Speaking for myself, my problem with Obama talking about Social Security isn't that his language is like Bush's. It has nothing to do with language at all. My problem is that Social Security isn't in trouble and it doesn't need fixing. He should be on another issue entirely because Social Security works. Is it more progressive to want to take away the wage cap? Maybe. But since we don't need to do it right now, why bother?

thosethingswesay.blogspot.com

J. McCutchen

Ed's right. The controversy isn't in the proposal itself. The controversy is that he raised the subject at all.

A slightly different but illuminating take from Ryan Liza, The New Yorker:

On Social Security, Clinton has avoided a detailed approach to fixing the system, which is expected to run out of money by the twenty-forties; for now, she would appoint a trusty “bipartisan commission” to recommend solutions. Obama proposes raising the ceiling on income that is subject to the payroll tax. As a political strategy, this appears to be a terrible idea. A potential crisis in the Social Security system is a long way off. Why, then, would a new President spend political capital on yet another tax hike when he will almost certainly seek to undo the Bush tax cuts for more immediate demands, like universal health care? When I asked Obama about this, he smiled and leaned forward, as if eager to explain that my premise was precisely the politically calibrated approach that he wanted to challenge. “What I think you’re asserting is that it makes sense for us to continue hiding the ball,” Obama said, “and not tell the American people the truth—” I interrupted: “Politically it makes sense—” He finished the sentence: “—to not tell people what we really think?”....Obama is not the most liberal candidate in the race, so he’s not defining his boldness strictly in ideological terms but, rather, as a sort of anti-politics that prizes truthtelling above calculation. When I asked him about this new tack, he seemed supremely confident. “I’ve been an observer of politics for two and a half decades, and what I’ve seen is that Democrats have not been able to move their agenda through Washington,” he said. “They have not been able to get the American people to embrace their domestic agenda, and they have been constantly on the defensive when it comes to their foreign-policy agenda. And it seems to me that, you know, if you’re not getting the outcomes you want, you might want to try something different.”

Perhaps there is a sense that a preemptive position is armor against attacks on that subject. In practice, few of us that see the cap reached in our pay stubs, and the income bump late in the year, have trouble getting by before then. Our expenses don't wait for us to fulfill our SS obligations. So I, for one, would not really notice removal of the cap.

But more important, removing the cap would allow reducing the basic rate, and would then allow a tax cut for the majority of wage earners, and decrease the inequity of the regressive nature of SS taxes.

Obama isn't "left". The left has no serious candidate. Edwards does a pretty good populist. Otherwise, we're pretty much stuck with Republican-lite and what Frank Rich calls "democracy-lite" candidates.

But the very worst of all to me is the candidate who is going to appoint another commission to come up with a "fiscally responsible" solution. If that candidate demanded a fiscally responsible war, I wouldn't be quite so disgusted with that kind of pandering to the right.

Who out there actually is presenting a plan to reduce the overall rate? Yes raising the cap would "allow" this, but I see no evidence that anyone is actually proposing such an offset. Moreover it is a terrible idea politically. As currently structured Social Security is a mildly progressive insurance plan, raising the cap turns it into a welfare plan subject to budget cuts based on the "we can't afford it" argument applied to SCHIPS. Removing the cap simply plays into the hands of pricatizers.

Obama's problem is one of expectations, as in we had lots, and he's come up short. He's supposed to be the candidate of change in this race, yet I don't see anything all that different from the others.  

"Thank God George Bush is our president." -Rudy Giuliani

Obama is also quite happy to throw secularists under the bus, along with gays. From a speech he gave to the Call to Renewal's Building a Covenant for a New America conference:

Democrats, for the most part, have taken the bait. At best, we may try to avoid the conversation about religious values altogether, fearful of offending anyone and claiming that - regardless of our personal beliefs - constitutional principles tie our hands. At worst, there are some liberals who dismiss religion in the public square as inherently irrational or intolerant, insisting on a caricature of religious Americans that paints them as fanatical, or thinking that the very word "Christian" describes one's political opponents, not people of faith.

Again, he uses the Republican frame that Democrats/liberals are meanies about religion. And he's lying. There are no Democratic elected officials or major Democratic public figures portraying religion or religious belief in this way.

But the problem is, Social Security is perceived as a problem. And if it's perceived as a problem, it does little good to ignore it. People will then think that you are not addressing their concerns.

When my wife gets upset about something, I sometimes try to convince her that she shouldn't be upset. She takes this to mean that I am not validating her feelings, and demeaning her subjectivity. I feel the same way when she does it to me. Obama, and any candidate, will end up alienating otherwise amenable voters if he takes the position that social security isn't a problem.

If people have blurry vision or are delusional the answer is not "Yes Life is fuzzy or yes those people are really out to kill you". Instead you prescibe corrective lenses and antipsychotic drugs. Obama's position on SS boils down to " You are not crazy, it is all just in your head". The solution is to front the numbers and not pandering to the vision impaired and deluded.

Obama insists on pushing Edwards supporters closer to Clinton.

People do, or can, understand that Social Security is fine for the next 35 years. And it's easy to show that its problems haven't been getting any closer. We thought they'd start in 2029 a few years ago and now we think the earliest they'll start is 2042. Why fix a problem we may well never get to? How about waiting until it's 20 years away, if that time every comes? I think people are happy to learn they don't have to worry about this now, and maybe never, your wife notwithstanding to the contrary.

If any of you don't believe in a SS crisis- talk to someone under 30. No one my age believes SS will still exist in 50 years. Absolutely no confidence that we will collect one thin dime. None.
That to me is a crisis.
Look at the facts-
1. More retirees than ever before.
2. Longest lifespans in Americas history.
3. More expensive drugs and medical treatments available.
4. More benefits than before.(Thx 2 Bushs drugs for florida reelection entitlement!)
5. And huge tax cuts and a war costs running up monster debts for my generation to pay off.

When you guys toss around the silly canard- SS ok until 2042- I'll only be 60 in 2042. Still 5 years from collecting my first check from a system I will have paid into for 40 years. Don't tell me no crisis! I know math.

Anything to prevent a Broder presidency.

2008 is a golden opportunity to take back the presidency. I hate the idea that a Democratic candidate will turn it into a gamble that most people will continue to believe he is who they think he is and not who he really is, whatever he really is. Lose that gamble and we face 8 more years of corrupt GOP rule.

Hoppy in Sacramento

Well, I listened to Obama and Hillary again tonight and I have to say that while I once would not vote for Hillary on war, I now have a second reason not to vote for Hillary.

So she won't raise the cap because that would be a trillion dollar tax increase on those with the most money. And she insists on "fiscal responsibility". So what's the other choice? Is she going to raise my retirement age AND cut my benefits or just one or the other?

Haven't we had enough of people defending the rich?!

I don't know if Obama is left but Hillary is to the right of plenty of Republicans I know!

You guys are just wrong on this. Obama may occassionally talk with a Republican "frame" but look at his record.

He's a lot stronger on gay rights in his actual voting record then Hillary. He hardly has thrown them under the bus and that's true on other issues too.

His great strength is that he know how to talk to conservatives about liberal issues and perogatives in a way that actually can resonate with them and therefore move the agenda foreward.

I mean, you guys talk about talking with our enemies in foreign policy, but you can't do it at home because you can't stop thinking about them as evil, and you can't concede for even one moment that they might have a point on any issues, like religion, and that attitude makes it impossible to move forward.

"I know math"

Well not enough to calculate the effect of 12.4% of payroll still rolling into the system compared to scheduled benefits. If you really know math then bring numbers. At this point you got nothing.

OK Brook here it goes.

Social Security is NOT in trouble.

Currently Social Security payroll taxes exceed payouts.

Surplus Social Security funds purchase Treasury notes creating an enormous trust fund. As I recall from the work done on Social Security done in 2005 the fund is valued in the trillions.

About 2019 Social Security payroll tax income will not be sufficient to cover payouts. At this point in time the trust fund will be used to make up the difference.

Projections are that by 2041 the trust fund would be exhausted.

If nothing is done at that time then the benefits would be reduced by about 25%.

If, at that time, the income cap is increased then benefits could be paid out at their full projected level. Given population trends this would keep benefits at 100% for many decades to come.

The populatin trends and life expectancy questions you put forth are already factored into today's projections.

But here's a little kicker that isn't in the projections.

The decline of defined benefit pensions will keep large numbers of people in the work force well beyond what we've come to regard as traditional retirement age. Social Security has had, for some years, increasing age payout schedules. These factors are in the projections, that a significant percentage of the workforce may work beyond the partial and full benefit payout age is NOT in the projections and will reduce pressure on payouts.

It is just more tax on the least able to afford a tax hike

No, it's not, at least not under Obama's proposal, which is either to further raise or to eliminate (I'm not clear which) the income ceiling on which SS taxes are collected.

That would raise taxes only on those making more than, at minimum, $102,000 a year, the richest 15% of households. Adjust it so the effect kicks in at $150,000 and it affects only the richest 6%.

SS is not a pension system, where what you get is dependent on how much you invested in it. If it was, most retirees would run out of benefits rather quickly. Rather, the income you received in the years prior to retirement are used to calculate your initial benefits, which is hardly the same thing.

That also means that initial benefits are not all equal, although there is a minimum. If you're concerned about the rich collecting SS (and there's no reason they can't, if their post-retirement income is low enough), you could also place a maximum on initial benefits.

Thanks for an excellent post.

I'm torn. I remember, long, long ago in the spring, wanting specifics whenever I heard that Obama was rallying or partying for "Change." Change is great in the abstract, but change WHAT in particular? Now, I'm beginning to wish that he'd stuck to generalities.

I think I understand the strategy behind the focus on SS -- it is an opportunity to be a "teller of hard truths" on a topic that Clinton seemed to want to skate over imperiously in the New Hampshire debate.

But it just doesn't add up for me. If you were looking for a topic to tell hard truths about, wouldn't the obvious choice be Medicare, not SS?

I've seen a number of commenters respond that it's important that Obama address SS because so many young people don't believe that there will be SS when they retire. Fine and good, but if Obama is reassuring people that they will have SS despite their fears, how is that a hard truth?

I really do wish that Obama could turn his persuasive gifts to another hard topic as his focus. Why not sell the American people on abolishing the death penalty? Reforming immigration? Why Tim Russert's favorite monster under the bed, for Pete's sake?

The system is nuts, let the high earners pay their full share like most people.

Obama wants to add 7 %; Rangell wants to add another 4% to fix AMT, Clinton wants to add another few % to pay for healthcare.

So if you count all DEmocratic programs, what would be commbined state and federal tax rate for the rich people making 100K and more?

You'll be able to collect your dime in 50 years provided someone else provides that dime to the US.

All those someone elses will provide it either by paying it as a tax or by loaning it to the US Government. Using numbers may explain it.

Let's say you (meaning all the people receiving SS then)are going to need a $trillion. The Government will need to get , say 600 billion as taxes from the economy ( social security, withholdings, corporate taxes, sales taxes , duties,"death taxes") and 400 billion from bonds.

How would its' ability to sell 400 billion in bonds be affected by the amount in the social security trust fund ?. Let us assume the fund "has" 900 billion in it. Doesn't matter. The Goverment will then need to get the same trillion from 6oo in taxes and 400 in loans. Now let us assume the fund "has" 100 billion in it. The Government , guess what , will need to get that same one trillion from taxes or loans.

There is no money in the trust fund.

But the money that has been withheld over the years is important because withholding those bucks prevented it from needing to issue bonds .

This year it has to pay its bills , for example its 500 billion for the dod. If it borrows all that money it will be creating a lot of bonds that will have to be paid off in the future.  And if it has too many of those  bonds in the hands of bond holders ( you, me , the Chinese Govt) people will get worried and stop being willing to loan it money. So instead of borrowing all the money it needs this year , the Govt will get some of it from this year's taxes. It might come from income tax, from corporare taxes, from payments into the trust fund.

Or from spending less. Let's say in Iraq.

Put another way , every dollar the govt spends in Iraq , or on SCIP, adds to the debt and therefore to the bonds it has to issue. Conversely ,every dollar it is able to cut out of that debt gives it a dollar more borrowing capacity to use in the future. And that's true whether it cuts the debt by spending less or by taking in more money in taxes.

When Clinton said "Save Social Security First" he really meant "reduce the government's need to borrow so that it will have the ability to borrow in the future". When Obama says , "let's raise the cap" he means "reduce the government's need to borrow so that it will have the ability to borrow in the future". When I say "let's cut $300 billion out of the defense budget" I mean "reduce the government's need to borrow so that it will have the ability to borrow in the future"

If 50 years from now the National Debt is Zero, the Government will have no difficulty paying you your social security even if there's nothing in the trust fund. If 50 years the National Debt is 5 times the GDP the Government won't be able to borrow a penny and it will have to raise the money for your SS from taxes. And it will have to raise the exact same amount irrespective of the size of the trust fund.

So if you're worried about collecting your social security 50 years from now you should want the government to hold down ,or eliminate the deficit, by reducing the military budget ( and all other spending) by withholding social security, by the "death tax".

Fuggedabout it. Just keep an eye on the National Debt. That's what will control whether the Govt is able to pay your SS in 50 years.

To put things into appropriate perspective, as I understood things last night, the discussion was about raising the cap on people making above $97,500 per year in wage income. Respectfully, that is not raising the cap on the rich. That may be raising it on 6 percent of wage earners in this country, but many Americans make more than $97,500 per year in wages and they are not rich. In many parts of this BIG country, that puts you right square in the middle class.

To determine who the rich are, you must look at many things, including all sources of income, wealth, residency, and other indicia.

Good luck to any Democratic candidate who chooses to campaign on the notion that families making over 97,500 per year are rich and should be taxed more. There goes New York, New Jersey, Pennsylvania, Connecticut, California, etc.

I'm not disagreeing that it may be necessary to raise the cap on payroll taxes for SS. I honestly don't know the answer to that question.

Yeah . I just take it one step at a time.In itself raising revenues addresses the problem.
Electing a malevolent president will of course recreate the problem just as you say.

Obama's rhetoric is telling: Democrats are 'they' not we.

Progressivepunch.com provides a way to see who people really are. It tracks how closely the votes of each Senator track the votes of a progressive control group when that group votes in opposition to the Republicans. Detailed methodology is available at their site. So on the principle that votes speak louder than words ...

Progressivepunch.com has a measure of how often a Senator votes with the majority of Senators deemed more progressive in the Senate when a measure is narrowly won or lost -- that is, when it was more likely that the vote could make a difference.

1. Clinton cast her vote with the majority of the more progressive Senators 87.28 percent of the time when the margin was narrow.

Obama cast his vote with the majority of the more progressive Senators 76.97 percent of the time when the margin was narrow.

Joe Lieberman cast his vote with the
majority of the more progressive Senators 76.14 of the time when the margin was narrow.

the well-earned end of Bush's 2005 drive to divert payroll tax funds to create private retirement accounts

.......just in time for them to have been
invested in SIVs. Not the entire amount of course. First a nice portion would have found its way into the bank accounts of the money managers and brokers who facilitated the process.

I get that if you just look at the numbers and take them at face value, then Social Security is not facing a serious crisis.  At most, it would take relatively minor tweaking to keep it solvent through the period when the baby boom demographic bulge is at its peak.

But the problem I see is that it is not clear that the numbers can be taken at face value.  Right now, the surplus of revenue over payouts in the Social Security system is lent to the general fund to help close the deficit in the other parts of the government.  In return, the Social Security trust fund gets IOUs - that is, special bonds, similar to T-bills but different in certain ways.

The whole question of whether or not Social Security is in crisis would seem to hinge on whether you believe the government will honor the terms of those bonds.  At some point - in about 10 years I believe - the payouts in Social Security will be greater than the revenue intake.  In order to make up the difference, the Social Security system will need to start redeeming those bonds.  That means that the general fund will, in effect, stop getting "subsidized" by Social Security and will start having to subsidize it.  Unless taxes are raised to cover this gap, the general fund will go into ever deeper debt, thus requiring more borrowing in general.  At that point, the pressure to radically change Social Security will be quite strong I would think, as politicians demagogue the issue and point to how much of a drain Social Security is on the overal health of the government.  The fact that Social Security ran up huge surpluses and is now legitimately cashing in its chips will be forgotten.

Thus viewed strictly in terms of the finances of Social Security system itself, the sytem is not in crisis.  But could it be that the system as it now stands will not survive the inevitable demagoguery that will come when the cash needs of Social Security force hard choices on the general fund?  That's the question I don't see being addressed.

Response from Matt Stoller posted at OpenLeft.
.
sPh

What trust fund are you referring to? T-Bills represent nothing more than a promise of future payment from general revenue. They are backed by no real assets. At the point where payments exceed receipts the difference will come from general reveue, and thus reduce the revenue available for all other purposes, progressive or not.

I am one of those independent or swing voters so beloved by the press. I do not accept the dogma of either the D's or R's as I currently understand it. I do care about what sort of world I leave to my children. That said, answer me this:

Why should my children be obligated by me as a matter of law to donate a hefty chunk of their future earnings to my generation? Social Security is not a retirement plan, it is not insurance. It is a transfer payment from young to old.

If we transition to personal retirement accounts owned by the worker they build up wealth, and that wealth can be passed on to their children. How can this be bad for our nation?

uce, You are correct about being rich on 100K .
I don't understand why we are talking about to raise the cap on payroll taxes.
If the issue is national debt and inability US to pay back to borrowers including Chinise and SS trust fund, we need to increase taxes and cut spending in general.
IF the issue is that people live longer time, then the obvious solution is to increase retirenment age.
If we want more equality, then we should make SS more like medicare, where everybody gets the same medicare benefits, but there is no cap on payroll taxes.

To oversimplify a bit, SS's "crisis" is due not to its' comination of withholdings and benefits; but to Bush's combination of a 2001 tax cut and a 2003 War.

I don't entirely agree with this.  I think that even if you take away the tax cuts and the war spending, the finances of the government will become precarious once Social Security starts to be a net user of cash rather than a net supplier.  The reasons are political.  Assume that another boom like the late 1990's, which produced a gusher of revenue for the government, doesn't materialize.  Assume also that significant tax increases or spending cuts in other areas don't happen.  The likeliest scenario is that the non-SS part of the government will be in deep deficit.  I believe that even in the 1990's, even in the surplus years, if you removed the cash that was coming in from Social Security payroll taxes, the government would have been in deficit.  I could be wrong about that, but I believe it's true.

So if the non-SS part of the government is in deficit, and then Social Security goes into deficit, a fiscal crisis will ensue.  There will be huge deficits as far as the eye can see.  The government will be faced with a huge decision.  Make draconian spending cuts in the non-SS part of the government, raise taxes significantly, or else put "everything on the table" including Social Security benefits.  The pressure to look at ALL government expenditure, including Social Security, will be immense.  At that point I believe it will be much harder to defend the program than it has been up to now.

So I agree that the whole finances of the government need to be taken into account.  But I disagree that this is an issue solely due to the fiscal policies of the Bush Administration.  Political reality is such that once Social Security goes into deficit, there will be severe pressure to alter it significantly.  Those of us who want to see it preserved should be thinking about what we can do NOW to head that off, even if it means opening up the program for discussion, something the right wants for entirely different purposes.

Is it more progressive to want to take away the wage cap? Maybe. But since we don't need to do it right now, why bother?

This is why Democrats have a reputation for not standing for anything. We just tack to the political winds. In the end, it's a matter of principal. Every American enjoys the potential benefit of Social Security, regardless of how rich you are today. A billionaire CEO or fund manager who ends up destitute at age 65--regardless of how remote the possibility--will want it. So, why shouldn't they pay into it on every dollar? Democrats need to stand for this regardless of whether there is a crisis today or tomorrow. Anyone who stands for continued regressivity in this system is quite simply anti-progressive. It's a black-and-white matter. I'm sick of paying d@mn-near 10% of my payroll in taxes for benefits that are continually diminished because we won't remove the cap. I guarantee you I could do better if they just let me invest in my 401k and health insurance. I would eliminate the cap and reduce the flat rate by a percent or so. Then no lower or middle class American would consider it a tax increase.

People DO think there's a problem

Indeed they do. And they did not come to that view totally out of the blue. It didn't happen in a vacuum. They believe it because 70 constant years of conservative propaganda (especially the past 25 years) have made it Conventional Wisdom.

A Democrat, and supposed liberal, like Mr. Obama repeating it just serves to further legitimize and reinforce it. He has just conceded on the principal rationale that the Republicans are using to push their privatization scheme. Don't be a chump, Barack.

This is a table we should not even sit down at. Which is one of the only things the congressional Democrats have gotten right recently. Regardless of the merits of any progressive proposals, e.g. raising the income cap for payroll taxes, if we sit down at that table it will not end there. There will be some hideous "bipartisan compromise". As Krugman recently noted, "bipartisanship" is merely Beltway-speak for "lets all come together and give the conservatives what they want." If we won the most recent round of the conservative's 70 year war against SS as a minority party with all three branches of government firmly under control of the GOP, then why, why, WHY should we even revisit this crap at all when we control the Congress and the WH (I'm assuming Obama is planning on pushing his plan from his chair in the Oval Office). It just makes no sense.

The country is faced with real crises, actual crises, on multiple fronts right now. Social Security is not one of them. There are 100 other issues more pressing than SS. Enough to keep any president busy for 8 years. Stop it already with the manufactured crises, and deal with the real ones.

"Every American enjoys the potential benefit of Social Security, regardless of how rich you are today. A billionaire CEO or fund manager who ends up destitute at age 65--regardless of how remote the possibility--will want it. So, why shouldn't they pay into it on every dollar? Democrats need to stand for this regardless of whether there is a crisis today or tomorrow. Anyone who stands for continued regressivity in this system is quite simply anti-progressive."

I consider it unlikely in the extreme that the benefit will be there in a recognizable form - I certainly am planning my retirement under the assumption that I will get nothing.

Why should not everyone pay into it on every dollar? How about because the ROI is lousy even without the inherent uncertainty that it will not be zero, and gets worse the more you pay. SSI is inter-generation welfare, a transfer tax from the young to the old, and that is all it is. How is it progressive to tax the young earner just starting out to pay for me or my father?

Democrats, Republicans, and all others need to speak the truth about SSI and what it is and is not. If we want an inter-generational transfer payment then that is the debate we should have. Then we can talk about what level of safety net we should have, how much, etc.

Thanks for the clarification.

Cross-posted from OpenLeft:

If in 2041 the United States has a good, healthy, self-sufficient economy with new sources of energy, ecological problems under control, and good relationships with the rest of the world than Social Security will be solvent.

If those things are not true then it would be better to spend our time rewatching "Mad Max" and "The Road Warrior" to pick up survival tips than arguing about a SS tax increase.

Social Security is a reflection of the health of the United States. There is no way for the largest economy in the known universe to "save". Particularly not when the current sport of kings is to take all Citizens' savings, skim 20% off the top, and send the rest to low-cost areas of the world.

sPh