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Why should looting Social Security be a "Grand Bargain"ing chip?

Hamsher asks a good question.

As she's been doing a lot, lately.

As Avedon writes:

Baby-Boomers didn't just pay for their parents' retirement during their working lives, but also for their own, thanks to Ronald Reagan giving us the biggest tax hike in American history - on payroll taxes.

Cutting Social Security benefits -- even for rich fucks who looted everything else -- is theft, pure and simple. I can't imagine why the FKD would even put it on the table.

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Submitted by jawbone on

statement (second paragraph) linked to by Lambert. I knew we "paid ahead" after Greenspan's SocSec salvation recommendations, but I also get big pushback that Boomers have not paid their own way. Repubs have done a thorough job of undermining confidence in the staying power of SocSec, and they're playing all their old favorites again and again and again. Indeed, pushback that SocSec will "be there." Here is What CMike Said:

In 1983 Social Security Expenditures were 6.8 times larger than the interest bearing Social Security Trust Fund. In that year Social Security Expenditures exceeded the payroll taxes collected. In 2006 the Social Security Trust Fund was 3.68 times larger than Social Security Expenditures. In that year Social Security payroll taxes exceeded expenditures as they had since 1984.

Here's a more sophisticated discussion:

Social Security was set up in 1935 as two programs. One under Title 1 was a straight out government pension system paid out of the general fund. Title 1 was designed to phase out in favor of a Title 2 worker funded insurance plan. It is this Title 2 insurance plan that we know as Social Security today.

Like most insurance plans there is no direct connection between the dollar paid in and the benefit paid out, instead what you are buying is coverage, once your actual premium dollar is collected it belongs to the company, or in this case government, and you have to trust that the results of THEIR investment decisions and continued flow of premiums will be sufficient to pay out all claims. In Social Security lingo this is called Pay-Go with a group of active workers paying premiums and a group of retired workers collecting benefits.

Social Security is obviously non-profit so it can and does keep its premium as low as possible and still be able to pay out benefits. Those premiums are credited into two accounts at the Treasury Department: the Old Age/Survivors Trust Fund (OAS) and the Disability Insurance Trust Fund (DI). For reasons of convenience these are normally reported together as the OASDI Trust Fund, but legally they are quite separate and have different degrees of solvency ...

Under the Act the Trustees are mandated to target Short Term and Long Term Actuarial Balance which is defined as having one year of reserves projected for the next 10 years or 75 years respectively. This is expressed in terms of a Trust Fund Ratio where 100=1 year. Currently DI is projected to drop below 100 sometime in 2017 en route to a total depletion date in 2025 ... OAS is projected to not drop below 100 until the late 2030s en route to depletion in 2042 meaning that it is in Short Term Balance but out of Long Term ...

Social Security first had a TF ratio below 100 in 1971 and despite reform efforts in 1977 was on track for total depletion in 1983 ... [T]his was considered to be enough of a problem that the President and Congress appointed a 15 person commission known after its chairman as the Greenspan Commission ...

The Greenspan Commission Plan worked, by 1993 the Trust Fund ratio was back above 100 ... [w]hich left the people of 1993 the freedom to plan in leisure ...

CMike | 02.24.09 - 4:51 am

Submitted by jawbone on

took the quote in my comment above. I've been meaning to bring this series from Angry Bear to Corrente readers' attention, but, uh, forgot.

So, before I forget again, here's the link for Social Security The Series.

Some tall weeds, but there is a summary post and a comment at the link which helps. Webb suggests dropping Paul Krugman's name, as in Krugman has analyzed the numbers and sees that SocSec is Ok, etc.

(And I thot I'd already posted this today, but it wasn't here...so hope this isn't a duplicate.)

Submitted by jawbone on

At Angry Bear, Webb explains in depth the Avedon quote in the Lambert's post.

He explains in some detail, closing with:

So future participants are responsible for a small portion of the $6.5 trillion gap between 2041 and 2082. As are Boomers. But mostly you are talking about Gen-X and leading edge Millenials not paying their way.

Note that a favorite talking point for Repubs and those advocating SocSec "reform," usually in the form of lower benefits, is that the Boomers are being paid for by the younger workers in an unfair manner. Wrong, per Webb. The Boomers, as Avedon states, have been paying extra since 1983 to cover the retirees ahead of them (Greatest Generation, for one group) and to cover their own SocSec costs. But the Repubs love to try to set up a Generational War. Bad Repubs!

The Boomers were paying extra, building up a surplus, which Gore famously wanted to keep in a metaphorical lockbox -- and Repubs, especially BushCo wanted to transfer to the uberwealthy. And did. They also wanted to let Wall Street and the Big Bankster Boiz get their hands on portions of the promised SocSec benefits. Which they did not achieve. But still, very, very bad Repubs.

Similarly future participants are not at all responsible for that $17.4 gap for current and past participants between 2041 and 2108. Nor are past participants, indeed many of them contributed to the Trust Fund that reduces that gap to $15.2 trillion. And by 2041 Boomers will range from old to dead. Meaning once again we are talking about Gen-X and leading edge Millenials not paying their way.

So when you add it all up almost all of this liability derives from the retirees of 2058-2108 not including any of those born after 1993. The very youngest Boomer will be 94 in 2058. And any of our grandkids born after 1993 will actually be contributing to a long term surplus. Meaning almost all of the problem derives from Gen-Xers and leading Millenials scheduled to get some $14+ trillion or so of extra benefits over contributions.

'Backwards transfer' my ass. Instead Boomers not only paid benefits for the Greatest Generation, we are projected to pay almost all of our own benefits and now are asked to take cuts so that Gen-X doesn't feel aggrieved by adjustments to benefits after around 2029. Whereas if they just got off the couch and grew the economy like Boomers and our parents and grandparents did everybody gets paid in full.

But I guess it is more fun to whine about 'Selfish Boomers' than to do the actual arithmetic. (My emphasis throughout.)

Read, bookmark, tell Obama to get a grip on the real math.

Now, about Josh, former protector of SocSec -- has he glommed onto the fact that his age group might need to do what the Boomers have already done and wants us to share his pain? Hhhmmmm.

First half of Webb's post explains the various "inflection points" Gibbs referred to in his attempt to explain why SocSec needs to be "fixed." But, maybe, just maybe, Obama and his econ team think they can bamboozle the public into thinking cuts and higher taxes are necessary NOW, NOW, NOW, in order to get more revenue into the general funds to pay down the debt? And when Repubs get back into power they'll raid those "excess" SocSec funds to give the uberwealthy more tax cuts....

We have seen this movie before; we're living it!