keep it safe.
7.11.2008 9:38am
SeaDrive:
So, let's get the old republic working again. Get all the citizens together and do some voting.

Do you want Social Security to continue? 1) yes or 2) no.
Do you want Medicare to continue? 1) yes or 2) no.

You may not like it, but you got it, and it ain't going away. Get used to it. Yes, if you are a productive citizen and pay something near the max SS taxes you are going to get back much less (50% less? Maybe.) than if you had saved/invested the money for yourself. You would also be richer if you didn't pay taxes for farm subsidies, military procurement, school breakfasts, the Centers for Disease Control, and levees to keep the Mississippi out of New Orleans. And here is a hint: it's really, really unattractive to hear well-off people complain about money.

I suppose you are all thinking that "back in the day" rich folks didn't have to support poor folk. Think again. It's a lot easier for poor folk to find housing and jobs, and to move to more prosperous areas than it was 150 years ago. One way and another, social pressure and cultural norms have always transferred wealth from the haves to the have-nots.
7.11.2008 9:42am
William Oliver (mail) (www):
The bottom line is that the federal government could wipe out any liability for funding Social Security in a couple of years without raising taxes or decreasing benefits -- by selling off its real estate assets.

The federal government owns millions of acres, particularly in the West, at a time when technology is making it feasible to live in a much more distributed society. Further, in contrast to the insistence of the envirofundamentalists, distributing our population more widely would *help* rather than hurt the environment.

A 21st century land rush would return property to private hands, would solve the debt, and would profoundly help the American economy.

It won't happen, of course, but Social Security is a problem that could be solved simply.
7.11.2008 9:45am
ParatrooperJJ (mail):
It is a disgrace and it took huge balls to say it.
7.11.2008 9:46am
byomtov (mail):
For how long?

According to the Trustees Report:

For OASDI, interest income will first be needed to pay a portion of benefits in 2017, although the trust funds will continue to accumulate assets. In 2027, trust fund assets will begin to be depleted and are projected to be exhausted in 2041, after which continuing tax income would be sufficient to cover 78 percent of scheduled benefits.

Note that this is based on the "intermediate cost" scenario, which uses relatively conservative assumptions about the economy.

This information, and lots more, is readily available. You'll do your blood pressure some good if you check it out before getting too upset.
7.11.2008 10:08am
Alan Gunn (mail):
Byomtov, quoting the Trustees' Report, wrote:


For OASDI, interest income will first be needed to pay a portion of benefits in 2017, although the trust funds will continue to accumulate assets. In 2027, trust fund assets will begin to be depleted and are projected to be exhausted in 2041, after which continuing tax income would be sufficient to cover 78 percent of scheduled benefits.

There are no "assets" in the "trust fund." A government bond, in the hands of the government that issued it, is not an asset, because it gives the government nothing that it would not have had if there were no trust fund. All the money that was earmarked for the trust fund has been spent, and you can't spend the same money twice, even if you write yourself a debt instrument when you spend it. Are there really still people who don't know this?
7.11.2008 10:13am
Eli Rabett (www):
Social Security is a generational transfer payment. My great-grandparents received support when the program started. This allowed my grandparents to buy houses and educate their kids, the same thing happened with my grandparents and parents.

I benefit especially from Medicare, there is no way we could have supported my mom's medical care over the last 30 years without going broke. All in all, Social Security and Medicare are the foundation of the prosperity of the country.

Government run pension schemes (the first one was introduced in Germany by Bismark) such as Social Security have enabled 5 and 6 generations of people to stay in school, buy houses and build capital.
7.11.2008 10:15am
Adam J:
David Nieporent- "Social Security eliminated the demand for jobs among older workers." How does Social Security eliminate demand? It would certainly lower the supply of elderly workers, since more of the elderly are financially secure and wouldn't need to work, but I can't see how it lowers demand.
7.11.2008 10:26am
Wayne Jarvis:

There are no "assets" in the "trust fund." A government bond, in the hands of the government that issued it, is not an asset, because it gives the government nothing that it would not have had if there were no trust fund. All the money that was earmarked for the trust fund has been spent, and you can't spend the same money twice, even if you write yourself a debt instrument when you spend it. Are there really still people who don't know this?


Not to boast but, I'm the worlds first gazillionaire because I wrote myself a note that says I owe myself a gazillion dollars.
7.11.2008 10:29am
JosephSlater (mail):
First, Snarky's posts have been substantive and valuable, and moreover they represent the opinions of the vast majority of Americans. This is another issue (along with wanting to repeal other major New Deal programs, the Civil Rights Act of 1964, etc.) where, at least politically speaking, the right-wing libertarian position on the issue constitutes an irrelevant minority. Social Security privitization was a dead letter when Repubs controlled the Presidency and both houses of Congress because it's a massively unpopular idea. That, and the fact that the numbers Bush proposed obviously wouldn't work, even on paper.

Second, as to McCain's statement, what was remarkable about his original quote is that he seemed to be shocked/horrified by the fact that, yes, younger workers put money into the system that then is used to make payments to older workers. So yeah, calling that a "disgrace" is calling the concept of Social Security a disgrace, but moreover his whole tone made it sound as if he had just discovered something wild and crazy, when in fact this is incredibly basic and well-known.

In short, this is not just a "gaffe" politically, as the backpeddling of his advisors show, but it also makes McCain look pretty naive.
7.11.2008 10:33am
Sarcastro (www):
Don't you see, Eli Rabett?

Staying in school, buying houses and building capital is bad! If people can't do that on their own, they shouldn't do it at all! That money could have been used to allow gazilionaires like Wayne to help buy a 5th Delorean for his daughter!

As they say, a rising tide totally sucks.
7.11.2008 10:35am
Prosecutorial Indiscretion:
All in all, Social Security and Medicare are the foundation of the prosperity of the country.


No, they're not.
7.11.2008 10:55am
Wayne Jarvis:
Sarcastro. You don't conjure up a bloated "retirement plan" to assist people's children to buy houses and pay for their grandchildrens' educations. You developed sensible programs directed at those issues.

My grandparents didn't have the money to go to college (In fact my grandfather didn't graduate high school). Social Security didn't help them. My parents didn't have the money to go to college. Social Security didn't help them.

I'm the first person in my family to go to college and Social Security didn't have anything to do with. My grandparents weren't even retirement eligible when I was in college. (Little known fact: poor people have children younger than the middle-class.)

You know what did help me become the first in my family to go to college? Federal loan assistance. See? A program targeted at a specific issue. Not a poorly designed "retirement program" that we blindly assert creates all these wonderful collateral benefits.
7.11.2008 10:59am
Randy R. (mail):
"How would the old Ponzi Scheme look today if our excess payroll tax receipts had been invested in even a conservative mix of blue chip stocks?"

IT would probably look pretty darn good, considering the state of the stock market lately. And people would be sleeping much better.
7.11.2008 10:59am
Brian G (mail) (www):
My first law job, between my first and second years of law school, was as a decision writer for the Social Security Administration's Office of Hearings and Appeals. McCain is right on when he calls Social Security a disgrace.
7.11.2008 11:12am
byomtov (mail):
All the money that was earmarked for the trust fund has been spent, and you can't spend the same money twice, even if you write yourself a debt instrument when you spend it. Are there really still people who don't know this?

The money that went into the trust fund was loaned to the government. The Trust fund holds bonds backed by the full faith and credit of the US government. These are little different from other Treasury securities. Will they have to be paid back out of taxes? Of course, just like the bonds held by private investors or the Chinese Central Bank. In this sense all Treasury bonds, including those held by SS are claims against US tax revenues.

Are there really people who don't understand this? Besides Bush, I mean.
7.11.2008 11:15am
Sarcastro (www):
Wayne Jarvis, I always suspected Eli Rabett was a liar. Now I have proof, as your anecdote clearly contradicts his anecdote. They can't both be true!

And what's all this talk about programs targeting education being the way to help the poor? Educating the poor? That's crazy talk. They're too lazy to learn. If they had a work ethic they'd be rich. Instead, their punished by the Invisible Hand for Sloth.

Mroeover, there is no way to both combat poverty AND care for the elderly. I mean, one helps society, and the other is a moral imperative! Everybody knows society must either by coldly rational or squishy and moral. Attempting to find some kind of balance between the two is like mixing oil and vinager!
7.11.2008 11:17am
Dan Weber (www):
The Trust fund holds bonds backed by the full faith and credit of the US government. These are little different from other Treasury securities.

The bonds held in the SS trust fund will be paid back. That's not the problem.

The problem is that the point of the Trust Fund was for the government to save up money so it wouldn't have to tax the ever-living daylights out of the country when the baby boomers retire. But if the Trust Fund is formed of government bonds, the government will still have to tax the ever-living daylights out of the country when the baby boomers retire.

Or keep on borrowing more. That's always good.
7.11.2008 11:30am
Wayne Jarvis:
Sacastro. You are right. Anecdotes are anecdotes. To that end, I'd love to see some evidence that SS increased educational opportunities (I've always understood the GI Bill is credited for that) or home ownership.

But the main point is even if its true that Social Security has some of these blindly asserted collateral benefits, if there is a better more effective and less expensive alternative to acheive the same outcomes that's what we should be doing.

BTW, I assure you, I understand far more about being poor than you ever will, so save the douchbaggery for another day, bro.
7.11.2008 11:31am
Mordecai:
Title of post = awseome Beastie Boys reference??

I'd like to think so.
7.11.2008 11:32am
Sarcastro (www):
As someone who grew up middle class, I am indeed completely unable to solve, or even discuss any problems that are poverty related.

Wayne Jarvis deserves thanks for pointing out that helping old people is only viable if it helps the young. How society spends money has no moral component at all!
7.11.2008 11:36am
Wayne Jarvis:

The problem is that the point of the Trust Fund was for the government to save up money so it wouldn't have to tax the ever-living daylights out of the country when the baby boomers retire. But if the Trust Fund is formed of government bonds, the government will still have to tax the ever-living daylights out of the country when the baby boomers retire.


No. You're looking at it the wrong way. The goverment can just write another note to its self to cover the over note. And then write a note to cover that note, etc. These things don't actually come due. It's like wishing for more wishes.
7.11.2008 11:36am
SATA_Interface:
Progressive Salad Dressing?
7.11.2008 11:43am
Alan Gunn (mail):
Byomtov:

The Trust fund holds bonds backed by the full faith and credit of the US government. These are little different from other Treasury securities. Will they have to be paid back out of taxes? Of course, just like the bonds held by private investors or the Chinese Central Bank.

No, they're a lot different from bonds held by investors, Chinese or otherwise. An investor who owns a US government bond, it can sell it and keep the money. If the US government owns a US government bond, it can sell it, but then it has to pay interest and eventually repay the principal--which it could also do if it didn't own a US government bond. In short, a debt instrument in the hands of the debtor is not an asset. So there are no assets in the trust fund--it gives the government nothing that it wouldn't have if the trust fund had never been created. The fact that these bonds would be assets in the hands of someone else is irrelevant. That's why Wayne Jarvis isn't really a gazillionaire, though I would be if he'd give me his debt instruments.
7.11.2008 11:46am
Wayne Jarvis:

As someone who grew up middle class, I am indeed completely unable to solve, or even discuss any problems that are poverty related.


Talk all you want. But you look like a dick when you try to talk down to me about being poor.

Wayne Jarvis deserves thanks for pointing out that helping old people is only viable if it helps the young. How society spends money has no moral component at all!


My position is pretty simple. If there is a problem: fix the problem. I have no problem with helping people who need help. I do have a problem imposing a compulsory retirement program on everyone because some people won't plan for their retirement. Let's help the people that actually need help, and leave everyone else alone.
7.11.2008 11:46am
Matt_T:
Anyone seriously coming out in favor of our social security system needs to look at the growth in the annual budget deficit between now and 2040 directly attributable to social security and medicare. Yes, the problem existed long before the Bush tax cuts, which didn't help. A benefits system indexed to inflation is a stupid idea. But keep crying, partisan idiots. Keep those benefits flowing to your core constituents to buy votes, and keep trying to outflank the other guy on just how fast you can run our country into the ground. If I though McCain knew what the hell he was talking about or called social security a disgrace out of anything other than a broken clock being right twice a day, I might applaud him for saying that. Social security is a disgrace and has been for decades.
7.11.2008 11:57am
theobromophile (www):
Late to the party, but would just like to point out that
The idea behind SS was to create some sort of minimal retirement benefit that was not subject to the swings of the financial markets, as well as to relieve younger workers of the burden of supporting their parents.

is very ironic. Now, we support not our own parents, but everyone's parents. I would prefer to be limited to four (if you count the stepparents), thank you.
7.11.2008 11:59am
Dan Weber (www):
A benefits system indexed to inflation is a stupid idea. But keep crying, partisan idiots.

Social Security payments are tied to wages, not prices.
7.11.2008 12:00pm
byomtov (mail):
Alan Gunn,

I don't understand your point about selling the bond. Once the US govt issues a bond it has to repay the debt, no matter who holds it, the Trust Fund or anyone else. If I own it has to pay me. If I sell it to you it has to pay you. The act of borrowing creates the obligation.

That's why Wayne Jarvis isn't really a gazillionaire, though I would be if he'd give me his debt instruments.

Neither one of you is a gazillionaire regardless. That's because Wayne has no way to meet the obligations. The piece of paper is worthless to you just as well. The US govt, on the other hand, has the ability to collect taxes to meet its obligations. That's what makes Treasury bonds valuable, not the fact that they are pieces of paper with numbers on them.

Now, if you believe the government will be unable to meet those obligations in the future then you believe we have a serious fiscal problem. But that problem is not due to Social Security. It's due to spending a lot more than is collected, on lots of things. And note that SS has in fact been in surplus for soem time, and will continue to be decades even under conservative assumptions.
7.11.2008 12:11pm
Matt_T:
Social Security payments are tied to wages, not prices.

Argh. Sorry, bad editing on my part. Sentence originally said "wages rather than inflation", I think.
7.11.2008 12:12pm
Sarcastro (www):
Wayne, are you advocating that we give to old people depending on their need? Cause that sounds a bit Marxist.

It also sounds like it would be totally simple to administer.
7.11.2008 12:14pm
SG:
I support providing for poor elderly people. Our society is wealthy enough that we don't need to put our parents on an ice floe when they cease to be productive.

But SS as currently constructed is a disgrace. I don't see how anyone can support wholesale wealth transfers financed by a regressive tax to the wealthiest demographic in our society. Sure, some elderly individuals require assistance, but not to the tune of 15% of everyone's income.

And to those that talk about SS reducing risk: you have no right to your social security benefit. I fully expect to see some combination of a) increased retirement age, b)decreased benefit, c) means testing of benefits and d) increased payroll taxes in the not-too-distant future. That's a lot of risk, and it's not even mitigatable - it hinges on who wins the next few Congressional elections.
7.11.2008 12:21pm
Dan Weber (www):
Now, if you believe the government will be unable to meet those obligations in the future then you believe we have a serious fiscal problem

I'll say it again, in bold: this is not the problem.

Imagine that the US Government knew that it was going to need to spend $10 Trillion in the year 2108, a hundred years from now. So it saves up by buying $100 Billion in Treasury Bonds each year. (Let's use constant dollars.)

Now, the year 2108 rolls around. Whatever event that we knew was going to happen happens. The government says "don't worry, we've got $10 Trillion in bonds right here!" They cash them in and use the $10 Trillion to pay off the event.

Do you see the problem with this?
7.11.2008 12:34pm
Grover Gardner (mail):

Well, that's not really right; rather, Social Security eliminated the demand for jobs among older workers.


Huh? The Depression came first.


My grandparents didn't have the money to go to college (In fact my grandfather didn't graduate high school). Social Security didn't help them. My parents didn't have the money to go to college. Social Security didn't help them.


Who's taking care of your grandparents now?


Now, we support not our own parents, but everyone's parents. I would prefer to be limited to four (if you count the stepparents), thank you.


And "everyone" supports your parents so you won't have to. Besides, benefits are tied to how much you contributed to the system. If your parents never worked, you'll get to support them all the same.

You might also ask your parents and step-parents if they want to depend on your support in their old age. I'd be interested in their response.

In fact, I'd love to hear from anyone here nearing retirement age who's looking forward to moving in with their children.
7.11.2008 12:34pm
Wayne Jarvis:

Wayne, are you advocating that we give to old people depending on their need? Cause that sounds a bit Marxist.


You are getting closer. I advocate treating poor old people the same way we treat poor young people. If they need assistance, I have no problem with assisting them. But that's a different issue than a compulsory retirement program. As far as "administration" we already administer assistance to the poor. What would be different?
7.11.2008 12:37pm
Sarcastro (www):
Wellfare to the poor has no problems at all! Extending it to the old is gonna be awesome!
7.11.2008 12:41pm
Grover Gardner (mail):

As far as "administration" we already administer assistance to the poor. What would be different?


What is different is that SS is not a "hand-out" or charity. Your benefits are determined by your contribution to the work force over the span of your productive life. If you don't work, you aren't entitled to any return. Your contributions and expected benefits are calculated so you know exactly where you stand. And they are guaranteed, not subject to the whim of politicians.
7.11.2008 12:45pm
Wayne Jarvis:

Who's taking care of your grandparents now?


Thank's for caring so much about my grandparents. The answer is that they take care of themselves. They have jobs. I'm sure they get some SS, but I doubt they get much because they have been self-employeed for most of their adult lives and thus haven't been paying much in the way of SS tax.
7.11.2008 12:46pm
Alan Gunn (mail):
byomtov:


I don't understand your point about selling the bond. Once the US govt issues a bond it has to repay the debt, no matter who holds it, the Trust Fund or anyone else. If I own it has to pay me. If I sell it to you it has to pay you. The act of borrowing creates the obligation.

The fraudulence of the "trust fund" has nothing to do with the government's having or not having an obligation, because that "obligation" is owed to itself. If the government had an obligation to pay me a lot of money, I'd be rich. If the government has an obligation to pay itself a lot of money, it's no richer than if that obligation had never been created. "Owning" these bonds--in other words, having an obligation to pay itself--does not give the government anything--not one cent--that enables it to pay Social Security benefits.

Consider two cases: (1) There's a "trust fund" stuffed with government bonds. The time comes when current Social Security tax collections don't fully fund payments. How can the government pay? Answers: It can raise taxes, or it can borrow the needed funds (e.g., by selling some of the bonds in the trust fund). (2) There was never a trust fund. The time comes when current Social Security tax collections don't fully fund payments. How can the government pay? Answers: It can raise taxes, or it can borrow the needed funds (e.g., by printing bonds and selling them).

You can also look at it back when the extra Social Security taxes were collected. Case 1: The government spends the extra money on non-Social Security stuff, and does nothing else. Case 2: The government spends the extra money on non-Social Security stuff and prints bonds, which it puts in a "trust fund." Is it possible to believe that the government in Case 2 is richer than that in Case 1--that it now has an "asset" that will fund Social Security payments for decades? If that's true, why don't we "lend" all tax receipts to the government before spending them? Then we could double government expenditures without raising taxes. Wow!

In short--a government with a "trust fund" containing trillions of dollars worth of its own bonds is not one cent richer than a government with no trust fund at all. The government's "obligation" to pay itself the money represented by these bonds means nothing. The money was spent. It can't be spent again. When the Social Security trustees issue reports saying that benefits will be paid out of the trust fund, they're lying.
7.11.2008 12:58pm
Dan Weber (www):
Your contributions and expected benefits are calculated so you know exactly where you stand. And they are guaranteed, not subject to the whim of politicians.

Absolutely and completely wrong.
7.11.2008 1:04pm
byomtov (mail):
Do you see the problem with this?

Yes. Do you see why it's not the same thing as SS?

What would be analogous to SS is if the govt imposed a special tax, call it the Special Reserve (SR) tax or something, with the idea of accumulating the money to meet the 2108 obligation.

Now, what should the govt do with the money in the meantime? Stupid to let it sit under a mattress, so it decides to invest it in government bonds. You may think this is a poor investment choice, but it is one that lots of private investors make, at least for part of their holdings, and there is safety to consider.

Notice that this investment is available only because the govt needs to borrow money because of its other operations. The SR tax did nothing do increase those needs. If the SR had not been available the govt would have had to borrow elsewhere.

Now presumably, if it has a sensible overall fiscal policy, the govt is, in 2018, able to redeem the bonds and pay off the obligation. The key difference from your example is that in SS there exists a dedicated source of revenue - the payroll tax - which is intended to meet the obligation. The wisdom of overall fiscal policy is another matter entirely, and yes, that is the problem.
7.11.2008 1:06pm
Grover Gardner (mail):

I'm sure they get some SS, but I doubt they get much because they have been self-employeed for most of their adult lives and thus haven't been paying much in the way of SS tax.


The contribution is the same whether you're self-employed or not. The only difference is that an employer kicks in half your contribution. Otherwise you pay it all yourself. I was self-employed for 25 years and I know--it's a healthy bite. Now if, as self-employed individuals, they've arranged their tax obligations in such a way as to minimize their income (which is one advantage of being self-employed) then they will receive fewer benefits. But the contribution is the same regardless of who employs you.
7.11.2008 1:17pm
shawn-non-anonymous:
McCain must be worried about Obama's appeal to younger voters. Younger people are worried that the Baby Boomers will run the social security system dry while consuming 16% of their wages in the process.

Pay no attention to McCain's lack of history fighting for a better solution. Other's have rightly commented on his unbelievable surprise over this situation. Instead, I wonder if this doesn't indicate we've reached the point where the proportion of voters who think they'll get little to no social security are large enough that the "third rail" isn't as dangerous as it used to be.
7.11.2008 1:18pm
A. Zarkov (mail):
byomtov:

"And if SS had bought foreign bonds then the Treasury would have had to borrow the money it borrowed from SS elsewhere, and would still have the debt."

You're missing the whole point. If the Trust Fund could invest its surplus in private markets it could get a better return on it surplus funds, and reduce the burden on future tax payers.

The University of California Retirement System (UCRS) manages a portfolio of stock and bonds to pay for retirees. It doesn't buy California bonds. From 1989 to about 2007 UC workers didn't have pay anything to UCRS pension system because the portfolio did so well. If effect the capital markets were paying for UC retirement obligations. That was a real benefit for all the members of the UCRS. This would not have happened to UCRS had bought California bonds.
7.11.2008 1:31pm
Dan Weber (www):
Yes. Do you see why it's not the same thing as SS?

Nope. In both cases the government is trying to save up for a big future obligation.

What would be analogous to SS is if the govt imposed a special tax, call it the Special Reserve (SR) tax or something, with the idea of accumulating the money to meet the 2108 obligation.

I'm with you so far.

Now, what should the govt do with the money in the meantime?

Put it someplace besides its own books.

Stupid to let it sit under a mattress, so it decides to invest it in government bonds. You may think this is a poor investment choice, but it is one that lots of private investors make, at least for part of their holdings, and there is safety to consider.

If it wants government bonds, it could invest in state governments or foreign governments. Anything but itself.

Notice that this investment is available only because the govt needs to borrow money because of its other operations. The SR tax did nothing do increase those needs.

Okay, I'm with you again.

If SR had not been available the govt would have had to borrow elsewhere.

Right, and it would suck to have to suddenly borrow $10 T in 2108. It's the situation that SR was meant to avoid.

Now presumably, if it has a sensible overall fiscal policy, the govt is, in 2108, able to redeem the bonds and pay off the obligation.

Right, if it has saved up $10 T someplace else it can pay off the redemption of those $10 T in bonds. Where do you think would be a good place to save up that $10 T?

The key difference from your example is that in SS there exists a dedicated source of revenue - the payroll tax - which is intended to meet the obligation.

Here's where I totally lose you. The payroll tax can't pay for the redemption of the Trust Fund. When we're redeeming the Trust Fund, the payroll tax will be 100% allocated to paying current retirees.

The wisdom of overall fiscal policy is another matter entirely, and yes, that is the problem.
7.11.2008 1:51pm
Derrick (mail):
Wellfare to the poor has no problems at all! Extending it to the old is gonna be awesome!


Sarcasto wins!
7.11.2008 1:56pm
Wayne Jarvis:

Wellfare to the poor has no problems at all! Extending it to the old is gonna be awesome!



The elderly already need and receive welfare such as food stamps and Supplemental Security Income. It's not really "extending" anything.
7.11.2008 2:07pm
byomtov (mail):
Me: The key difference from your example is that in SS there exists a dedicated source of revenue - the payroll tax - which is intended to meet the obligation.

You: Here's where I totally lose you. The payroll tax can't pay for the redemption of the Trust Fund. When we're redeeming the Trust Fund, the payroll tax will be 100% allocated to paying current retirees.


Yes. I wasn't totally clear. The obligation I'm referring to is the 2108 obligation. In your analogy that is the obligation to the retirees. In other words, my SR will be used to pay off the amount due in 2108, just as payroll taxes are used to meet SS obligations, first by being saved to accumulate a reserve, then directly.

It's certainly true that poor financial management by the govt may cause it to be unable to meet its obligations, but that applies to all its obligations, not just the one we are singling out.

Let's suppose that the govt put the money somewhere besides "on its own books." How would the situation be different in 2108?

First, it would still owe just as much money (aside from the 10T). It would have borrowed from someplace other than the SR reserve, but the debt would still be there. So if you fear it would lack the resources to pay back money borrowed from the SR you should equally fear it will lack the resources to repay the different lender. (This is a big part of what I mean when I say it's a general fiscal problem, not at all specific to SS).

Second, it would take the outside SR investments and use them to pay off the 10T. (Now, it's arguable that outside investments would earn a better return, and so make the process cheaper, but that's a different issue).

So the 10T obligation will be met, and besides that the government will have to pay off some debt to outside lenders.

Look at it like this (ignoring returns for simplicity):

1. Govt runs annual deficit of $100 billion on its ordinary operations, which it must borrow somewhere.
2. In addition, govt faces $10 T obligation in 2108, 100 yrs from now.
3. Govt imposes SR tax of $100 billion a year to enable it to meet the special $10 T obligation.

Plan 1:

Govt borrows $100 billion from SR each year. In 2108 it has to produce $10 T to repay SR, which then pays off the obligation.

Plan 2:

Govt borrows $100 billion a year from others. SR invests in foreign bonds or something. In 2018 SR sells its investments and pays off obligation. Govt must still produce $10 T to pay back the money borrowed from others to fund its operations.

In both cases the govt comes up with $10 T and the obligation is met. In both cases if it can't there's a big problem.
7.11.2008 2:28pm
Doc W (mail):
I used to think a gaffe was when you said something false that you didn't mean. Now it seems to be when you say something true that you do mean.

I'm curious--can anyone in this august legal community cite the Constitutional provision under which the feds operate SS? Without laughing?

Some folks have pointed out here that most people probably wouldn't want to abolish SS and/or Medicare. This is typical of government programs, almost no matter how stupid--they create constituencies who depend on them, even if folks would have been better off if the program never existed. If we weren't bled in taxes, we'd have more with which to take care of ourselves and help others.

The notion that SS isn't a handout is complete nonsense, but it's an illusion that the feds carefully maintain. There's a "trust fund" that we pay into, and from which we get paid back when we retire. Of course, the trust fund contains nothing but IOUs from the feds to the feds. So what's really happening is that the younger generation gets taxed to pay our expenses. It would make vastly more sense if SS were means-tested and paid out of general revenues, but that would destroy the illusion that it's some sort of legitimate insurance program rather than the Ponzi scheme it is. And also, the pols wouldn't have had an SS "surplus" to squander on all sorts of spending as they've been doing for a long time.

But isn't the SS fund just like government bonds, and aren't government bonds safe investments? YES, in a perverse sort of way. The feds' debt instruments are "safe" because they're backed up by a coercive power to extract the necessary funds from the taxpayer (or to inflate the money supply and thereby effectively repudiate much of the debt). Massive government debt is just a way for the pols to push problems off onto someone else, especially the next generation. The main difference with SS is the deceptive packaging.

In a free market economy, when people pay into a private retirement fund over the long term, the money is invested in productive capital that generates wealth. That wealth is the basis for their collecting a retirement income. When people pay into SS, the money is spent and gone. That's at least part of the reason why SS is a drain on the economy. If the feds invested in the stock market, what you would end up with is out-and-out socialism, an even worse situation than we have now.
7.11.2008 2:33pm
EIDE_Interface (mail):
Sacastro is a useless troll. Don't answer it.
7.11.2008 3:07pm
LM (mail):
Randy R.:

IT would probably look pretty darn good, considering the state of the stock market lately. And people would be sleeping much better.

I may be way off, but from your apparent reference to the recent market downturn as if it were relevant to my comment, I'm guessing you thought I was lamenting the defeat of Bush's Social Security plan. On the contrary, but anyway I'll try to be clearer now:

I was referring to Republican refusal on ideological grounds in the 1930's to allow Social Security to invest any part of the Trust Fund in equities. Which makes it pretty ironic for the same party to now characterize Social Security's potential funding shortfall as the result of a liberal Ponzi Scheme, or similar nonsense. Needless to say, if Republicans had allowed the Social Security Trust Fund to be invested the same way, say, CALPERS is invested, we wouldn't be arguing about insolvency. We'd be arguing about what to do with the humongous surplus. It's a textbook case of the guy who kills his parents and complains about being an orphan.
7.11.2008 4:52pm
Perseus (mail):
Social Security privitization was a dead letter when Repubs controlled the Presidency and both houses of Congress because it's a massively unpopular idea.

There have been plenty of polls (e.g., Gallup (plus others), NPR, Zogby) that showed significant support (particularly among those under the age of 65) for some form of SS privatization, so your claim is mere ideological posturing.
7.11.2008 5:23pm
Perseus (mail):
Needless to say, if Republicans had allowed the Social Security Trust Fund to be invested the same way, say, CALPERS is invested, we wouldn't be arguing about insolvency.

So it would be a good idea to allow the federal government to invest payroll tax funds, but not a good idea to allow individuals to invest those funds on their own behalf?
7.11.2008 5:36pm
Bruce Hayden (mail) (www):
The reason that means testing hasn't been implemented is that it would turn the system into a welfare system, and thus become almost indistinguishable from other welfare programs. Instead, a small welfare program was hidden within the pension system.

I would suggest though that the retirement/pension system is neither defined contribution nor defined benefit, but something in between. In a defined contribution system, there is typically a real tie between what you contribute and what you get. That money is yours. But SS doesn't pay out of what you put away, but what is being taken from those still contributing.

Part of the problem there is that the benefits are larger, after compounding, than would be available under a defined contribution plan. And that is how we have one generation after another benefiting from the work of the succeeding generations.
7.11.2008 5:52pm
JosephSlater (mail):
Perseus:

So then why was Bush's social security privitization initiative such a complete non-starter? Republicans controlled both houses of Congress and the Presidency. . . .
7.11.2008 6:08pm
Eli Rabett (www):
Pretty much no one graduated high school in the 1920s (ok, I exaggerate, but it was relatively rare) because they had to go out to work to support their families. Much of this burden was relieved by social security.

You can argue about that, but one thing that having social security (here and elsewhere) does, is relieve the pressure to have large families so that there will be someone to take mom and dad in when they start to dodder.

You get the sarcasto you deserve.
7.11.2008 6:14pm
fishbane (mail):
A 21st century land rush would return property to private hands, would solve the debt, and would profoundly help the American economy.


But then you'd be depriving the BLM of selective discretion in awarding all sorts of favors to red state farmersproductive Americans at the small cost of some campaign contributions. And we all know that isn't welfare - they deserve a return on their investment.
7.11.2008 6:40pm
Perseus (mail):
The failure to get such a major reform proposal through Congress does not constitute adequate proof that it was a "massively unpopular idea." All it proves is that it was not so massively popular that Congress could not refuse to pass it (none of the polls I cited indicated massive support, only that there was sufficiently large public support to gainsay your "massively unpopular" characterization). And anyone familiar with the legislative process would know why major reforms (even in cases when they enjoy broad public support) are defeated far more often than not.
7.11.2008 7:09pm
pmorem (mail):
Whether or not Social Security is truly broken may be a matter for some debate. Don't worry, though. We're going to make absolutely sure of it by trimming our economy to deal with AGW.
7.11.2008 8:01pm
byomtov (mail):
Perseus,

As always, poll results have to be taken with a shaker of salt. Voters may favor "privatization" in the abstract, but that doesn't mean they like any particular plan.

The problem is that when you actually put forth a specific rational proposal voters quickly discover they hate it.
7.11.2008 8:42pm
DeezRightWingNutz:

And they are guaranteed, not subject to the whim of politicians.


Wow, a one-day-old that knows how to type!
7.11.2008 9:05pm
theobromophile (www):
And "everyone" supports your parents so you won't have to.

GG, you make that sound like a good thing, rather than the evil it is.

Maybe you have crappy parents that you want to foist on everyone else, but the rest of the world doesn't feel the same way. If my parents (especially my father and stepmother, who raised me) needed my support in their old age, I would consider it an honour to pay them back for what they've done for me. It is NOT the responsibility of "everyone else" to care for my family; it is the responsibility and duty of my family.
7.11.2008 10:32pm