Asymmetrical Information

No, Bush is not trying to fool ignorant people with that line. Really Jane, which 30% do you think that old people in the year 2042 should cut out? (a) dog food, (b) home heating oil, (c) overpriced prescription drugs? If Bush were trying to fool ignorant people, he'd go down that road.

Hey, Brad, given that people below the age of thirty have a much lower median net worth than people above the age of 65, how much taxes should young people pay to ensure that old people don't suffer any cuts?

No, I don't think he's trying to fool ignorant people, at least not in the way you intimate. In fact, I believe I heard him use the "70% benefits" line in a speech on the subject.

Hey Will, I'm in the "end it don't mend it crowd". I'm just saying that W is not scaremongering on this issue. In fact, he constantly uses the phrase "we will not be able to fully meet out aw-bli-gaaaaaaa-shens" to describe the problem. My example (dog food) was meant to be way over the top sarcastic. Hope it was clear.

No, he's not trying to fool people. The retirees who are projected to receive 70 percent of scheduled benefits in 2042 would receive those benefits from Social Security taxes paid by workers in 2042, not from the nonexistent trust fund.

Instead of answering critics, I was hoping to see your ideal (w/some modicum of politically feasibility) reform of Social Security. I can tell you're in favour of private accounts. Do you believe that the full 12.4% we're taxed now should be in private accounts with a choice of 5-6 funds (similar to most 401k's)? Should the private accounts be protected from bankruptcy or garnishing? Will the government administer the funds or existing mutual fund companies? What benefits should be cut, e.g. should dependants receive benefits for death or retirement?

Could probably keep coming up with questions, but honestly curious what your 'ideal reform' would be.

I plan to plant a roof garden on my garage and am considering raising some chickens or other livestock.

Another answer might be to make a dramatic play like the following

Pick an age, say 35 (I am of course 36), and announce that if you are under this age you will not be receivieng SS benefits. Most people under this age don't beleive they will be receiving them anyway. Also this will not agitate the current or near future members of AARP. This at least limits the backend liability and gives everybody time to react. Then wait. As insolvency approaches, the voting demagraphics will be more favorable to upping the eligability age. Everybody under say 45-50 will not be eligable anyway by then and those older than 70 will want to protect their income. This will allow us to slowly get rid of this beast. I can see no other way.

http://www.janegalt.net/blog/archives/004444.html#19400

Seems to me, this is a question that can be answered objectively. If polls show that those who support Bush's position understand that "bankrupt/broke/insolvent" means "able to pay about 70% of planned benefits", then I'd stand corrected. I've got nothing but a hunch either way, so maybe Jane's right.

Turning the question around is interesting - I hadn't thought of that before. It probably is the case that the Democratic demagogues do hope to take advantage of the misunderstandings created by their vague arguments.

Hard to argue this quantitatively, but it does seem like the Bush-side of the popular debate does rely more heavily on vague terms, ill-understood concepts, and obfuscation, but that's just my opinion. The thing I find most convincing is the dearth of explanation about the dates - e.g. net outflow by 2017, insolvent by 2042, etc. Aren't those based on worst-case scenarios? Seems to me that most laypeople have been convinced that those dates are practically certain which is a misunderstanding that, at best, Bush clearly trades on, and at worst, is resopnsible for...

"No, Bush is not trying to fool ignorant people with that line. Really Jane, which 30% do you think that old people in the year 2042 should cut out? (a) dog food, (b) home heating oil, (c) overpriced prescription drugs?"

Ho, ho, ho! The U.S. per capita GDP in 2042 will probably be over $150,000:

http://www.longbets.org/194

I doubt anyone will be eating dogfood!

"No, Bush is not trying to fool ignorant people with that line. Really Jane, which 30% do you think that old people in the year 2042 should cut out? (a) dog food, (b) home heating oil, (c) overpriced prescription drugs?"

Oh, and another thing: the majority of U.S. homes in 2042 will be heated by fusion.

Oh, a final thing:

The U.S. GDP per capita of over $150,000 in 2042 is in ***year 2000*** dollars, not year 2042 dollars.

When Democrats tell people the system is "just fine" until 2042, do you think that people understand that either taxes or government borrowing will have to go up, or current spending on other programmes go down, starting around 2015?

What are you talking about? The fact that the Social Security Fund will be running a diminishing surplus is not a problem.

Will the lack of cheap loans from the SSA put a crimp in the spending habits of Congress and the President? Quite possibly. But it will only make plain what has been true all along: the government is running a deficit and, yes, that can only be solved by increasing taxes, cutting spending, or borrowing more. Only 10-15 years from now the creditors may very well be foreign nationals instead of American workers. Frankly, I would think that the small-government types would welcome the curtain being pulled back on the government's fiscal policies. Hiding behind the skirts of SSA surpluses is not responsible governance.

"The fact that the Social Security Fund will be running a diminishing surplus is not a problem."

It's not that Social Security runs a "diminishing surplus"; circa 2018, the payouts will exceed the contributions.

When that happens, the U.S. government will have to do one or more of the following three things:

1) Issue Treasury Bonds to the public,

2) Cut benefits, or

3) Raise taxes.

Mark Bahner, or

4)Cut other spending

There is a lot of stuff I would cut before social security.

"Cut other spending" isn't bloodly likely. Remember that in government accounting "reducing growth" is the same thing as a "cut" and support for a program is equal to the amount of cash that program gets.

I like the idea of picking some arbitrary age and saying, look, people under X aren't getting squat. I'd call it 25 (I'm 23). At 25 people are hardly thinking of retirement, and still have plenty of time to adjust expectations.

The Democrats simply want to increase taxes to solve the problem. They hope that if they delay long enough, eventually there will be no option left but to raise taxes. The assumption being that the public will not accept the elderly eating dog food, no heating oil, etc., etc., and will allow tax increases.

Here's what they are forgetting. First, that the average worker already feels over taxed. Second, that the longer we wait, the sharper the tax increase will have to be. Workers (voters) will be thinking that they themselves will be eating dog food if taxes are raised to the extent necessary.

Intergenerational conflict will mean the death of Social Security. Private accounts are the solution to that problem as they make each generation responsible for its own security. What the Democrats should do is push for some tax increases now along with private accounts and benefit cuts - because the alternative is not higher taxes later, but the end of Social Security later.

It occurs to me that for those of us who would just as soon eliminate Social Security, or turn it into a pure welfare program, the path to follow is the path the Democrats are currently on.

Interesting take, Jane. The condescending Democrats think 'the Great Unwashed' are idiots who 'confuse bankruptcy with "having absolutely no income or assets".'

Yet, by saying 'the system is "just fine" until 2042', these same nefarious Democrats are playing on the notion 'that people (won't) understand that either taxes or government borrowing will have to go up, or current spending on other programmes go down, starting around 2015'.

Jesus, you can't win for losing. SS privatizers get to use simplified terms, but SS revitalizers don't? When Democrats simplify things, they're being contemptuous, but when Republicans do it, they're telling the whole complex story - because after all, it's just so obvious?

Of course most people know that repairing SS will require some or all of the fixes you list. Guess what? They're for those fixes - most notably for raising taxes on the richest amongst us.

What they aren't for is fixing something that ain't broke - or more accurately, throwing away something that ain't broke but will quite naturally need tinkering with here and there over time.

The greatest challenge for those at the top is convincing the majority in a economically divided, democratic society that minimal redistribution of accumulated wealth is an immmoral 'soaking'.

Who's fooling who, here?

Actually, the tipping point is 2008 or so. That's when the SS surplus peaks. Right now Congress is enjoying the $150 billion+ SS is bringing in. But when that drops to $100 billion a year surplus or less Congress is going to feel it.

The problem with setting an arbitrary age below which workers will not receive Social Security is that those who will receive nothing will still have to contribute to those who will. I find that very distasteful. I'm 30 and I don't expect to receive any benefits so I am unhappy that I have to contribute my money which I could be investing in my own retirement to pay for those who have gone before me. If we want to characterize it correctly, it's extortion of the young by the elderly to subsidize their retirement.

most notably for raising taxes on the richest amongst us
How dare those rich people! They are so rich...I just can't stand it. We should just take there riches...or at least their "excess". They don't need it. They can afford it. It's just not fair! We need to retire, move to Florida, play golf. We NEED these things!

Life is so easy when you are a socialist...until your society collapses because there are no longer any real incentives to contribute. Statements like the one I quoted simply make me want to wretch.

What Democrat is saying social security is "Just fine"? I hear democract saying its solvent for the next 40 years or so and that we do need to so some reform at some point, but I really haven't heard a "Just fine" from any democrat.

What Democrat is saying that meeting the "trust fund" bond obligations in 2015 is going to require more deficit spending, cuts in benefits, cuts in spending, or increased taxes?

solvent for the next 40 years
That is simply false. The Democrats claiming SS solvency are just a disingenuous as the Republicans who want to "fix" social security while continuing to spend money like drunken sailors.

"Mark Bahner, or

4)Cut other spending."

"There is a lot of stuff I would cut before social security."

Yes, "other spending" could indeed be cut. The point I was making is that the "Trust Fund" is irrelevant/worthless. The key date is NOT circa 2042 (when the worthless/irrelevant "Trust Fund" "runs out").

The key date is circa 2018, when Social Security starts paying out more than it receives.

"What Democrat is saying that meeting the "trust fund" bond obligations in 2015 is going to require more deficit spending, cuts in benefits, cuts in spending, or increased taxes?"

You mean, "What Democrat is being honest?" The answer as far as I know is, "D@mn few!"

(Democrat) Patrick Moynihan was saying that. But he's dead. I can't think of any live Democrats who are saying it. Well, perhaps some in the Concord Coalition...?

I wrote, "The key date is circa 2018, when Social Security starts paying out more than it receives."

But then I see Hederman writes that the key date is actually 2008, when the difference between what SS receives and what it pays out starts to go down from its maximum value.

I've never before seen ANYBODY mention that, but I agree. Good point.

Heres my expectations -
73% SS, fixed pension after Medicare B deducted, fully income taxed with 403b draws

which is pretty much the trend with current funding expectations and tax law.

I gather from the responses to my question that no Democrat is saying that Social Security is "just fine".

Timothy said:

""Cut other spending" isn't bloodly likely. Remember that in government accounting "reducing growth" is the same thing as a "cut" and support for a program is equal to the amount of cash that program gets."

So you think cutting social security is easier than cutting other spending? Not the way I would bet.

When you G@@gle "'just fine' social security", the first link that comes up is:

http://www.cepr.net/columns/weisbrot/social%20security%20fine.htm

And there is plenty more (admittedly both pro and con). I didn't browse through them all to find a quote from a specific Congressional Democrat...

sigh...I couldn't resist wasting more time on this...

Here's the esteemed Harry Reid saying "Social Security is just fine for the next 50 years"

"Actually, the tipping point is 2008 or so. That's when the SS surplus peaks. Right now Congress is enjoying the $150 billion+ SS is bringing in. But when that drops to $100 billion a year surplus or less Congress is going to feel it."

I have no real reason to post other than I wish this point was the first point made in every SS debate. Forget solvency or bankruptcy 15, 20, 40, 50 years from now. The SS surplus has been subsidizing the deficit in a big way for a long time now. Once the surplus starts shrinking in 2-4 years -- the deficit is going to get real bad real fast. It's been just outside the 10 year budget window for a while now - but it will start showing up soon.

Pick an age, say 35 (I am of course 36), and announce that if you are under this age you will not be receivieng SS benefits. Most people under this age don't beleive they will be receiving them anyway. Also this will not agitate the current or near future members of AARP.

In economics actions speak louder than words. We are told Social Security decreases savings because why should people save if they are going to be getting SS checks at 65? OK, if this is true and if it is true that people under 35 do not believe they will get Social Security then shouldn't the savings rates for under-35 yr olds be dramatically higher than 35+? Or at least higher than previous generations of

Yet, by saying 'the system is "just fine" until 2042', these same nefarious Democrats are playing on the notion 'that people (won't) understand that either taxes or government borrowing will have to go up, or current spending on other programmes go down, starting around 2015'.

It should be noted that Bush's plan is basically to cut benefits. The benefit cuts he proposed will mostly bite far into the distant future. They will push the date that the SS Surplus disappears back maybe a few years and will push the exhaustion of the trust fund date back maybe a total of 7 years. If either of these dates represents some sort of horrible doomsday isn't it a bit dishonest to claim you have a solution whose benefit is to just move the date back a few years? Is bankruptcy in 2049 really all that much better if bankruptcy in 2042 will spark 'intergenerational conflict', whatever that means?

Actually, the tipping point is 2008 or so. That's when the SS surplus peaks. Right now Congress is enjoying the $150 billion+ SS is bringing in. But when that drops to $100 billion a year surplus or less Congress is going to feel it.

Considering that the Fed is running a deficit of, what?, $450B why is a decrease of $50B in the SS surplus going to be particularly painful?

'I gather from the responses to my question that no Democrat is saying that Social Security is "just fine".'

I gather you've never read the comments sections of Semi-Daily Journal, Max Speak, Angry Bear, Political Animal, or dozens of others.

"They will push the...will push the exhaustion of the trust fund date back maybe a total of 7 years."

Oh, well, if you're worried about the date of the exhaustion of the "Trust Fund," I'll simply write a personal check to the Social Security system for $5 trillion.

My check for $5 trillion will be worth exactly as much as the I.O.Me's in the "Trust Fund."

I'm not worried about the exhaustion of the trust fund. I'm curious as to why our President is telling me I should be worried about it becoming exhausted in 37 years, or that I should be concerned that it will start becoming exhausted in maybe 13-15 years or so and then proposes (after great pulling of teeth) a policy that does nothing but put it off for another 1 year and 7 years respectively.

Have you ever read Jane's criticisms of the Kyoto Treaty since its net effect would appear to be to delay global warming by about 3 years or so? Is that criticism only valid if aimed at Democrats?

"Pick an age, say 35 (I am of course 36), and announce that if you are under this age you will not be receivieng SS benefits. Most people under this age don't beleive they will be receiving them anyway."

Rather than screwing one age group out of everything, it would be better to incrementally taper off. (So everyone gets screwed a little.)

1. NO MORE COLA OR ANY OTHER INCREASES! Unless the Libertarians win an election and go back to the gold standard, this in itself will eventually reduce SS to inconsequentiality.

2. Tie the retirement age to life expectancy. It was set at 65 when most people didn't live that long; why should people who are probably going to live to 85 expect to suck from the public teat for 20 years?

3. Come back in a few decades after #1 and #2 have had time to work, "discover" that it just isn't cost-efficient to pay 1,000(very inflated) dollars/hour to government clerks to send out small checks, and shut the whole program down.

How about a simple first step? No Social Security checks for people with incomes over $200,00. Starting now.

Life is so easy when you are a socialist...until your society collapses because there are no longer any real incentives to contribute. Statements like the one I quoted simply make me want to wretch.

I take it the above was aimed at my comment ... and I must admit I take a certain pleasure in imagining that I've caused you to wretch, MP.

At any rate, you'd think people would be more grateful to socialism, considering the number of times which it has rescued capitalism from itself.

(Note to MP: It's possible to walk and chew gum at the same time when it comes to freedom and security ... you should try it sometime ...)

What's missing from this discussion is an appreciation of the stability social security provides for our markets. Imagine our economy without this humble, steady engine of capital growth. Imagine our collective economic psyche without this security blanket which is always there, good times and bad.

Dammit, social security is worth saving. It's worth doing what it takes to save, in an incarnation as close as possible to what it currently is ... because it's worth more than we have the ability to measure.

Oh, and this - "why should people who are probably going to live to 85 expect to suck from the public teat for 20 years? - is an incredible statement.

Golly, markm, it sure would be nice if old people who have paid into social security would have the decency to just drop dead before they could collect a penny of their investment.

Do you not comprehend that collecting from a social security that you have paid into is not "sucking from the public teat"?

Or was your putting the time at which social security payees would begin "sucking from the public teat" at 65 (85-20) - the VERY FIRST YEAR of their eligibility to collect - just a typo?

"I'm not worried about the exhaustion of the trust fund. I'm curious as to why our President is telling me I should be worried about it becoming exhausted in 37 years,..."

My understanding (based on reading protestations on the blogs of leftist economists) is that our President has correctly identified the Trust Fund as a completely worthless fraud.

I didn't vote for him either time, but I certainly applaud his honesty on that particular matter. The Trust Fund is a completely worthless fraud. It won't be "exhausted" in 2042, because it doesn't contain anything of value in 2005.

Yes and Ocleanlanda has always been our enemy. It's a worthless fraud today because it will be exhausted in 2042 (but it's really exhausted today) but it won't be under Bush because his reforms would extend it to 2047!

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