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199 comments on DrumBeat: June 29, 2006

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westexas on June 29, 2006 - 11:43am Permalink | Subthread | Parent | Comments top
I'm just amazed at the microscope that the feds put private enterprise under when the feds are running the biggest financial fraud in world history--the Social Security Trust Fund.   American taxpayers--especially younger ones--are going to be taxed twice, once to build up the "Trust Fund" and then again to pay off the bonds.  
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mcain6925 on June 29, 2006 - 4:39pm Permalink | Subthread | Parent | Comments top
I always feel like I have to defend the Social Security system...

Everyone's long-term forecasts of SS payments show them stabilizing at just about 6.2% of GDP (versus today's roughly 4.3%). Figure II.D5 in the trustee's annual report illustrates this nicely. I assert that, as a society that places a high value on personal independence for our elderly, we can afford this, although I acknowledge that others feel that's too much to "give" to retirees. If the retirement age is raised somewhat and/or some very modest means-testing is applied to benefits, the payments stabilize at a lower rate. The SS fiscal "crisis" is due to the 12.4% total tax rate being applied to a steadily shrinking portion of the US national income. If the current 12.4% payroll tax were replaced with a 4.3% tax on all income, increasing gradually over the next 25 years to 6.2%, the system is solvent and a very large majority of those younger American taxpayers would be much better off.

Now Medicare, forecast to take an increasing share of national income forever, eventually costing far more per year than SS, whose trust fund will be exhausted decades before the SS fund, that's a real fraud.

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westexas on June 29, 2006 - 7:10pm Permalink | Subthread | Parent | Comments top
"whose trust fund will be exhausted decades before the SS fund"

The Social Security Administration has the assets in the Trust Fund, the bonds.  

The Treasury Department has the liability, to ultimately pay off the bonds.

These are two branches of the federal government.

Therefore, the asset is offset by the liability.  

Therefore, there are no net assets in the SS Trust Fund.

The actual money is spent every year on other government programs, which allows Congress to pretend that we are building up the assets in the "Trust Fund" while actually spending the money on other programs, which constitutes a multi-trillion dollar fraud on  American taxpayers.

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mcain6925 on June 29, 2006 - 10:12pm Permalink | Subthread | Parent | Comments top
What you say about "assets" in the trust funds is true. Think of it as bookkeeping -- since 1983, the plan has been to collect excess payroll taxes for 20 years, then pay it back with excess income taxes (or other revenue sources) for 20 years. All out in the open, and no one who is paying attention can be fooled about what is going on (you can be pissed off about it, which you are and I am, but you can't be fooled). The economy has done quite well, so substitute 35 in place of 20 in each place. In fact, there is some probability that the bonds in the SS trust fund may never need to be redeemed. See The Bruce Web for at least one person who brings considerable knowledge about the actual basis for the SSA forecasts and some fairly serious number crunching to the problem.

I guess I mostly object to using SS as the example of "fraud" when the General Fund is currently running a deficit of >$500B per year, and the Medicare program has both long-term benefits which are simply not affordable and the payroll-to-income tax shift occurs much sooner than SS.

Of course, if the Peak Oil pessimists are correct and we're really about to charge over the edge of a production cliff, then SS isn't going to be around for long enough to worry about :^)

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AlanfromBigEasy on June 29, 2006 - 10:23pm Permalink | Subthread | Parent | Comments top
Perhaps our best hope is our growing obesity, which will lead to several life shortening diseases.

One can usually get to age 60 at least with obesity, but the numbers begin falling quickly after that.

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phineas gage on June 29, 2006 - 11:03pm Permalink | Subthread | Parent | Comments top
yes, unless there is a breakthrough in the treatment of obesity (or a radical change in American habits), the long standing growth in American life-expectancy will likely decline due to obesity and its medical complications. here's a MSM article describing this penomenon:

http://www.cnn.com/2005/HEALTH/diet.fitness/03/16/obesity.longevity.ap/

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David JM on June 30, 2006 - 11:23am Permalink | Subthread | Parent | Comments top
On the other hand, maybe all our fat citizens will need all that blubber to make it through the winter in "The Long Emergency"...;o)
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TrueKaiser on June 30, 2006 - 1:00am Permalink | Subthread | Parent | Comments top
even taking peak oil out of the picture i have always considered SS to be dead already and gone long before i even reach that age.
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Nagorak on June 30, 2006 - 2:47am Permalink | Subthread | Parent | Comments top
Yes, but your belief is primarily based on the fact that one of the two political parties our country has wants to kill the program.  It's fairly easy to save SS.  It's really not that complex or difficult.  The reason we here all these complex plans is because Republicans want to find a way to get rid of the program, and they can't do so out in the open due to its popularity.  

I have to hand it to Republican propaganda on this issue.  They have been very successful.  

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westexas on June 30, 2006 - 7:13am Permalink | Subthread | Parent | Comments top
My proposal is that we fund Social Security/Medicare with a tax on energy consumption.
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mcain6925 on June 30, 2006 - 6:42pm Permalink | Subthread | Parent | Comments top
I have no problem with this. The EIA puts current spending on energy at about 8% of GDP. Current spending on SS and Medicare is about 6% of GDP, so we need roughly a 75% tax on top of current energy prices. Being self-employed, and probably making less than $93K this year, I'm paying 15% of my earned income in payroll taxes. If I can drop that in return for an energy tax that looks like about 6% of my income, I'll be better off than I am now. The poorest workers, who spend more of their household income on energy than the average, will be worse off. Poor pensioners, who pay no payroll taxes and little income tax, will be substantially worse off.
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mcain6925 on June 30, 2006 - 6:25pm Permalink | Subthread | Parent | Comments top
Those who wish to kill SS have an interesting definition of "broke". Even if the bonds in the trust fund are declared to be worthless and not redeemed, what would be the situation? If we use the SSA forecasts, starting in 2018 benefits would be decreased slightly so that payments did not exceed payroll tax revenues. By 2042, benefits would have decreased to about 74% of what is currently promised for 2042. Note that in the forecasts, the 74% level is still going to be a larger inflation-adjusted benefit for new retirees than is paid today. As you move beyond that in time, the forecast says the size of the benefit paid will continue to decrease slowly when measured against the size of the benefit promised, but will still grow faster than inflation for new retirees.

Consider the quality of the forecasts. Since 1996, the SSA shifted the first date out by six years, from 2012 to 2018. Since 1996, the SSA shifted the second date out by twelve years, from 2030 to 2042. The CBO, charged with forecasting the most likely outcome (and the SSA is not charged with that), says the second date is 2052 and the percentage is higher. I will cheerfully bet a beer that by the time we reach 2018, payroll tax revenue will still exceed benefits being paid, and that the forecast date for the shortfall to begin will have been pushed out to 2024 or beyond.

I have no issue with people who want to do away with SS on ideological grounds. The position that the government should not be involved in pensions is logically defensible (I happen to disagree with it, and polls suggest that 80% of the US adult population disagrees with it, but it's still a defensible position). Those who attempt to justify that position on the basis that "today's young workers won't get a dime from SS" are, however, saying something that is not even close to the truth according to anyone's forecasts, from the SSA to the CBO to the Cato Institute.

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xironman on June 29, 2006 - 6:55pm Permalink | Subthread | Parent | Comments top
I think they cornered 90% of their target market, I could not find the transcript on the story I heard.  Then attempted to fix the prices on that market. That's illegal, just because the Feds can be a problem in one area does not mean that we need to ignore the laws.
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199 comments on DrumBeat: June 29, 2006

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