The Left's Four Fiscal Fantasies

[DSpencer]

Re: The Left's Four Fiscal Fantasies

No offense meant to you in the slightest vt, we all have our preferences on how to fix these types of problems.

But as far as I am concerned to hell with this type of exclusions. The generation getting ready to retire has absolutely swamped this country with problems as far as the eye can see. They inherited an industrial behemoth with one of most sound financial underpinnings of any nation on earth... and thanks to decades of idiotic, self aggrandizing policies have wrecked it.

And now that the bill is coming due? Privatize medicare and raise the age limit on SS... but only on the rest of society not on them personally or generationally. Let the next bunch pay up for their sins. To hell with that. Anything they want to propose to fix these problems goes across the board or not at all. I've had it up to here with all these gray hairs telling us about fiscal responsibility while trying to avoid even an scintilla of the costs of doing so.

Will

Refreshingly honest. Who do they think spent all the money?! People that have voted in 1 election? The reality is that "Grandma" lived off the exorbitant privilege her whole life while racking up huge debts to finance a luxury lifestyle. Now the idea that her generation should actually experience any quality of life reduction on the LONG path back to stability is simply unacceptable. They are OWED all the money they paid into the system, despite having already paid it out to themselves.

[dcarrigg]

Re: The Left's Four Fiscal Fantasies

dcarrig,

I understand that you feel like you'll be cheated if they cut SS benefits now/soon. I have a very long way to go until retirement. Even by current estimates, which are typically overly optimistic and have to be continually revised closer for the worse, all these programs will be insolvent by the time I retire.

Please explain how it is fair to take the money that I need to save for retirement and give to to retiring people now, knowing full well that there won't be enough left to pay me in full when I retire?

On an individual basis you can always make the case that "I didn't vote for this so it's not fair". On a group basis THE PEOPLE voted for politicians that took the money from SS and used it for other purposes. The "fund" is simply trillions of dollars in IOU's from other parts of the same government. Essentially, the voters already spent the money on themselves. The solution is take more from the people working now because who gives a rip about what happens to them when they retire.

Or apparently it's to send our military onto foreign lands and raid their banks. I suppose that's the American Way now. Other countries' laws be damned.

Well, the fund is in treasuries. That's was my jab at the Fed. When they took the funds rate so low, they did it by dropping treasury rates through buying trillions of treasuries. That means lower returns for the fund. Which means as far as I am concerned, any real shortfalls on the SS side were engineered. That combined with the fact that the wage base has stayed so low compared to incomes that it covers 80-some-odd percent of total income rather than the 96% it was designed to cover shows me that it was deliberate policy choices to create a crisis and punish the middle class, not some natural phenomenon proving that SS doesn't work.

[DSpencer]

Re: The Left's Four Fiscal Fantasies

Well, the fund is in treasuries. That's was my jab at the Fed. When they took the funds rate so low, they did it by dropping treasury rates through buying trillions of treasuries. That means lower returns for the fund. Which means as far as I am concerned, any real shortfalls on the SS side were engineered. That combined with the fact that the wage base has stayed so low compared to incomes that it covers 80-some-odd percent of total income rather than the 96% it was designed to cover shows me that it was deliberate policy choices to create a crisis and punish the middle class, not some natural phenomenon proving that SS doesn't work.

I think if you and I were starting a new country from scratch we would probably agree more often than not on how things should be structured. The problem is that we find ourselves at the end (or the middle depending on perspective) of a long series of wrong choices. There's been so many screw jobs and favors handed out over time that it's hard to know what the right answer is to get back to a fair society. Do two wrongs make a right? Reasonable people can disagree on these issues.

The problem is that politicians aren't even discussing our real problems. They care only about getting money/votes.

[charliebrown]

Re: The Left's Four Fiscal Fantasies

I'm in agreement with a lot of the the things you say DC about this. The general lanscape of retirement needs to be changed.

I think the philosophy of a "trust" fund or "insurance" fund needs to be scraped and just have the payments a direct obligation of the treasury.
This would avoid the concept of I paid into it, i deserve it mentality. The philosopical idea of a trust fund does not "feel" good to those of us
who know they have a limited life span. I'm paying 15% of money into this fund and will not see any. The cash from the SS payroll tax has been spent on daily operations of the gvt. It is not a trust fund. To actually turn those special iou's into cash the congress would have to issue new treasuries on the open market, and pay the special ones, it's just a shell game.


The fica/med tax should be progressive and apply to all income and capital gains.
Benefits should be means tested. Some securities should not be held in US treasuries, and treasuries held should be not special non-marketable treasuries. I'm sick of every time there is a budget ceiling debate about hearing the SS checks will not go out. If the securities where ordinary treasuries they could be sold on the open market regardless of the debt level. Hopefully with all income being taxed and benefits means tested, the base rate could be lowered and the numbers still work out.
The 1/2 being paid by the employer should be stopped, and the employee pay the full freight. This will make the full cost of the system more visible to the person actually paying it.

Raise the retirment age and maybe make the diability insurance easier to qualify for??? So if you are primarly do hard work, you can qualify for some sort of disability?
If you cannot perform your job you have skills in? I know may people in there 50's who cannot perform physical work on a 5 day a week basis, let alone 60's, 70's.

From my perspective, unless the people at the helm of .gov are stupid, they had to see these problems coming. I'm not sure it is stupidity, hopium, not on my watch, we are servants of the upper class etc.

[DSpencer]

Re: The Left's Four Fiscal Fantasies

Benefits should be means tested.

Do we really need a system that's more complex and prone to fraud and abuse?

The 1/2 being paid by the employer should be stopped, and the employee pay the full freight. This will make the full cost of the system more visible to the person actually paying it.

This is a great idea. Although many people would probably experience a de facto pay cut.

make the diability insurance easier to qualify for???

You think the system where a man who lives his life as an adult baby (complete with diaper) and qualifies for disability is too HARD to qualify for?

http://www.washingtontimes.com/news/...d-of-social-s/

This didn't slip through the cracks. This guy was "triple cleared" and continues receiving checks. He even wants an apology from a Senator for accusing him of SS fraud.

This guy builds his own baby furniture and runs a website to document his pathetic lifestyle. All on taxpayer money. The world has truly gone crazy.

[Polish_Silver]

Re: The Left's Four Fiscal Fantasies

If Obama didn't run the payroll tax holiday and if he lifted the FICA wage base (which, like saying "no healthcare mandate," was part of his platform when he ran against Hillary in 2008) we would have no problem with Social Security at all.

In fact, I and more than a few of my left-leaning friends were angry at Obama for the payroll tax holiday because it weakened these programs.

And I said as much here. I'm not scared to criticize him. He has made lots of poor fiscal moves in my view. Extending the Bush tax cuts did nothing good for the budget gap. And maybe bringing part D into question would have been wise for Medicare when it was still fresh and people weren't so used to it. Pharma would hate it, but it might have been worth talking about in 2008.

Plus, if the Fed didn't keep the damn rates so low for so long, the Social Security fund would be in fine shape too.

We are not dumb.

But we also have been paying in for a long time.

And we don't want to see them pull the rug out from under us.

Plus, all empirical data shows 401(k)s are absolutely not working as retirement funds for average Joe and Jane.

So without SS, what would they do?

I consider myself one of those lefties.

And I'm not backing down to let them cut Social Security.

I just won't do it.

I'd rather tack payroll taxes onto capital gains first.

I'd rather send the Marines into the Caymans to pull the secret banking data on all the offshore accounts and put them on the books before I stuck it to America's elderly.

That's just how I feel about it.

Medicare's another story. As is Medicaid. Those ones are going to be tough nuts to crack. But I think the whole damn health system is screwed. And now the cat's out of the bag. I'm not at all sure how it will get fixed. I think you'll see states in the Northeast start going single-payer on their own toward the end of this decade optimistically, or in the 2020s realistically. But that's another story.

Look. The point is that I think a lot of "centrists" like to look at the US like a business that needs to just keep every law as it is today and cut programs by percentages on a spreadsheet just to get back in line.

But I think a lot of liberals, and conservatives too, with ideas realize that we can change the law and the fundamental landscape to get things in line too. It doesn't just have to be taking a blind axe to 15% of grandma's fixed income.

SS was headed for the rocks long before Obama. If I recall, there is a 30% long term shortfall. The obvious solution would be to raise the tax 15% and lower the benefits by 15%. Other solutions are possible. Needs based benefits, what ever.

The elderly, in general, are not impoverished. If you look at assets owned or whatever, as a group they are doing fine.

Only some of them are needy, and provision needs to be made for them.

[dcarrigg]

Re: The Left's Four Fiscal Fantasies

SS was headed for the rocks long before Obama. If I recall, there is a 30% long term shortfall. The obvious solution would be to raise the tax 15% and lower the benefits by 15%. Other solutions are possible. Needs based benefits, what ever.

I have no clue what you mean by a 30% long term shortfall.

If you're talking actuarial deficit required for the fund to break even, then we're talking an increase in payroll taxes of 2.72% for SS and SS Disability combined. That's the latest from the trust fund report.

Like I said, if it were earning in the 6% range like it did back in the pre-2000 era, this wouldn't be much of a problem. If the wage base cap grew at a rate commensurate with income such that 96% of income still fell under the payroll tax, as was the initial design, there would be no problem with the fund at all.

But now it earns in the 3% range thanks to the Fed dropping interest rates, and it only covers 80 something percent of income due to the wage base not raising with income inequality. The result is that it is a bit short. But nowhere near the point of needing to cut 15% of benefits or add a 15% tax to people.

1.36% on the employee side and 1.36% on the employer side would solve the problem.

Increasing the wage base would solve the vast majority of the problem too.

Or, who knows, maybe an age of prosperity comes back around the bend. Some brisk middle class wage growth would tidy the problem right up too. I'm just not holding my breath on that one given the way things are going.

The elderly, in general, are not impoverished. If you look at assets owned or whatever, as a group they are doing fine.

Only some of them are needy, and provision needs to be made for them.

Yeah. So they paid off their houses after 30 years. And they own assets. But they still often live on fixed incomes. Forcing them all to sell their homes to finance a few years probably isn't going to solve the problem.

And you are partially right, but do realize that if/when they take an axe to Social Security it will be the under 50 crowd that feels it, not people currently getting it.

Thus is the nature of politics.

[dcarrigg]

Re: The Left's Four Fiscal Fantasies

I think if you and I were starting a new country from scratch we would probably agree more often than not on how things should be structured. The problem is that we find ourselves at the end (or the middle depending on perspective) of a long series of wrong choices. There's been so many screw jobs and favors handed out over time that it's hard to know what the right answer is to get back to a fair society. Do two wrongs make a right? Reasonable people can disagree on these issues.

The problem is that politicians aren't even discussing our real problems. They care only about getting money/votes.

Yeah. It's tough. And a lot of questionable moves were made. And politics are strange. Here's a fun thing to ponder:

Part of me could not believe that liberals were fine with Obama dropping the payroll tax. If Bush tried to do it, they'd be screaming: "He's gutting Social Security!" And I think they'd be right.

On the other side of the coin, W. Bush enacts Medicare Part D, an unfunded, expensive social insurance program to buy drugs for seniors. If Obama tried to do that, conservatives would be screaming: "He's exploding the deficit!" And I think they'd be right.

The truth is awfully strange.

[vt]

Re: The Left's Four Fiscal Fantasies

Well I should consider changing my name to Scrooge

Here are a few facts and proposals to consider:

Longevity may increase more than official projections.

http://abcnews.go.com/Health/ActiveA...1#.UdOsLfnCaSo

"5. $238 billion in Social Security reform, to be used to ensure the program is sustainably solvent in the infinite horizon by slowing benefit growth for high and medium-income workers, increase the early and normal retirement age to 68 by 2050 and 69 by 2075 by indexing it to longevity, index cost of living adjustments to the Chained-CPI, include newly hired state and local workers after 2020, increase the payroll tax cap to cover 90 percent of wages by 2050 and creates a new minimum and old-age benefit".

http://en.wikipedia.org/wiki/Nationa...ity_and_Reform

http://www.urban.org/retirement_poli...irementage.cfm

http://blogs.marketwatch.com/encore/...ent-age-to-70/

http://www.ssa.gov/policy/docs/ssb/v63n4/v63n4p17.pdf

http://www.aarp.org/content/dam/aarp...i-econ-sec.pdf

The key question we face is how to we pay for entitlements? I see it as difficult to cut benefits for all but the wealthy, and it seems unfair to raise taxes on the young when so many have student loan debt. Raising eligibility ages seemed to avoid cutting benefits or raising taxes.

Remember that OASDI also has a disability benefit for those unable to make it to the normal age of eligibility for retirement benefits if unable to work.

http://en.wikipedia.org/wiki/Social_...United_States)

By the way, I'll be 66 in a few weeks and will not start taking social security until 70. Plus I will continue to work well past seventy and continue to pay into social security and medicare for myself and my one employee.

I fully understand the difficulty of some not being able to work till old age. My father, who was born in 1900 worked 12 hours a day 6 days a week as a butcher lifting heavy pieces of beef in his butcher shop. He retired at 62 with a bad back, and lived until 90. I've been working since 14 and am not super rich.

We have to take care of those that can't fully do so, but we have to be able to afford it too.

[Raz]

Re: The Left's Four Fiscal Fantasies

Yeah. It's tough. And a lot of questionable moves were made. And politics are strange. Here's a fun thing to ponder:

Part of me could not believe that liberals were fine with Obama dropping the payroll tax. If Bush tried to do it, they'd be screaming: "He's gutting Social Security!" And I think they'd be right.

On the other side of the coin, W. Bush enacts Medicare Part D, an unfunded, expensive social insurance program to buy drugs for seniors. If Obama tried to do that, conservatives would be screaming: "He's exploding the deficit!" And I think they'd be right.

The truth is awfully strange.

Most "conservatives" aren't Conservative and most "liberals" aren't Liberal.

Looking at the two most recent piles of tripe the American people have placed in the White House tells me that they're mostly Yuppie Fascists.
("Gimme mine right now! Who cares about the future?")

[dcarrigg]

Re: The Left's Four Fiscal Fantasies

Raising eligibility ages is a benefit cut.

Here's something I've seemed to suss out for how the media has perverted our common language in regards to government programs these last couple of years:

1) Reform = Money for the Upper Class
2) Entitlement = Money for the Middle Class
3) Welfare = Money for the Lower Class

Entitlements used to be called either social insurance or by their direct program names.

Now it's "entitlement," which I am pretty sure is a smear campaign to demonize these programs like the word "welfare" already accomplished.

But here's the thing: this isn't welfare. We pay into these programs individually. You get more if you work more and earn more money. I don't think it will be quite as easy to demonize social insurance as they think. But it won't be for lack of the PR spin doctors trying.

Because when people pay money for something, they usually feel entitled to it. That's why they paid money for it.

Changing the deal mid-stream or trying to take away the thing you already paid money for is dicy.

It's legal. It's doable. But it's not going to make the person who already paid for it happy.

Your position is that we should raise the age and/or cut benefits. That's not a radical position. It is the standard WSJ/NYT position as well.

But I just can't bring myself to smile whenever those two papers agree on anything.

Because every time they agree it seems to hit me, and a couple of hundred million of my fellow Americans, in the wallet.

I've suggested many other paths here. There are more we might follow. But pre-emptive capitulation is not part of my schtick. Especially after I've already worked to show in this thread that the shortfall in SS was engineered, done purposefully, and benefitted nobody but the would-be "reformers," safe in their Manhattan townhouses.

Plus part of me just likes to make it a general rule of thumb to do the opposite of whatever Tom Friedman says. And if him and Peggy Noonan give the same prediction...well, let's just say assuming the opposite is probably the closest thing to a sure bet you'll ever find in this world, short of death and taxes.

[dcarrigg]

Re: The Left's Four Fiscal Fantasies

Most "conservatives" aren't Conservative and most "liberals" aren't Liberal.

Looking at the two most recent piles of tripe the American people have placed in the White House tells me that they're mostly Yuppie Fascists.
("Gimme mine right now! Who cares about the future?")

That reminds me of something Rousseau said back in 1772, only instead of today's America, he was applying it to yesterday's Europe:

Today, no matter what people may say, there are no longer any Frenchmen, Germans, Spaniards, or even Englishmen; there are only Europeans. All have the same tastes, the same passions, the same manners, for no one has been shaped along national lines by peculiar institutions. All, in the same circumstances, will do the same things; all will call themselves unselfish, and be rascals; all will talk of the public welfare, and think only of themselves; all will praise moderation, and wish to be as rich as Croesus. They have no ambition but for luxury, they have no passion but for gold; sure that money will buy them all their hearts desire, they all are ready to sell themselves to the first bidder. What do they care what master they obey, under the laws of what state they live? Provided they can find money to steal and women to corrupt, they feel at home in any country.

[Polish_Silver]

social security vs Tbonds

I have no clue what you mean by a 30% long term shortfall.

If you're talking actuarial deficit required for the fund to break even, then we're talking an increase in payroll taxes of 2.72% for SS and SS Disability combined. That's the latest from the trust fund report.

Like I said, if it were earning in the 6% range like it did back in the pre-2000 era, this wouldn't be much of a problem. If the wage base cap grew at a rate commensurate with income such that 96% of income still fell under the payroll tax, as was the initial design, there would be no problem with the fund at all.

But now it earns in the 3% range thanks to the Fed dropping interest rates, and it only covers 80 something percent of income due to the wage base not raising with income inequality. The result is that it is a bit short. But nowhere near the point of needing to cut 15% of benefits or add a 15% tax to people.

1.36% on the employee side and 1.36% on the employer side would solve the problem.

Increasing the wage base would solve the vast majority of the problem too.

Or, who knows, maybe an age of prosperity comes back around the bend. Some brisk middle class wage growth would tidy the problem right up too. I'm just not holding my breath on that one given the way things are going.










Yeah. So they paid off their houses after 30 years. And they own assets. But they still often live on fixed incomes. Forcing them all to sell their homes to finance a few years probably isn't going to solve the problem.

And you are partially right, but do realize that if/when they take an axe to Social Security it will be the under 50 crowd that feels it, not people currently getting it.

Thus is the nature of politics.

DC,

Our numbers are not that far off.

The current fica tax is about 12.4%, So a 2.72% rise in total tax is ~ 22% increase in SS tax.

The size of the shortfall depends on who you ask.

WHAT IS THE PROBLEM WITH SOCIAL SECURITY? The answer is a long-term shortfall. Social Security plans for solvency over 75 years, but because of demographic pressures and the weak economy, it is currently solvent only until 2033. After that, without reforms, it would pay about 75 percent of promised benefits.

NY times.

(other references: Running on Empty by Peterson, What if Boomers Can't Retire, by Thornton Parker)

And that simple analysis assumes that the gradual liquidation of T-bonds will have no other effects on US finances.

The system was setup when the population was young, and growing rapidly.
Since the 1930's, people are living to much greater ages, benefits have been liberalized, etc.

Raising interest rates would not help social security at all. The "trust fund" is just T bonds. But the rest of the government is running chronic deficits. So raising rates would just require higher taxes on working people---same effect as raising social security taxes.

The SS surplus should not have been invested in T-bonds, but it was typical
"party now-- pay later" politics for decades. My advisor used to complain that the SS surplus was used to fund the Vietnam War. (If all these wars had to be paid from current taxes, we would have a lot fewer of them. WWII was "once in a life time", but the cold war and terror wars are interminable, and should be paid out of current income.)

I agree with you that SS can be fixed with incremental changes to taxes and benefits.

The problem with medicare is that the whole medical system is so over priced. I don't think Obama care is helping much with that.

[jiimbergin]

Re: The Left's Four Fiscal Fantasies

I have no clue what you mean by a 30% long term shortfall.

If you're talking actuarial deficit required for the fund to break even, then we're talking an increase in payroll taxes of 2.72% for SS and SS Disability combined. That's the latest from the trust fund report.

Like I said, if it were earning in the 6% range like it did back in the pre-2000 era, this wouldn't be much of a problem. If the wage base cap grew at a rate commensurate with income such that 96% of income still fell under the payroll tax, as was the initial design, there would be no problem with the fund at all.

But now it earns in the 3% range thanks to the Fed dropping interest rates, and it only covers 80 something percent of income due to the wage base not raising with income inequality. The result is that it is a bit short. But nowhere near the point of needing to cut 15% of benefits or add a 15% tax to people.

1.36% on the employee side and 1.36% on the employer side would solve the problem.

Increasing the wage base would solve the vast majority of the problem too.

Or, who knows, maybe an age of prosperity comes back around the bend. Some brisk middle class wage growth would tidy the problem right up too. I'm just not holding my breath on that one given the way things are going.










Yeah. So they paid off their houses after 30 years. And they own assets. But they still often live on fixed incomes. Forcing them all to sell their homes to finance a few years probably isn't going to solve the problem.

And you are partially right, but do realize that if/when they take an axe to Social Security it will be the under 50 crowd that feels it, not people currently getting it.

Thus is the nature of politics.

The lower interest rates have made a difference, but the OASDI Actuarial deficit was still 1.89 back in 2004 prior to ZIRP and back in 1998 it was 2.19. ZIRP has reduced the effective rate earned, but actuaries would never project long term interest rates anywhere near the level they have been at times in the past. For example back in the early 80s, the OASDI was earning over 11%, but the projected rates would have been much lower. Also, the amount of new money being invested is relatively small, about 1 billion in 2012.

[LorenS]

Re: The Left's Four Fiscal Fantasies

I think left and right has become obsolete, just like the Democratic and Republican parties are so corrupt they have no benefit to the voters.

One of the key issues I've identified when talking to people is that no one wants to measure if their plan is working or not. The concept of measure/feedback/improve is not part of politics. Politics is more like a ball of ants, the only goal is to get to the top of the ball. Doing something is far more important than doing the right thing.