More on Social Security and Responsibility

By Dave Anderson:

I want to follow up on the whack I took at Kevin Drum on his support for a bipartisan commission to take a whack at Social Security in the next couple of years.  Social Security is fundamentally a rounding error over the seventy five year intermediate case projection if one assumes that the 1983 grand bargain will be upheld where the working and wage earning classes agreed to pay more in wage taxes for thirty to forty years in return for the rentier, capital gains and CEO class to pay more in income taxes after this thirty or forty years to pay for Social Security.  If that is the operating assumption, Social Security is a mild concern at best. 

I made this point in one of my first posts at the Typepad/Newshoggers.com iterations of the 'Hog:

We had to destroy the system to resolve an anticipated problem in either fifteen years as the elite was seeking to renege on their promises from 1983 or thirty five years.  Social Security was in trouble and non-sustainable in its current form for any length of time. But never mind any of the other fiscal proposals that had/have larger ongoing projected costs than OASDI --- those are either critical penis enhancement projects where we must stay for 100 years to show resolve, or critical changes in the tax code that encourage dead people to be more productive.

Yet when we look at the evidence today, Social Security is not that big of a problem.  Over the 75 year projection range, the Social Security Administration projects the entire program deficit to be 0.6% of GDP.  In the grand scheme of things that will produce a large number but it is fundamentally a rounding error. 

Let us take a look at a couple of other major policy initiatives --

a)  John McCain's tax proposals would result in a permanent loss of roughly net $400 billion dollars a year in revenue.  That is slightly more than 3.0% GDP, or roughly five times the size of the projected long run Social Security deficit.  Yet he is a 'credible' individual on economic policies.

b)  The supplemental appropriation for Iraq this year was roughly $200 billion dollars this year.  That is roughly 1.5% GDP...

in the past year 'serious' new proposals for expenditures and revenue losses make up roughly 5.5% of GDP, or about 9 times the size of the long run deficit for OASDI. Just keep that in mind when told that Social Security is in trouble.

Given the Democratic Senate is unwilling or unable to take on more than one tough task a term (see Claire McCaskill beg off any work on a climate bill this Congress), Social Security would be gutted and looted, Democratic base voters would see no reason to come out and vote for Democratic leaders who just shot themselves in the gut, and "get the Washington Post and the Wall Street Journal and the Peterson folks to quit droning on endlessly about this, we might actually clear the way for discussion of some real issues.." still babbling on about Social Security's problems. 

If one is actually interested in solving the long run fiscal problems of the US, then the discussion starts at health-care (all inclusive), then moves to getting a decent tax system without too many perverse incentives that can collect with minimal pain 20% to 25% of GDP in revenue, then look at the defense budget and then finally think about Social Security.  Anything else is a facade that seeks to distract the "serious" people with shiny objects.

Comments

[John Ballard]

Scare-mongering about Social Security is in the same category as the death panels flap. The system can keep going a long time simply by tweaking the annual cap (or eliminating it altogether as in the case of the Medicare tax).

Next step is a means test insuring that those with generous lifetime income sources are no longer eligible. My retirement job working among seniors has been an eye-opener. In some cases multiple pensions from private sector employment, military and government careers is producing one of the richest and best-cared-for populations of old people on the planet. Their Social Security checks are spending money.

The old-fashioned defined benefits pension plans are an endangered species, but they are being replaced by a constellation of tax-favored employee-paid plans (401-k, Roth, Traditional IRA's) that managed properly will put coming generations into really good lifestyles.

Finally, the Diamond-Orszag Plan is waiting to be put into place, with features as delicately balanced as a Swiss watch. (Congress, of course, is more than willing to screw it up, so that or any other meaningful option is apt to be of no value as we are witnessing with health care reform.)

[Curmudgeon]

Slashing SS benefits is entirely justified given the damage the reactionary elderly have inflicted on the political process and younger generations.

Redirecting a portion of the economic surplus to compensate the elderly for 40 years of work is only acceptable as long as the elderly don't conspire to prevent people who are in their working lives from receiving just compensation today.

It's unconscionable to require 20-50 year olds to pay the SS benefits for a generation that returns the favor by working to start wars, cut wages and deny health care to people under 65. The elderly made their beds by choosing to vote Republican. Let them lie in the mess of their own creation.

[rusted]

Gee Curmudgeon.. are you done? You seem to overlook the fact that some of the people who should be receiving Social Security that they "earned" by meeting the requirements as established can't due to government changes to the laws in the 1980's... I have no problem if the raise the cap to say $250,000 is taxable for Social Security payments by people earning that... after all.. Warren Buffet is entitled to collect his monthly checks if he cares to...He put his money into the "system" ...I think you might need to read some more history on how a couple of generations paid for the "Cold War" with their taxes etc...the wrong thing to do is to pit one generation against the other...
And with regard to voting GOP... this country swings from right to left depending on the mood of the country...In my lifetime Nixon was more of a threat to freedom of this country then the Vietcong under LBJ...Ford had more guts the Nixon or LBJ.. even though I disagreed with him on a few things...Carter tried... introduced some great military projects...and so on...nothing in the USA is ever perfect..