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

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.

Whoa, whoa, you're mixing apples and oranges, there.

T-bills are considered one of the safest investments there is -- it's the kind of thing that blue-haired old ladies invest in. They are paid back all the time out of general revenue -- they are not paid back out of Social Security receipts. Like every other bond, they are nothing more than a promise to pay at a future date, but they are backed by the full faith and credit of the U.S. Government, which heretofore has been considered solid gold.

If the time were to come when the U.S. Government defaulted on its T-bill payments, it will mean we have far worse problems than the solvency of Social Security -- it would mean that the entire government was insolvent, and we will have become like Argentina in 2002. Pretty much everything would be down the toilet at that point, including, more than likely, your private assets.

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?

Because you donated a portion of your own earnings to supporting your parents' generation, as well as to supporting and educating your children when they were too young to be able to care for themselves. It's part of the social compact, and it's not something that was new with Franklin Roosevelt. In earlier generations, children took elderly parents and uncles and aunts and disabled siblings and orphaned nieces and nephews into their households to care for. That was as expected as it was for you to care for your own children. Social Security just provides an adaptation of the fulfillment of that obligation in an age of mobile populations and households of nuclear rather than extended families.

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?

The math on that just does not work. There was an excellent analysis of the whole Social Security question in the New York Times Magazine in early 2005, when Bush's proposals were first floated. Do read it -- it addresses many of the questions you have raised. (The discussion of the relative merit of private accounts begins on page 7.)

.> That was then, this is now.

For some odd reason now is looking more and more like then (specifically, the Gilded Age) to me every day.

.> Why should anyone be entitled (in the
> sense that the government / society owes
> them a living in whole or part) to retire
> when able to work?

As I say to my kids, there are all sorts of light bulbs on the shelf at the hardware store ranging from 0.5 W nightlights to 3000 W floodlights. You may consider yourself a floodlight and that is fine and honorable, but every one of those bulbs contributes to some area of life and we couldn't do without any of them.

We have built an incredibly rich society in part through the use of differential rewards and if you consider yourself one of the high achievers that is fine and honorable too - but every member of society contributed in some way to building and maintaining society and we own them all some basic decency. If the only way you can accept that is "to avoid Bolshevik riots", the conclusion Bismark reached, so be it.

Also, it is not clear to me that in a society of such wealth there is any reason for everyone's nose to be rammed into the grindstone from age 16 to 96. That's the Scots Presbyterian outlook on life but it is not a universal outlook by any means.

sPh

It's a good point, Tenaciousd. But, the reason the cap exists is because benefits stop accruing over the cap. The Social Security check you get is indexed, somewhat to the wages you earn throughout your life. That indexing stops when the cap does. So if you earned $3 million a year throughout your working life, you only get benefits as if you earned $100 k a year because that's all the money you spent the taxes on. If you remove the cap, do you also increase benefits to billionaires?

thosethingswesay.blogspot.com

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.

I believe there already is one, isn't there? That's the justification for capping the income subject to FICA tax in the first place. SS yields a lower ROI for those at the top of the income scale than for those at the bottom, but that's not an accident.

we've been able to keep borrowing via Treasury Bills based on reputation alone. No other government would be allowed to rack up a debt level as high as ours and still keep a high credit rating.

The official debt stands over 9 trillion. This doesn't include the unofficial debt owed to Social Security by the federal government. The financial trail here is so serpentine, there may not be anyone who really knows what our total debt is.

The folks coming out here and downplaying the serious financial crisis we face represent the reason nothing ever gets done.

You are making a flawed assumption, that is that the US Government must and will continue to fund SSI.

Umm, I don't think you really mean SSI, which is a completely separate program and is funded from general revenue, not FICA taxes.

It's true that one Congress cannot obligate another through ordinary legislation, but can you imagine any Congress suddenly deciding to cut the legs out from under millions of constituents (people who are near and dear to millions of other constituents)? You may have a dim view of Congress, but they are not that stupid.

The value of investments in real assets is much more likely to hold up than the value of an empty pledge.

You mean like mortgage-backed securities or stock in high-growth companies like Enron and AOL? Sure, right, infinitely safer than T-bills. If you think "full faith and credit of the U.S. government" is no more than an empty pledge, then I'm not sure why you think anything is worth anything at all. The paper money in your wallet, the balance on your bank statement, the value of your life insurance, the pension your employer has promised you -- those would be just empty pledges, too. What are you going to do, build and stock a bunker in your back yard?

Sounds pompous , but I'd say I'm not suggesting anything, just describing reality.

1. More retirees than ever before.
2. Longest lifespans in Americas history.

Both of which have been taken into account by the actuaries. That has already been figured into the tax/payout schedules.

3. More expensive drugs and medical treatments available.

But Social Security does not pay for that, so I'm not sure what you are getting at.

4. More benefits than before.(Thx 2 Bushs drugs for florida reelection entitlement!)

You are evidently referring to Medicare. That is a separate program with a separate funding mechanism.

5. And huge tax cuts and a war costs running up monster debts for my generation to pay off.

For us all to pay off. Look, I'm not denying that in the last 7 years the Republicans have created a fiscal mess that needs cleaning up, but Social Security is one of the few things that seems to me to be in pretty good shape.

I'm certainly no expert, but...

Social Security was created as one-leg of the three-legged retirement stool.

1 - Private savings: IRAs, cashed in real estate equity when you went from the big family house to the smaller one, etc.

2 - Employment savings: This was generally pensions, which are, of course, going away.

3 - Social Security: Government guaranteed savings.

Social Security was created to battle the rampant poverty among the elderly. One of the leading causes of death for those over 60 in 1930 was hypothermia. FDR wanted to make it clear that in the richest country in the world, there is a line below which no one would fall. (FDR also tried to implement an earlier version of universal healthcare but couldn't get it through; now over 70 years later we're asking for it again...)

So if everyone basically rolls their SS accounts into private accounts (essentially into one giant 401k), security from market turmoil is gone. In other words, the main point of Social Security would be gone; the security and freedom in knowing that in this society you will not freeze to death or go down your last days eating cat food (unless, of course, you want to).

SNAKE EATING IT'S TAIL LOGIC ALERT

And of course, all these projections that SS will go insolvent in 2041 are based on a projected 2% annual growth. Considering we've averaged about 8-10% growth since the Great Depression, these insolvency predictions are EXTREMELY conservative and unlikely. But even more to the point...

1. If we seem to be approaching insolvency, there will be plenty of time to fix it.

2. If SS IS going to be insolvent, the economy will be such a mess from less than 2% growth over decades, that those private accounts will all but assuredly be an unmitigated disaster (and will likely be the least of our worries).

So we're left with a few observations...

1. SS is NOT in trouble.
2. Making SS private undermines the very point of SS.
3. Even if it is in trouble, private accounts would likely only make the problem worse.

(Oh, and while it's not full insurance, SS does act as disability insurance in some cases, and perhaps others that I'm not aware of, but like I said, I'm no expert.)

Agree.

I meant the few families that have been fighting against estate taxes and dividend taxes, etc.

So if the non-SS part of the government is in deficit, and then Social Security goes into deficit, a fiscal crisis will ensue.

Not necessarily:

Since 1970 there have been 11 years in which Social Security has operated at a deficit; each time, it redeemed bonds from the trust fund without a fuss. [Stephen] Goss, the agency's [chief] actuary, says he has no doubt it will be able to do so again. ''Absolutely,'' he said when asked if the trust-fund bonds are sound.

New York Times Magazine, January 16, 2005

-----------

The pressure to look at ALL government expenditure, including Social Security, will be immense.

[...]

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

So in order to avoid having the program opened up to wholesale changes in the future, we should open up the program to wholesale changes now? Sorry, I don't quite see the logic of that.

Here's the thing: Even if the current 75-year projections are correct (and there are a number of analysts that think they are overly gloomy), what deficits are forecast for the system can be fixed with fairly modest adustments. What is the wisdom of making drastic changes to affect a future that we have only a very limited ability to predict in the first place? Wouldn't it be wiser to be content with the minimum adjustment that seems to have a reasonable chance of giving the desired outcome?

Meanwhile, it seems to me we would do far better for Social Security by getting our overall fiscal house in order so that when the time comes, we will be able to borrow any Social Security shortfall without bringing the whole house down.

"Owed by other Federal Agencies"? What are you talking about? The money is owed to it by the American people, not by individual agencies of the government.

Are you asking what the total assets of the trust fund are? According to the latest Trustees' Report, the OASI trust fund had assets of a little over $1.84 trillion at the end of 2006, a net increase of $181.3 billionfor the year. Most of those assets are in the form of Treasure securities.

I think you are right, but it is very important to those who do not want SS to be converted into a means tested welfare program funded by general revenue to maintain the political shell game.

Yes SS isnt in trouble.

But I agree with Obama in removing caps.

I also agree that General Tax should pay for their borrowings from SS used to pay for deficits ---after all, as it is today--it is not the Govt money, it is insurance money paid by employees.

And if there is no money in General Tax--then they have to find a way -- like increasing taxes from the higher income brackets. But Loan should be Repaid.

Also , the convention that SS benefits must be in some way related to the "trust fund" provides a discipline apparently creating a control over "excessive" increases in benefits.

I agree with what I think is your implicit warning that we'd better at least pretend we are just keeping the program that FDR (clever guy) gave us.

"Always keep a hold of nurse for fear of getting someone worse"

Or 8 years of slightly less corrupt Clinton rule.

The usual raiding of the till for profit is not the problem with Bush. Obviously Lady Hawk is far more intelligent than Dubya (who isn't?). She has far more ability to do damage.

I wondered how any sane person might vote when Louisiana offered the delight of David Duke or Edwin Edwards. The thought crossed my mind that David Duke might be the rational choice, given that he was a moron. Bush provides powerful evidence that such a possibility was dead wrong. I am not so sure yet.

Edwards is safely tucked away in jail now that it matters not at all. Even that afterthought is not possible with a corrupt president it seems.

I would have passed were I a Louisianan with such horrendous choices. I will again next year if I have only a choice of hawks offering privilege for the upper classes and nothing for the workers.

Best, Terry

Best,

What many do not understand is that Obama is a completely different person than one we are use to seeing and hearing.

Hoppy in Sacramento

He's a lot stronger on gay rights in his actual voting record then Hillary.

What votes do you have in mind?

*Adding: Only votes I'm seeing are on a constitutional ban on same sex marriage, which they both voted "no" on.  And Clinton voted "yes" on adding sexual orientation to hate crimes legislation in 2002.  Obama wasn't in the Senate then, but I assume he'd have done the same.

Prior posts have discussed the social security issue well. Basically, I support removing the caps. And, I believe there is no serious crisis in social security.
I would like to respond to other parts of your position. First, you argue that the left has problems with Obama. Well, I am on the left. I am a long time activist in Democratic Socialists of America and in my union. I support Obama. Most of the folks who you refer to are liberal at best- is that what you mean by left?
For a good piece on this see Michael Eric Dyson on Obama.
Second, you assume that most leftists have or will have a problem with Obama. ( I think you mean liberals).
Again, I would be more precise.
It appears that you assume that most thinking people, most liberals, support Edwards.

Most precise:
Most thinking white males liberals over 35 support Edwards.
On the other hand, most white males over 35 vote Republican.
So, while I may agree with you on Social Security, the major remaining analyses seem ego centric and flawed.
More on these issues at http://www.choosingdemocracy.blogspot.com and
www.sacramentopa.blogspot.com

Unless taxes are raised to cover this gap, the general fund will go into ever deeper debt, thus requiring more borrowing in general.

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

Social Security 'Crisis' simply does not survive an encounter with the numbers. Which is why you have massive Social Security comment threads whose operating assumption seems to be "Let no dollar signs be harmed during the course of this production".

What are the real numbers in context? That's the question I don't see being addressed. Along with any semblance of analyzing the economic projections. Where is the discussion of ultimate 1.7% productivity, of 2.0% Real GDP? Are those reasonable numbers? And if so why? That is the real question that determines whether Social Security is solvent going forward, and that discussion is simply not happening anywhere.

No he is wrong and Hoppy is right. You have to understand the cash flow.

Currrently Income excluding Interest continues to exceed Cost. The Treasury Department borrows that money and in turn places Special Treasuries in the Trust Fund. Those borrowed dollars show up on the balance sheets as additional debt. In turn the Interest on those dollars shows up in the budget as expenditures.Any further increase in tax dollars flowing to Social Security serves to increase the overall National Debt and load up the General Fund with more debt service. Raising a buck today only cuts a buck of National Debt if it is used to pay off current debt. Which not only doesn't seem to be part of the plan would be inequitable besides. The debt was accrued nationally, it doesn't make sense to pay it off from the single sector represented by wage workers.

What Obama's plan does is to shove back the date at which we would be required to start paying the debt but increase the amount of debt overall. A combination of a cap increase and more realistic numbers is likely to push Trust Fund depletion past the standard 75 year window and result in a de facto abrogation of the Trust Fund. I know it sounds outlandish but at this point in time the Trust Fund are more likely to be overfunded going forwards than underfunded, and even more outlandishly that condition puts Social Security more at risk then underfunding.

To understand this requires some detailed examination of the numbers and an understanding of what a Trust Fund Ratio of 500 or above would mean in the future political context given the probable economic numbers as they appear in the current Intermediate Cost and Low Cost alternatives. I don't see that examination happening, this entire discussion seems trapped at the conceptual level. Well the numbers are important. Trust Fund Ratio Explained

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.

The plan worked brilliantly with the results you cite. Nobody under 40 thinks Social Security will be there. But that is the result of not thinking things through. The payroll tax isn't going anywhere and so some sort of benefit will always be able to be paid. Certainly there can be a gap between scheduled benefits and income, the question is how much that would actually be in real terms.

Prof. Rosser of James Madison and some of his colleagues polled their incoming Econ students to see if any of them knew the actual result of depletion in real terms. None of them passed the test.

I call it Rosser's equation. Under the current schedule the benefit check in 2041 will be 160% in real terms than the one current retirees get. If the Trust Fund goes to depletion in that year the checks reset by 25%. Well 75% of 160% = 120%. Not only will you get a check, it will be 20% better in real terms than the one my Mom gets today.

Two entire generations simply got played on this issue. You my friend are the simple victim of con game. If you want to see how it worked simply click on that link and Mr. Stuart Butler and Mr. Peter Germanis will show you exactly how they planned it.

Don't tell me no crisis! I know math.

Terry a common bumper sticker in Louisiana at the time was:
"Vote for the Crook. It's important."
It really does matter what numbers are on each side of the aisle.

When you take money from the poorest workers to give to the richest segment of the population and even have a surplus to do things like helping kill Americans and Iraqis, seems to me there is a problem.

You are simply substituting some tired polemic for analysis here. If you want to talk about wealth transfers from the poor to the rich maybe we could start with defense spending. The very wealthy did not get that way by siphoning 12.4% from some dishwashers check, they did it by owning stock in defense companies (plus ownership of a Congressman or two). Social Security is simply not the place to start restoring progressivity.

Raising the cap is poor policy and poor politics. And the Trust Fund is just as real as the political will of the American people to enforce that obligation. To suggest otherwise is simple surrender to a calculated Right talking point. Don't get played into taking the same line as Cato and Club for Growth. Those people are not your friends.

Well I don't know about Destor but I have an entire website devoted to hard Social Security data. I have got links to every Report back to 1942, I have some of the relevant data table split out, I have some posts explaining the Trust Fund Ratio, examining the liklyhood of a result coming closer to Low Cost than Intermediate Cost. For people who don't understand what those terms mean I even have explanations. Google 'Bruce Webb Social Security' and you will get 814,000 results many of which are in fact either my work product or from people referring to my work product.

As a starting point you would want to examine the following table from the Economics Policy Institute Social Security: Changes in Trustees Projections over Time. You will see that a system projected to go to depletion in 2029 was by 2004 scheduled to go to depletion in 2042. The real questions in November 2004 were "Why has this date been moving?" and "Can that process continue?" And the answers were pretty simple "Better economic growth than projected" and "Most likely yes".

There have been some fluctuations since 2004 due to some assumption changes in labor participation and assumed interest, but the general trend in likely to continue. Depletion is being pushed back at an average rate of more than a year per year, and given any amount of Real GDP growth over 2.6% near term and 2.0% far term should serve to push that date further back and reduce the projected payroll gap.

By the way that 'stark reduction in recipients to payors'. First it ignores overall Dependency Ratio (even though the data is in adjacent columns) Table V.A2.-Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1950-2085 . Under Intermediate Cost assumptions we never get back to Dependency rates we saw in the 60's and 70's. Moreover if you examine the principal demographic numbers you will see that much of that drop comes from ridiculous immigration assumptions Table V.A1.-Principal Demographic Assumptions, Calendar Years 1940-2085 There is no reason to believe that we will reduce