[BRussell]

Kevin Drum writes a particularly clear explanation of the recent history of Social Security. In short, for the past 20 years we've been keeping income taxes on the rich low through higher taxes on the lower/middle classes. We did this with the understanding that we would raise taxes on the wealthy in the future. Now, instead, we've gone ahead and cut taxes on the wealthy, gone into long-term deficits as a result, and are saying that we can't afford to pay for Social Security any more.

It's a true scam to soak the poor, but since it takes place over many decades, you wouldn't know it unless you actually looked into the history of what's happened.

Unlike ordinary government functions, Social Security is funded by its own tax, the payroll tax. In 1983, at a time when Social Security was genuinely facing a crisis - it was mere months away from failing at the time - a commission appointed by President Reagan and headed by Alan Greenspan proposed a series of fixes. Among other things, the Greenspan commission recommended increasing payroll taxes.

But there was a twist: Knowing that the baby boomers would begin retiring around 2010, Mr. Greenspan recommended raising payroll taxes by much more than was needed to pay benefits at the time. The surplus would be used to buy Treasury bonds, which could be redeemed when the boomers retired and payroll taxes were no longer sufficient to fully fund retirement benefits.

This is where the second twist comes in. Because the surplus payroll taxes were handed over to the federal government (in return for Treasury bonds), this meant ordinary income taxes could be kept low. After all, the federal government has a fixed need for money, and if it gets excess money from payroll taxes it can afford to keep income taxes lower than they'd otherwise be.

But the payroll tax is a flat tax, paid disproportionately by low and middle income workers. The income tax is a progressive tax and is paid disproportionately by high earners.

So this was the implicit bargain in the reforms recommended by Greenspan and signed into law by Reagan: From 1983 to 2018, low- and middle-income earners would pay excess payroll taxes. This allowed income taxes to be kept low, and primarily benefited high earners.

Then, beginning in 2018, instead of raising payroll taxes to pay for baby-boomer retirement benefits, Social Security would begin selling its bonds back to the government.

To pay for those bonds, income taxes would be raised - high earners would begin paying higher income taxes.

In other words, the fact that income taxes will eventually need to be increased in order to cover Social Security benefits was part of the Greenspan/Reagan plan from the start.

[Sage]

Social Security is an inherently lousy system… it shouldn't exist at all. Why should I have the government save my money for me, when I can save it myself? (I think I'm quite capable of doing that on my own.) And instead of "picking" on the low, medium, or high wage earners, it seems a lot easier to just pick on nobody.

[mubach]

Originally posted by Sage:
Social Security is an inherently lousy system… it shouldn't exist at all. Why should I have the government save my money for me, when I can save it myself? (I think I'm quite capable of doing that on my own.) And instead of "picking" on the low, medium, or high wage earners, it seems a lot easier to just pick on nobody.

Agreed, one can get much better returns when they invest it themselves. However not everyone has the willpower to turn their money into a Roth IRA or a mutual fund/bonds etc when they can buy something "now" that is "tangible"

[spacefreak]

Reagan is no longer in office, and nowhere in any of the tax cut legislation passed during his terms is there mention of a required increase in taxes on the wealthy.

I find it ridiculous that for the past decade, we've all heard Democrats bitching and complaining about the sure-to-be doomed Social Security system. Now that Bush and the Republicans have Social Security reform in their sites, the Democrat line is "Social Security is fine... none of that bankruptcy stuff will happen for another 50 years."

Fortunately, we have dedicated members here such as BRussell (thanks for the post) who are kind enough to keep us abreast of what the Democrats' real intentions are with regards to social security: let it flounder until it's too late, then tax the hell out of the rich.

Even now, as reform is gaining momentum, the Democrats are trying to slide this "tax the rich" stuff (divide-the-nation-via-class-envy) as some sort of alternative to the Bush plan.

If the government wants to set up individual savings acounts for its citizens to ensure that some sort of nest egg is present upon retirement, then I say go for it. And if that nest egg can be bereaved to surviving family members upon death, even better.

The one thing holding me back from totally denouncing the concept of social security is that it is not in the nation's best interest to have tens of millions of penniless elderly citizens.

[CRASH HARDDRIVE]

Originally posted by spacefreak:
Reagan is no longer in office, and nowhere in any of the tax cut legislation passed during his terms is there mention of a required increase in taxes on the wealthy.

The goofiest thing about tax and spend busy-bodies and their constant salivating to build a suction-pipeline directly into the wallets of the 'wealthy' (defined as anyone with a buck more than the next guy) is that they've ALREADY phantom-spent the imagined influx of cash 1,000,000 times over, on a million different causes and ‘crises’.

One minute they're fantasizing the money will provide 'free' bennies up the wazoo for every possible social ill, and the very next minute THE VERY SAME $ are being fantasy-spent to 'save' Social Security, etc. Whatever is the cause-of-the-minute, that's what the SAME fantasy pile of money soaked from the rich will be phantom-spent to solve. Yet the next time any of us blinks, the same dough will have been fantasy-earmarked to pay for something else.

Why, if we can just soak ‘the rich’ enough, we can endlessly phantom-spend our way out of ALL problems! Just “chaaaaarge it!” to surrogate Ma-Ma and Da-Da taxpayer!

[Millennium]

Originally posted by BRussell:
Kevin Drum writes a particularly clear explanation of the recent history of Social Security. In short, for the past 20 years we've been keeping income taxes on the rich low through higher taxes on the lower/middle classes.

If any one of the top 400 taxpayers in the US didn't pay as much at the bottom 40,000 combined, I'd believe you. The fact is, however, that this is not the case.

[SimeyTheLimey]

I'll give the Democrats credit for one thing. At least they are finally admitting that the Social Security tax is a tax complete with their soak-the-rich redistributive agenda. That's not how it was originally sold to the American people. Most were under the impression that it was a retirement scheme.

Even as it was marketed, Social Security is a giant intergenrational ponzi scheme. The solution is to allow the money to be invested, and to means test benefits so that wealthy people don't take money that they don't need taking needed money away from the safety net.

But try getting either reform past the AARP lobby or the reactionaries in the Democratic Party. They are happy to increase your taxes, but don't talk to them about seeing that your taxes aren't frittered away.

[BRussell]

Originally posted by CRASH HARDDRIVE:
Why, if we can just soak ‘the rich’ enough, we can endlessly phantom-spend our way out of ALL problems!

It's funny how, in the face of a scheme that raised taxes on the poor in the 1980s, beyond what was necessary to pay for Social Security, you complain about your usual bogey men, those who want to soak the rich. How do you it Crash?

[BRussell]

Originally posted by SimeyTheLimey:
I'll give the Democrats credit for one thing. At least they are finally admitting that the Social Security tax is a tax complete with their soak-the-rich redistributive agenda.

How can it be soak-the-rich when the agreement in the 1980s raised taxes on the poor? The deal that the conservatives like Greenspan and Reagan came up with was that we'd have a payroll tax hike in the 80s, more than necessary to pay for social security, and then when there was more retirees than money when the baby boomers retired, we'd pay back that surplus with regular taxes. Now the conservatives are saying we can't do that. It's soak the poor not soak the rich.

[BRussell]

Originally posted by spacefreak:
Reagan is no longer in office, and nowhere in any of the tax cut legislation passed during his terms is there mention of a required increase in taxes on the wealthy.

It was Reagan's tax increases on the poor, in the form of payroll taxes, that made that deal. It wasn't tax cuts.

Fortunately, we have dedicated members here such as BRussell (thanks for the post) who are kind enough to keep us abreast of what the Democrats' real intentions are with regards to social security: let it flounder until it's too late, then tax the hell out of the rich.

It wasn't the Democrats who made the deal, it was largely conservatives, though Democrats (stupidly) went along with it.

[SimeyTheLimey]

Originally posted by BRussell:
How can it be soak-the-rich when the agreement in the 1980s raised taxes on the poor? The deal that the conservatives like Greenspan and Reagan came up with was that we'd have a payroll tax hike in the 80s, more than necessary to pay for social security, and then when there was more retirees than money when the baby boomers retired, we'd pay back that surplus with regular taxes. Now the conservatives are saying we can't do that. It's soak the poor not soak the rich.

I know nothing about this supposed "deal" in the 80s, and I don't trust an editorial from a leftist like Kevin Drum as our only source. Unless you can come up with a more neutral source, let's leave that aside.

I also strongly dislike any notion of any exchange between Social Security taxes and income taxes. If we are going to treat both taxes as interchangable and intermixable, then we should be honest enough to combine them. But Social Security taxes ostensibly are there exclusively to find the Ponzi scheme. In Al Gore's words it should be in a "lockbox" of its own. That way we don't start confusing what this supposedly dedicated fund is for and don't start using is as a backdoor way to simply tax people more and more by misleading them with a separate line item on their pay stub.

So, come up with a way to reform Social Security that:

1. doesn't worry about redistributing income among current workers. That's not what it is there for.

2. gives a rate of return that isn't laughable (yes, invest it on "Wall Street" (boos from the antibusiness Democrats).

3. gives Americans who need it a reasonable chance of having benefits there to draw off.

4. doesn't waste money by giving it to those who don't need it (so have a means test already!).

5. doesn't take money from relatively poor current workers and give it to relatively rich retirees (i.e. keep the rates reasonable, AND means test the benefits) (howls of outrage from the AARP).

6. Doesn't cause the rest of the government to starve for funds.

Grapple with the above issues, and I think we'd be getting somewhere. Play this stupid rearguard attempt to reverse income tax cuts and this will deadlock.

[BRussell]

Originally posted by SimeyTheLimey:
I know nothing about this supposed "deal" in the 80s, and I don't trust an editorial from a leftist like Kevin Drum as our only source. Unless you can come up with a more neutral source, let's leave that aside.

I'm not leaving it aside because it's the point of my thread. Here's the SSA's website about the Greenspan commission. If you think Drum's characterization is wrong, tell me how it's wrong. (And Kevin Drum is a "leftist?" Why not just go all out and use the term "communist" for all Democrats with an opinion.)

Let me test you a bit. Do you agree with the following:

1. We currently take in more in SS taxes than we need to fund SS.
2. We are purchasing T-bills with the excess - i.e., we have a SS "trust fund."
3. The idea is that when the baby boomers start retiring and we have more retirees than the workers can pay for (currently projected to be 2018), we will start redeeming those IOUs.
4. We redeem the IOUs out of the general treasury, i.e., tax dollars.
5. SS taxes fall more heavily on the poor and middle class, and income taxes fall more heavily on the rich.

If those statements are false, please show me how. But if they're true, how is Drum's analysis wrong? We are currently overtaxing the poor to buy SS IOUs with the understanding that we'll overtax the rich in order to redeem those IOUs.

edit (I'm interested in your other comments about SS reform, and I want to respond to them, but I think where we are now must be fleshed out before we get into those other issues.)

[Millennium]

The problem with the current system is that it makes far too many assumptions which simply have not panned out. It never accounted for significant increases in life expectancy, for example, nor did it account for declining birth rates. Does the system need to be scrapped? Not necessarily, but it does need an overhaul to make it sustainable in the long run, and in particular better able to withstand the issues which have brought it to the current state. Whether there are better methods than the Bush plan is certainly debatable, but if such methods exist then they need to be brought forth and debated more openly.

For all the talk about using energy and other natural resources in a sustainable manner, few people seem to know much about using money or laber in sustainable ways nowadays. The government has had this problem for a long time, but it's crept into the populace as well; witness the ballooning consumer debt.

[SimeyTheLimey]

Originally posted by BRussell:
I'm not leaving it aside because it's the point of my thread. Here's the SSA's website about the Greenspan commission. If you think Drum's characterization is wrong, tell me how it's wrong. (And Kevin Drum is a "leftist?" Why not just go all out and use the term "communist" for all Democrats with an opinion.)

Let me test you a bit. Do you agree with the following:

1. We currently take in more in SS taxes than we need to fund SS.
2. We are purchasing T-bills with the excess - i.e., we have a SS "trust fund."
3. The idea is that when the baby boomers start retiring and we have more retirees than the workers can pay for (currently projected to be 2018), we will start redeeming those IOUs.
4. We redeem the IOUs out of the general treasury, i.e., tax dollars.
5. SS taxes fall more heavily on the poor and middle class, and income taxes fall more heavily on the rich.

If those statements are false, please show me how. But if they're true, how is Drum's analysis wrong? We are currently overtaxing the poor to buy SS IOUs with the understanding that we'll overtax the rich in order to redeem those IOUs.

edit (I'm interested in your other comments about SS reform, and I want to respond to them, but I think where we are now must be fleshed out before we get into those other issues.)

Don't you see the issue? It's all based on robbing Peter to pay Paul. Or rather, Robbing Peter to pay Paul, Mary, Sally, and Harry. Even if we are taking in a small surplus more than current SS expenditures (I haven't checked, but I'll assume that), it's not like there is a huge amount of money sitting in a pile sufficient to pay the baby boomers. Whether you pay the difference by paying investors T Bills (whose interest is paid to the buyers out of income taxes), or whether you raise some other tax, the money to pay a retired American still has to come out of the pocket of a working American.

The reason is because the Social Security system is based on a fundamentally flawed concept. The idea was that it would be a current money in, money out, zero investment wealth transfer system. The other flawed idea is that it would pay out to everyone, no matter how wealthy.

The only fix that I see is to change those two assumptions. You have to put the money somewhere where it earns non-governmental interests. The money has to be put to work in the private sector so it can build real growth and return interest. Interest does not mean one part of the government borrowing money from another part. That's just an accounting dodge. Nor does it mean taxing one group of Americans to pay interest on T Bills to another group of Americans. That has the same basic problem as the rest of the ponzi scheme.

Second, you have to limit who you pay money out to. You have to find some way to reduce the number of retirees being supported by the declining number of current workers. Put simply, Generation X cannot support the Baby Boomers the way the Baby Boomers did the Depression generation. The numbers of workers just aren't there. Raising taxes would just going to make the economic imbalance worse by damaging economic growth.

I am sure that SS can be fixed, but first, there has to be a willingness to face reality and fix it. I guess this is what the reactionary left doesn't understand. Just because FDR came up with something, doesn't make it holy writ. You have to change with the times once in a while.

[BRussell]

Originally posted by SimeyTheLimey:
Don't you see the issue? It's all based on robbing Peter to pay Paul. Or rather, Robbing Peter to pay Paul, Mary, Sally, and Harry. Even if we are taking in a small surplus more than current SS expenditures (I haven't checked, but I'll assume that), it's not like there is a huge amount of money sitting in a pile sufficient to pay the baby boomers. Whether you pay the difference by paying investors T Bills (whose interest is paid to the buyers out of income taxes), or whether you raise some other tax, the money to pay a retired American still has to come out of the pocket of a working American.

There are two important dates. One is 2018, at which point it is projected that SS taxes will equal SS payouts. Until then, we're taking in more than we need. The second date is 2042, at which time the trust fund will be exhausted. Here's the Social Security Trustee's report that has those dates:

Projected OASDI tax income will begin to fall short of outlays in 2018 and will be sufficient to finance only 73 percent of scheduled annual benefits by 2042, when the combined OASDI trust fund is projected to be exhausted.

Side note: Those dates are according to the most recent (2004) projections. In response to Millennium above, the projections have consistently been overly conservative. A few years ago, both of those dates were projected to happen a lot sooner, and they keep on being moved further and further out every year.

Anyway, that means that right now, we're using retirement taxes to pay for the general budget - to fund wars and tax cuts and all the other goodies - to the tune of 150 billion last year, and 200 billion next year. No one seems to have a problem with that. Even Saturday Night Live made fun of Gore's silly "lock box." Let's all have a good laugh at how silly he was.

But, OMG the horror of using general revenues to pay for SS benefits! It's a Ponzi scheme! It's soaking the rich! It's redistributionist, communist! We have to do something about this!

Does no one see the hypocrisy of that?

This is the reason your "leftists" Simey are opposed to scrapping the system completely. Yes, there is a temporary population imbalance that we're going to hit soon. But we have already set up a plan to deal with it - take in more retirement taxes than we need now, and then pay it back when the retiree-worker ratio goes out of wack. But now that we face paying it back in a decade or so, people say we can't do it. That's outrageous.

Any discussion of changing SS, and any complaints that leftists don't want to face up to the crisis, have to take those facts into account.

[RAILhead]

Social Insecurity is a joke.

If you save $100 -- just $100 -- each month and invest that $100 in a mutual fund that only gets 8% yield (and the 10yr+ average is 12%) from age 30 to 70, you'd retire with about $349,000. If you get into some that yield 12%, it would end up as $1,176,477.25.

Let's move to a Roth IRA: $4000 each year ($333 per month) for 40 years at 12% you'll end up with around $3,921,590.84 -- TAX FREE.

There is absolutely NO reason for people NOT to be able to retire without assistance. But for the Devil's Advocates, let's say you can only afford to save $50 each month and you invest it in an 8% for 40 years, that's still $174,550.39 -- which, if you can only afford to save $50, is probably enough to live on for a while. Going with the current market averages of 12%, that $600 over 40 years would come to about $588,238.63.

Of course, doing this requires personal responsibility, which is something most Americans don't have much of nowadays. Further, if the math above pans-out to be HALF wrong, you'd still be able to retire a millionaire for $333 per month.

Maury

[SimeyTheLimey]

Originally posted by BRussell:
This is the reason your "leftists" Simey are opposed to scrapping the system completely.

Nobody is suggesting scrapping the system entirely. The problem is that the Democrats seem opposed to making any changes to Social Security. That's quite stupid when we can see the freight train barreling down on us. You talk as if 2018 is the far-off future. It's 13 years, or closer than the Reagan years you are so keen to discuss. That's not long at all!

At least we have a party in control at present that is willing to face the issue. Hopefully we'll be able to do more than put a bandaid on it. And of course, it is possible that this prudence will prove unnecessary. Maybe all the baby boomers will have accidents with their second-childhood Harley Davidsons and sportscars and kill themselves prematurely. If so, we'll be able to have a massive refund, wouldn't that be nice?

Oh wait! I'm sure the Democrats would oppose that "tax cut" too.

[TETENAL]

Originally posted by BRussell:
Does no one see the hypocrisy of that?

If you allow a non-American to raise an opinion, read on. If not, skip to the next post.

Unlike Simey I don't think money the government spends is burnt money. Just like private entities the government as well can make investments. Improved infrastructure will profit the economy in the future. Education will provide necessary know how. And even the war in Iraq by 2018 will have paid off maybe, when it guarantees the energy supply required by the American economy. Etc. with other types of investments a government can make. If these investments work and stimulate the economy, they will result in higher tax income in the future. Which then will allow to flow back into social security. It's not an absolute requirement, that the excess money of social security money now goes into private investment only.

[SimeyTheLimey]

Originally posted by TETENAL:
If you allow a non-American to raise an opinion, read on. If not, skip to the next post.

Unlike Simey I don't think money the government spends is burnt money. Just like private entities the government as well can make investments. Improved infrastructure will profit the economy in the future. Education will provide necessary know how. And even the war in Iraq by 2018 will have paid off maybe, when it guarantees the energy supply required by the American economy. Etc. with other types of investments a government can make. If these investments work and stimulate the economy, they will result in higher tax income in the future. Which then will allow to flow back into social security. It's not an absolute requirement, that the excess money of social security money now goes into private investment only.

Uh, nice thought. But no, building bridges and so on won't pay retirees Social Security. This is a demographic problem, not an infrastructure one.

I think you misunderstood the difference between private investment and T Bills. T Bills are essentially loans to the government. When they are repaid by the government, the government adds interest on top. The interest comes from government revenues -- taxes.

If, on the other hand, the government allows some of the Social Security taxes to be invested in the stock market, it allows private investors to do the things that private investors do best -- build profitmaking ventures. The money is then in effect lent by the government to the private sector, and the private sector returns the growth to the government as a nice little profit that would be quite helpful in paying our demographic problem.

Do you see the difference? The money went in the opposite direction and lender and borrower switched places.

Oh, and being really picky, only government invests. Everything else is consumption.

[TETENAL]

Originally posted by SimeyTheLimey:
But no, building bridges and so on won't pay retirees Social Security.

Infrastructure was only one example of governmental investment. The bridge needs to be built, or goods are not going to leave the company (across the river). The government doing it will free the companies from doing it, increase their profits and therefore the future tax income. Future tax income will have to play for social security. That's the idea.

Disagree with me here, and you agree with BRussell that your current system is fraud at the worker.

Oh, and being really picky, only government invests. Everything else is consumption.

You're a lawyer, not an economist.

[Millennium]

Originally posted by TETENAL:
Infrastructure was only one example of governmental investment. The bridge needs to be built, or goods are not going to leave the company (across the river).

That works when the bridge actually needs to be built. Now, who determines that?

The government doing it will free the companies from doing it, increase their profits and therefore the future tax income.

But because corporate taxes come out of profits -otherwise many corporations would be driven out of business- the government will get far less money back in taxes than were spent to build the bridge. That's not a very good investment.

Future tax income will have to play for social security. That's the idea.

In other words, once again it's tax-and-spend. There isn't anything in place to ensure that future tax income will be enough to cover Social Security, because the system was designed to assume that population would always increase at a given rate, and that the working population would always outnumber the retirees. We are now entering a situation where this will not be the case, and the whole scheme collapses... unless you raise taxes sharply in order to cover the difference.

[TETENAL]

Originally posted by Millennium:
That works when the bridge actually needs to be built. Now, who determines that?

Town planning department?

But because corporate taxes come out of profits -otherwise many corporations would be driven out of business- the government will get far less money back in taxes than were spent to build the bridge. That's not a very good investment.

I would say that most business would go out of business over the need to build a bridge than over taxes. But infrastructure was just one example of governmental investment. However, you a free to believe that government is useless. But I think even in the US it is common infrastructure is usually considerd a governmental task.

There isn't anything in place to ensure that future tax income will be enough to cover Social Security, because the system was designed to assume that population would always increase at a given rate, and that the working population would always outnumber the retirees. We are now entering a situation where this will not be the case, and the whole scheme collapses... unless you raise taxes sharply in order to cover the difference.

Increased life expectancy doesn't just mean that we live longer. It also means that we are healthier at age 65 than previous generations were. So we don't also live longer, we can also work longer. Therefore the number of retirees will never outnumber the working population.

How else would you solve the problem? If you switch to a strictly investment based system, you'd have a hole generation without coverage. That would create a very tense situation. It's not going to happen.

[SimeyTheLimey]

Originally posted by TETENAL:
Infrastructure was only one example of governmental investment. The bridge needs to be built, or goods are not going to leave the company (across the river). The government doing it will free the companies from doing it, increase their profits and therefore the future tax income. Future tax income will have to play for social security. That's the idea.

This is just baloney. The government doesn't "build" bridges even when it decides to build bridges, and the government building a bridge doesn't free up a private company from building it. Quite the contrary. The government just pays the money and contracts the job to a private firm capable of building bridges. That's how bridges get built. Rarely if ever are bridges built for non-governmental customers. But that results in money leaving the Treasury. We are talking here about how to get money to come into the Treasury, so that it can be paid out again in retirement benefits.

Even sorting out your economics, what you are arguing for is Keynesian stimulation. Fine, but that isn't the issue because we aren't dealing here with insufficient economic growth. The economy isn't stagnant. The problem is demographics -- too many retirees for too few taxpayers. All that further deficit spending would do would be to spike inflation or create a bigger deficit to pay off in addition to paying for all the retirees. Either would make the situation worse, not better.

[TETENAL]

Originally posted by SimeyTheLimey:
This is just baloney. The government doesn't "build" bridges even when it decides to build bridges, and the government building a bridge doesn't free up a private company from building it. Quite the contrary. The government just pays the money and contracts the job to a private firm capable of building bridges. That's how bridges get built.

Semantics. Strawman. You are losing the argument.

But that results in money leaving the Treasury.

That's the nature of investment.

The problem is demographics

No, it's not. Age of retirement is not fixed by law of nature.

[BRussell]

Originally posted by SimeyTheLimey:
At least we have a party in control at present that is willing to face the issue.

My problem with privatization is that it makes worse the very problem the proponents say it's solving. We know there's a problem bearing down on us due to the aging population. But privatization would take even more money out of the system. When you pay for those private investment accounts, you take the money out of the same pot that people who are currently retiring are drawing on. In other words, it exacerbates the fiscal problem underlying social security - the same problem people say they are trying to fix.

I do think the Democrats are being too sanguine about the situation. There is a problem, but, at first anyway, it's largely a fiscal problem - we need to be going into the future with surpluses rather than deficits in order to pay back those T-bills, and they have a pretty damn good argument that the current fiscal situation is the result of Republican policies rather than Democratic ones. But after that, there's still a problem.

IMO, Democrats ought to say that we need to keep our obligation to pay back those t-bills, i.e., we need to help pay for SS with tax dollars, and then AFTER THAT we need to make adjustments until the population problem is back in balance. That will involve some manner of reduced benefits or increased payments. I think they ought to get rid of the cap on SS taxes, but then I'm a communist.

I don't have any problem with private accounts. I love private accounts. I have 'em, and most everyone else does too. That's what 401ks and IRAs and all the like are for. I think it's a bad idea to turn SS, though, into a private account system. I honestly think it would be better to simply scrap SS entirely than make it a private account system.

IMO, the mistake is in thinking of SS as retirement investment, or savings. It's not an investment, it's insurance. At work, I am required to pay medical insurance. If I don't get sick, I won't use it. If lots of people get sick at once, the healthy people get screwed by having to pay more in premiums even though they're perfectly healthy. In the same way that current workers pay for current retirees in SS, in medical insurance currently healthy people pay for the currently sick people. That's not a Ponzi scheme, it's just the nature of insurance. Once you accept that it's insurance rather than savings or investment, it seems less of a problem.

[SimeyTheLimey]

Originally posted by BRussell:
But privatization would take even more money out of the system. When you pay for those private investment accounts, you take the money out of the same pot that people who are currently retiring are drawing on.

Didn't you just get through saying that we are currently taxing more than we need to meet present obligations? Make up your mind.

IMO, the mistake is in thinking of SS as retirement investment, or savings. It's not an investment, it's insurance. At work, I am required to pay medical insurance. If I don't get sick, I won't use it.

I agree with you, but your party and the AARP does not. You are describing Social Security as if it had a means test. Like insurance, you would then draw on it only if you really need it. The Democrats and the AARP are committed to Social Security as it currently is. You get the benefits whether you really need them or not because it doesn't means test. The result is a lot of wasted money.

[MacGorilla]

There's actually nothing horribly wrong with Social Security. You can fix it without raising taxes or privitizing it.

If we do nothing Social Security will remain in the black until at least 2050. The Social Security trust fund regularly has a "profit" which is skimmed by the government to use in the general budget. If we took 10% less of this surplus and kept it in Social Secuirty, it would remain solvent for hundreds of years. We can also raise payroll taxes 1% and keep Social Security solvent for as long as we can calculate--something like 10,000 years.

The drive to privitize social security is political fear mongering.

[BRussell]

Originally posted by SimeyTheLimey:
Didn't you just get through saying that we are currently taxing more than we need to meet present obligations? Make up your mind.

True, but:

1. We are currently running large deficits even when we count the SS surplus as part of the general budget. Taking even more money out would simply increase the overall deficit even further.

2. We won't be running those SS surpluses forever, only another 10-15 years or so.

Private accounts are just another spending program on top of all our other deficit spending.

I agree with you, but your party and the AARP does not. You are describing Social Security as if it had a means test. Like insurance, you would then draw on it only if you really need it. The Democrats and the AARP are committed to Social Security as it currently is. You get the benefits whether you really need them or not because it doesn't means test. The result is a lot of wasted money.

I'm not following you here. I'm saying that when people compare SS to a savings plan, like Railhead above for example, they misunderstand it. SS is really a retirement insurance plan. YOu get the benefits if you live past retirement. If you don't retire, you don't get the money.

But I'm surprised that you sound like you want to treat SS as a welfare program.

[SimeyTheLimey]

Originally posted by BRussell:
2. We won't be running those SS surpluses forever, only another 10-15 years or so.

Private accounts are just another spending program on top of all our other deficit spending. I'm not following you here. I'm saying that when people compare SS to a savings plan, like Railhead above for example, they misunderstand it. SS is really a retirement insurance plan. YOu get the benefits if you live past retirement. If you don't retire, you don't get the money.

But I'm surprised that you sound like you want to treat SS as a welfare program.

On point 2, that's a good reason for tacking the issue now, not further putting the issue off to a point where it becomes an emergency.

The other reason is simply because there is a good political window of opportunity at the moment. We have a president who ran on reforming Social Security who has an enhanced majority but who also isn't facing reelection. At the same time, we have a like-minded Congress of the same party with control of Congress. The combination makes it possible to do things that are normally virtually impossible in Washington. So of course, we should take advantage of that opportunity.

That means, of course, that the Democratic minority have a choice -- get onboard, and try to shape what emerges, or be marginalized. Unfortunately, the comments of Pelosi and Reid lately suggest they prefer the latter. They seem to have boxed themselves into the corner of opposing all reform. Given that they really aren't in a position to stop reform, that just means they will be left out. So be it if that is the way they want it to be, but I do wonder if it occurs to them that they are creating a solid impression as being reactionary deadwoods on simply every issue of importance.

As for your third point, Social Security is a safety net, but it most assuredly is a retirement plan (and also a disability plan). Saying you don't get it if you die first just reiterates the assumption that got us into this mess in the first place. Back in the 1930s, it was reasonable to assume that someone retiring at 65 either wouldn't make it to 65 or wouldn't make it much past 65 years of age and therefore wouldn't drain much out of the system. That just isn't the case any more.

That means we have to make sure that those who need it will have it for 10 or perhaps 20 years past retirement. I personally think that should include a means test to cut out those who really don't need it which would leave more money for those who do and reduce the burdens on current workers. It makes no sense to me to heavily tax struggling young people and young families in order to send paychecks to those retirees who are really quite wealthy. Giving that sensible idea the perjorative "welfare" isn't in my view helpful.

[tie]

Originally posted by SimeyTheLimey:
So, come up with a way to reform Social Security that:
..
2. gives a rate of return that isn't laughable (yes, invest it on "Wall Street" (boos from the antibusiness Democrats).

How is this going to work? The money I pay for social security is paid out to somebody else. Pay as you go Ponzi, as you said. In this it is no different from any other government programs. If it makes sense to take the incoming tax dollars for social security and invest them in the stock market, then it makes sense to do so with all our tax dollars, not just social security.

I guess your real idea is that we should keep social security paying out benefits, but without financing it with taxes. Just borrow the money.

[BRussell]

Originally posted by SimeyTheLimey:
On point 2, that's a good reason for tacking the issue now, not further putting the issue off to a point where it becomes an emergency.

The other reason is simply because there is a good political window of opportunity at the moment. We have a president who ran on reforming Social Security who has an enhanced majority but who also isn't facing reelection. At the same time, we have a like-minded Congress of the same party with control of Congress. The combination makes it possible to do things that are normally virtually impossible in Washington. So of course, we should take advantage of that opportunity.

That means, of course, that the Democratic minority have a choice -- get onboard, and try to shape what emerges, or be marginalized. Unfortunately, the comments of Pelosi and Reid lately suggest they prefer the latter. They seem to have boxed themselves into the corner of opposing all reform. Given that they really aren't in a position to stop reform, that just means they will be left out. So be it if that is the way they want it to be, but I do wonder if it occurs to them that they are creating a solid impression as being reactionary deadwoods on simply every issue of importance.

I think the Dems are doing exactly the right thing by being opposed to this, because it's a truly awful plan. Why should they go along with something that makes worse what it says it's making better? How about a reform plan that actually improves things? If Bush proposed what you have - means testing benefits - then they should support it. But that's not what's being proposed.

If the Republicans were truly interested in input, it would be different, but you know very well that they don't want to compromise with Dems. They want Democrats to go along with their already-decided-upon plan for one reason: political cover. I'm actually shocked that Dems seem unified in their opposition, given how many of them went along with other terrible Bush proposals in his first term.

That means we have to make sure that those who need it will have it for 10 or perhaps 20 years past retirement. I personally think that should include a means test to cut out those who really don't need it which would leave more money for those who do and reduce the burdens on current workers. It makes no sense to me to heavily tax struggling young people and young families in order to send paychecks to those retirees who are really quite wealthy. Giving that sensible idea the perjorative "welfare" isn't in my view helpful.

I'm with you, I think that's exactly what needs to be done. But again, you're proposing something that would improve the solvency of SS, while the Republican plan would increase insolvency.

I don't like it when I hear SS defenders say that there is no problem. There is - but in the short term it's really a fiscal problem. We have to pay back those excess payroll taxes that have been paid in over the past 20 years, and we have to do it with general revenues. I think Clinton was right to say we should retain the surpluses in order to do that, rather than having tax cuts that put us into greater debt. In the longer term, it's a demographic problem, and we could solve it if we started, now, in doing the kind of thing you suggest. I agree with you that the longer we wait the worse it gets. But I'll be interested to see if you support the Republican plan, because it sounds right now like you support something very different.

[SimeyTheLimey]

There haven't been any suggestions from the Democrats, other than do nothing. Just this morning Kerry was on Meet the Press. He was asked about statements he made in 1996 saying that we should consider raising the retirement age and means testing benefits (using language essentially identical to the language I used above). His answer now is that they considered those ideas and rejected them -- which is simply a weasely way of saying the party line had changed, or that Senator Flip-Flop has done it again. In fact, he went on to call it a phony crisis. Then he changed the subject to medical insurance.

So that's the Democrats' position: do nothing, because Bush wants to do something. Not very responsible.

Edit: here is the link to the transcript.

[MacGorilla]

They don't want to do anything because, guess what, there is nothing to do. Read my post above.

[zigzag]

I keep reading complaints here about "tax and spend" Democrats. That's fine, that's fair game, I'm just trying to understand the alternative: "Don't tax, but keep spending," which is even more irresponsible. Before I consider voting for them, I'd like to know what Republicans really stand for, if not fiscal responsibility (not that I want to derail the thread . . . ).

[BRussell]

Originally posted by SimeyTheLimey:
There haven't been any suggestions from the Democrats, other than do nothing. Just this morning Kerry was on Meet the Press. He was asked about statements he made in 1996 saying that we should consider raising the retirement age and means testing benefits (using language essentially identical to the language I used above). His answer now is that they considered those ideas and rejected them -- which is simply a weasely way of saying the party line had changed, or that Senator Flip-Flop has done it again. In fact, he went on to call it a phony crisis. Then he changed the subject to medical insurance.

So that's the Democrats' position: do nothing, because Bush wants to do something. Not very responsible.

Edit: here is the link to the transcript.

From the sound of it, you and I agree on this. Democrats obviously see a political opportunity here - they have fantasies of the Republican takeover in 93-94. Their political calculation apparently is that it's best to simply oppose Bush's plan rather than offer alternatives.

But Bush doesn't want to just "do something" generically to improve SS. He has a very specific plan that is highly irresponsible. Dems should oppose Bush's plan, but I also think Congress could enact some reforms that everyone agrees would improve the solvency of SS, and do so in a bipartisan fashion. They could be relatively modest if done soon. But neither side right now is proposing modest solvency improvements - neither Democrats nor Republicans, and Republicans control the agenda.

[BRussell]

Originally posted by zigzag:
I keep reading complaints here about "tax and spend" Democrats. That's fine, that's fair game, I'm just trying to understand the alternative: "Don't tax, but keep spending," which is even more irresponsible. Before I consider voting for them, I'd like to know what Republicans really stand for, if not fiscal responsibility (not that I want to derail the thread . . . ).

And Republicans consistently spend not just the same as Democrats, but more.

[SimeyTheLimey]

Originally posted by BRussell:
From the sound of it, you and I agree on this. Democrats obviously see a political opportunity here - they have fantasies of the Republican takeover in 93-94. Their political calculation apparently is that it's best to simply oppose Bush's plan rather than offer alternatives.

I think that is their calculation, but it is very mistaken. The Republicans took over partly (though not entirely) because they offered a specific positive program, which gave people a reason to vote for them, not just against the other party. I think it would have been harder for Gingrich & Co to have won a majority on the basis of reflexive naysaying.

This seems to be a pattern for the Democrats. We have just come out of a campaign in which the Democratic nominee offered very little of a vision other than being not Bush. I wonder if the reason the Democrats have become so (in the true sense) conservative (i.e. resistant to change) is because of their own deep divisions, or because they genuinely are flummoxed by not being in control of the agenda, which they complacently became used to setting beginning in 1933. Whatever it is, the Democrats strike me as a party that is flailing, and this issue is a good illustration.

[olePigeon]

The term of "Democrat" and "Republican" is sort of like a container format for a movie compression (like QuickTime and AVI.)

During and after the Civil War what rolls of what you'd call Democrats and Republicans today were completely reversed. When 50s and 60s rolled around their rolls reversed again.

So I find it funny when either side blames the other side for all our problems, then start quoting presidents of the past to support their positions. Maybe we should get rid of the "party" system and just boil it down to what it really is, conservative and liberal. Democrat or Republican, it doesn't matter.

What does this have to do with this thread? Read spacefreak's replies on blaming only one party for the woes of our Social Security system. We've had different representatives of each party as presidents and as house/senate majority, they both f*cked up the Social Security system.

[Millennium]

Originally posted by olePigeon:
Maybe we should get rid of the "party" system and just boil it down to what it really is, conservative and liberal.

But these, too, are container terms. Or at least, that's what the present political parties would desperately love you to believe. Take your pick as to whether 'liberal' means 'freedom' or 'hedonism', or whether 'conservative' means 'aristocracy' or 'values'. None of it is true, but the stereotypes have become so ingrained in people's minds that the damage must be undone before we can hope to move to a non-party-centric system, or it will simply degenerate into partisan politics again.

Believe me, few things in this world would delightme more than to move away from party-centricity, to force all candidates to lay all their cards out on the table, rather than hiding behind a pre-canned platform, and to force voters to actually think about who they're voting for, rather than a straight party ticket. But as I've observed the past few years, I'm becoming increasingly convinced that certain things must happen before that can work.

[BRussell]

Originally posted by SimeyTheLimey:
I think that is their calculation, but it is very mistaken. The Republicans took over partly (though not entirely) because they offered a specific positive program, which gave people a reason to vote for them, not just against the other party. I think it would have been harder for Gingrich & Co to have won a majority on the basis of reflexive naysaying.

This seems to be a pattern for the Democrats. We have just come out of a campaign in which the Democratic nominee offered very little of a vision other than being not Bush. I wonder if the reason the Democrats have become so (in the true sense) conservative (i.e. resistant to change) is because of their own deep divisions, or because they genuinely are flummoxed by not being in control of the agenda, which they complacently became used to setting beginning in 1933. Whatever it is, the Democrats strike me as a party that is flailing, and this issue is a good illustration.

I started a thread about the Democrats' version of Contract with America. It does have a list of proposed legislation, but not on Social Security. Note that Republicans did not have a health care proposal with their Contract, and yet their opposition to the Clintons' health care plan is credited with being one of the keys to their victory. It strikes me as quite similar.

I agree that Democrats don't offer a platform. But I don't think it's because Democrats are particularly divided. What divisions are you referring to? I think they just believe that the populace is much more conservative than them, which is probably true, and so they're timid. They're also "conservative," as you put it, perhaps because they've won many of the big battles over the years. If they went even further still - say, gay marriage - it would probably be going to far for the country. I'd like to see a bolder party too, and now that they're in the clearest minority position than they've been in our lifetime, this is their chance.

[SimeyTheLimey]

Originally posted by BRussell:

I agree that Democrats don't offer a platform. But I don't think it's because Democrats are particularly divided. What divisions are you referring to?

The Democrats seem to be divided on the biggest issues of the day. Particular standouts seem to be the approach to the War on Terror, whether or not the Iraq war was justified, or should be continued, and, more broadly, the ethics of an American foreign policy. This division has lead to a certain confusion in message to say the least. Senator Flip Flop was probably a good choice in that regard. He didn't seem to know whether he represented the Howard Dean/Michael Moore wing, or the Lieberman/Kerry-before-he-was-nominated wing. I think a lot of his confusion was the result of trying to paper over a wide chasm in the party. But I think the country saw through it. People like Moore, MoveOn and International ANSWER spoke for you and were taken as representative of you not because they really do represent all Democrats, but because moderate Democrats would not distance themselves. The only reason for that has to be a perceived need to keep an impossible and schizophrenic coalition together.

The same divisions can be seen on economic and social issues. Gay rights is one. Kerry's position ended up not much different from Bushes in part I think because much of the party is at core as squeamish about gay rights as much of the Republican party (if you don't believe me, look at state politics). On business policy, you have your anti-corporate, anti-business, anti capitalism wing, ably represented here by mr natural, and you have more mainstream Democrats (like Hillary Clinton) who are as comfortable with big business as any Republican. But there again is an issue where the disagreement can't really be papered over because you are talking about a completely different world view.

Social Security reform is another issue. Just look through this thread. You agree that it is a serious issue that needs to be tackled (albeit, not in the way the President wants to). But your article doesn't really agree -- it is pushing the DNC line that says that SS doesn't need to be reformed. Your standard bearer Kerry said the same thing on Sunday, and various posters in this thread have chimed in with the same myopic sentiments.

The proposals you are talking about aren't serious ones, they are window dressing. They all suppose a Democratic majority and indeed, many of them are remnants from ideas of the early 90s that the Democrats couldn't agree on to pass even when they controlled the House and Senate and the White House. They are never going to be able to pass them in today's climate.

Rather than feebly try to emulate Gingrich, they would be smarter to look at how the Republicans for 40 years managed to get parts of their agenda recognized and incorporated into law even when they were for decades shut out of leadership positions in Congress by the Democrats, Prior to 1994 the Democrats had a near lock on Congress, but the Republicans still managed to be effective in representing their constituency. They did it by working with the majority and by putting forth positive proposals that gathered bipartisan support, which meant they were based in part on the Democrtic agenda. That would be a much more realistic and positive model for the Democrats in Congress than the Gingrich model which they only seem to be adopting because it dovetails with their denial of their true position.

But first, the Democrats need to work out some of their own core differences among themselves. They can hardly hope to unite the country behind them if they can't even figure out their basic philosophical stances.

[Millennium]

Originally posted by BRussell:
I started a thread about the Democrats' version of Contract with America. It does have a list of proposed legislation, but not on Social Security. Note that Republicans did not have a health care proposal with their Contract, and yet their opposition to the Clintons' health care plan is credited with being one of the keys to their victory. It strikes me as quite similar.

Not quite. The Republicans' Contract with America does not offer a health care proposal because they do not believe that health care is a legitimate function of government, and therefore there is no need for a proposal.

I find it difficult to believe that the Democrats would consider Social Security to not be a legitimate function of government. Quite the opposite, actually. They see no need for change here, ergo no proposal. Same conclusion, but opposite reasoning.

I agree that Democrats don't offer a platform. But I don't think it's because Democrats are particularly divided.

Likewise. I believe that Democrats don't offer a platform because, frankly, that's not what they're about. Kerry was an examplary Democrat, in that he viewed whatever the polls said at the moment, because that's at the core of Democrat ideology: government officials are nothing more than delegates of the people, to execute their will whatever it may be at any given moment. They consider polls to be the best way of determining that will, and so someone like Kerry who follows the polls is seen as simply doing his job well. What Republicans saw as flip-flopping, Democrats would see as exercising power responsibly.

This can be contrasted with the Republican view, which is that government officials have been appointed by the people to rule, and are thus entrusted with this power. The right to rule as one sees fit comes with the responsibility to lay out how one intends to rule -essentially a platform- and then to stick by that. To simply follow the polls, changing with the volatile whims of the people, would be a betrayal of that trust. Republicans believe that by sticking to the platform they put forth when they were elected, they are exercising the will of the people, because the election was a signal that they wished to be ruled in the manner of that platform.

[Athens]

a added note to that post, the election system itself was designed in such a way that a small group decided for the larger group because back when the election system was designed the common person was thought of as being to stupid to be able to pick good leaders. Hence the electoral college.

[SimeyTheLimey]

Originally posted by Millennium:
Likewise. I believe that Democrats don't offer a platform because, frankly, that's not what they're about. Kerry was an examplary Democrat, in that he viewed whatever the polls said at the moment, because that's at the core of Democrat ideology: government officials are nothing more than delegates of the people, to execute their will whatever it may be at any given moment. They consider polls to be the best way of determining that will, and so someone like Kerry who follows the polls is seen as simply doing his job well. What Republicans saw as flip-flopping, Democrats would see as exercising power responsibly.

How do you square this theory with the (Northern) Democrats' approach during the Civil Rights era (to take one example). Advancing civil rights was never politically popular. Politicians like LBJ who took stances in favor of civil rights did so knowing that they were bucking popular opinion. Didn't they do it because they thought it was right and because, having been elected, they had a responsibility to do what they thought was right?

[SimeyTheLimey]

Originally posted by Athens:
a added note to that post, the election system itself was designed in such a way that a small group decided for the larger group because back when the election system was designed the common person was thought of as being to stupid to be able to pick good leaders. Hence the electoral college.

This is completely wrong. That isn't why the electoral college was created. But it is also off topic. We aren't discussing the electoral college in this thread.

[Athens]

Originally posted by SimeyTheLimey:
This is completely wrong. That isn't why the electoral college was created. But it is also off topic. We aren't discussing the electoral college in this thread.

I didnt have a chance to finish where I was going with that, there was alot more I was going to say that would have put it in perspective but I cant remmeber now. just as my shift was ending at work a guy got hit by a car infront of my hotel.

[Millennium]

Originally posted by SimeyTheLimey:
How do you square this theory with the (Northern) Democrats' approach during the Civil Rights era (to take one example). Advancing civil rights was never politically popular.

That depended on where you went, and it explains the apparent split between Northern and Southern Democrats: they were, for the most part, following the polls relative to their own constituencies.

Politicians like LBJ who took stances in favor of civil rights did so knowing that they were bucking popular opinion. Didn't they do it because they thought it was right and because, having been elected, they had a responsibility to do what they thought was right?

Johnson -as with JFK before him- was by no means a typical Democrat. If anything, the man's beliefs fell with neither, and although he caucused with the Democrats, he was not noted for party discipline.

Besides this, even during this time, civil-rights advancement was gaining steadily in the polls, a fact which both JFK and LBJ knew and sought to capitalize on. JFK never lived to see the fruits of this, but LBJ managed it quite well. This sort of speculation is quite valid for someone who is following the polls.

[SimeyTheLimey]

Originally posted by Millennium:
That depended on where you went, and it explains the apparent split between Northern and Southern Democrats: they were, for the most part, following the polls relative to their own constituencies.

Not really. Desegregation and associate bussing was quite unpopular in the north as well. In Detroit, for example. There it took a court order that didn't happen until the 1970s. That court order was not popular at all.

Do you have any documentary evidence or cites for your theory? I don't see anything so clear-cut in either party's behavior. It seems to me that both parties regularly operate in contravention to the polls, and that equally both parties from time to time allow themselves to be lead by public opinion.

I think you could make a better argument that the Democrats at the national level are faithful to their primary constituency. That is why, for example, they support partial birth abortion even though public opinion in general is pretty revolted by the practice. But that isn't unique either. Both parties pander to their respective bases.

[finboy]

Originally posted by SimeyTheLimey:

The problem is demographics -- too many retirees for too few taxpayers.[/B]

That's it, in a nutshell. As the system exists today, everyone under 50 will end up paying LOTS MORE IN TAXES just to keep up in a few years.


This fact has nothing to do with economic stimulus.

The only legitimate benefit of involving govt. in the retirement process would MAYBE come from creating some economies of scale (making retirement more accessible by standardizing, leveling the playing field). SS doesn't do that. It's designed as a wealth transfer system.

BRussell, it isn't just a little demographic problem, it could bankrupt the country. Look at the numbers.

And we haven't even started talking about disability income for those who need it (and there are those who legitimately NEED it, although it may be administered poorly). That will end up being a direct transfer of wealth no matter what we do, unless it's privatized. We can only hope.

[SimeyTheLimey]

Democrats might want to take a look at what one of their own former senators is saying in today's Wall Street Journal (free registration required today, should clear tomorrow).

Pride and Prejudice
"Hell no, we won't go" is the wrong liberal approach on Social Security reform.

BY BOB KERREY

(Note: this is Bob Kerrey, not John Kerry. This one is the real war hero who was senator from Nebraska and who recently served on the 9/11 Commission).