Asymmetrical Information

:"NPV of the deficit has grown to $4.7 trillion from $3.5 trillion. I wouldn't worry to much about this last number, which is at least in large part an artifact of inflation and economic growth."

Isn't the biggest reason that the NPV grows so much is that every year you use lose a good year (SS runs a surplus) and add a bad year(SS adds a large deficit).

During your (relative) blogging pause, I've wandered over to Ezra Klein and Yglesias' place. They seem to think that since Medicare is much larger and worse, Social Security isn't so much of an issue. They argue that since the GOP isn't talking about Medicare, then talk of SS reform is disingenuous.

I disagree, but I think that if you're hit by a car or crushed by a jet engine, you're just as dead.

But since they don't want to do anything about Medicare either, aren't they at least as disingenuous?

No, AT, I could be wrong, I'm pretty sure they plan to do something about it. I think their solution to Medicare is the wholesale reformatting of health care in the US,mainly through the elimination of private insurance and targeting pharma and labor costs. I tend to think that's a bad idea, but I dunno.

hederman, part of the increase is because 2007 dollars are worth less than 2003 dollars.

Couple of ideas re: SS and Medicare.

SS: buyout. $500K to each senior currently receiving full benefits (aged 70 and above). $450K to each senior aged 69. $400K to each senior aged 68. And so on in decreasing increments of $50K. Expensive, but it's a one-time expense and then it's just a matter of paying off the debt incurred in financing the buyout. Anyone with 10 or more years until full eligibility gets nothing, but no longer has to pay into the system and their employer's "matching contributions" go directly to the employees rather than the SSA. Everyone gets a de facto raise and employers' bottom lines are affected not at all.

Medicare: Medical Negative Income Tax and Health Savings Accounts. For any income (from all sources) less than, say, $50K/yr, citizens get $X/year (analogous to the Earned Income Tax Credit...the less you make, the more you get, on some graduated scale) deposited directly into their HSA. Money in the HSA is available only for non-elective medical expenses and health insurance. Individuals may make their own, after-tax, contributions to the HSA as well. Heirs may cash out the HSA (and pay taxes on it) or roll it into their own HSAs and NOT pay taxes on it.

Details would have to be worked out of course, but this is a start. Make people the owners of their own healthcare expenses and let them keep more of their own money with which to prepare for their own retirements.

Jason,

Very egalitarian approach on SS, if the feds and states don't tax the distributions as regular income, as is the case with 85% of SS payments currently.

However, what happened to my Medicare ENTITLEMENT? Seems that if I saved when I worked, I lose Medicare because my income exceeds both SS income and 50K. Not very egalitarian on Medicare!

It actually could get much worse if the interest rates drop or labor participation rates worsen than what is assumed with tighter immigration controls.

This is small potatoes.

I heard a rumor that the Social Security system has actually *run out of assets* with which to pay beneficiaries and now, can only keep the system alive by taxing current workers to pay current beneficiaries. Like, it doesn't actually save your money, it just blows it all as it comes in and makes it up from another sucker. Sort of like a Ponzi scheme.

Can anyone corroborate this?

Ed, no system is perfect, and someone's ox will be gored by any change. My proposal is the best I could do given that I'm not an expert on the arcana of the current system. And the $50K figure was pretty arbitrary. Make it $100K if that works better.

Possibly a compromise could be effected for those citizens who are not in a position to make the switchover to HSA-funded healthcare right away, but I suspect that that wouldn't be too many.

Jason,

I like the direction that you are heading and would like to subscribe to your newsletter, but Ed is right, you would definitely have to do better with Medicare to get my vote. (And I don't mean a plan that would include me per se, just that $50k is way too low.)

However, you run into two problems. First, if retirees get a buyout, then you are taking an enormous amount of power away from Washington. The pols aren't going to allow that.

Second, the first time television airs some poor schlep who has spent their entire buyout and now they are living in a cardboard box, people will demand that the government (whoever that is) do something.

Reagan Fan,

You can't please all the people all the time. The $50K figure was a starting point. I'm not wedded to that number. As for the press screaming about poor old Mr. Grasshopper, were I President I'd simply invite the journalists pushing the story to contribute to a "Cardboard Box" charity (non-tax-deductible of course) to support pool old Mr. Grasshopper.

Let them put their *own* money where their mouths are for a change.

And as for taking power away from DC...well, I have no problem with that. Congress would disagree, but I don't expect my proposal to be taken seriously by anyone who could implement it, alas:-(. Just trying to get the meme out there.

Person,

Not sure if you're joking or not, but:

SS is required by law to "invest" any surplus in Treasury notes. That is, it lends the money to the general fund. It has been doing this since it was created.

The only "assets" it possesses are notes backed by the credit of the US Treasury, i.e., your income taxes.

Your income taxes are currently lower than they "should" be, with the difference made up in SS taxes. When SS obligations become too great to do that, income taxes will have to go up (dramatically) to pay off all the debt that the general fund owes to SS.

Essentially, the government has been lending money to itself for decades and calling the result a "trust fund," which is about as smart as saving for retirement by regularly writing yourself IOUs and putting them in a cookie jar.

Keep in mind that this does NOT, in the minds of liberals, mean that SS is facing a crisis. It means the general fund is facing a crisis, and it is very deceptive to say that the problem is with SS rather than the general fund. Accounting fictions are apparenlty extrememly important to some people.

At least, that's what Njorl has told me.

Rob_Lyman: Yes, I was joking (at least, *I* think it's funny when you explain it the way I did ...) and yes, you're mostly right, except for one thing:

The government's borrowing from SS doesn't necessarily mean my income taxes are lower than they should be. It's an open question whether the inability to do so would lead the government to raise the money elsewhere, or just restrain spending more.

Oh, great, now I've gone and provoked Njorl for no reason. Just when he had posted two comments that I not only agreed with, but found humourous.

But in any case, I don't think Congress can restrain spending. The big expenses are 1) middle-class entitlements and 2) defense. As much as I dislike the thought of funding the National Cowgirl Hall of Fame, it's just a drop in the bucket compared to giving money away to wealthy baby boomers.

OK, Gingrich got rid of the National Board of Tea Appeals. Where's my Tea dividend?

Rob_Lyman, what Njorl posts are you talking about?

And yes, there is considerable room to cut spending. Defense is only half the discretionary budget. (I know, I know, everything is "discretionary" ... just giving a comparison.)

A good test of whether or not a commenter is worth paying any attention to in regards to financial matters is whether or not they believe the size of the Social Security Trust Fund's balance has any fundamental effect on the ability of the future government to pay the benefits in the future. On liberal websites, I have found that about 95% of the commenters are completely clueless.

The Madden NFL comment (in the Naomi Wolf thread) and the "expecting too much from suicide notes" comment.

The NFL comment was cute, but the suicide note was a real classic.

Rob, cookie jar analogy not quite right. My cookie jar doesn't have armed federal agents available to collect my i.o.u.s!

Why do folks who can't believe there is a medicare/social security problem also tend to be those who buy into man-made global warming where minor tweaks to an incredibly complex model produce all sorts of results, some of which are relatively benign?

It makes perfect sense once you consider that these are the same people that define reducing the rate at which taxes are schedules to increase as a "tax cut".

Some of the numbers indicate that the problems with SS are getting worse at a slower rate now than in the past, thus SS is getting better...

Cognitive dissonance at its finest.

-kd

Rob Lyman,

"middle-class entitlements"
"giving money away to wealthy baby boomers"

Please permit me to "pick a nit" regarding the above. First, to the best of my knowledge, there are no "middle-class entitlements"; there are "entitlements" to those of all classes who have "contributed" to the two federal entitlement programs (SS and Medicare).

Since baby boomers, whether wealthy or not, have "contributed" to both entitlement programs during their entire working lives, they become entitled to receive the benefits they were "promised" (but not "guaranteed") upon reaching retirement age (SS) or reaching age 65 (Medicare). Therefore, these benefits hardly constitute "giving money away to wealthy baby boomers", except to the extent that paying the taxes to fund the entitlements were "giving money away to the government".

Welfare programs and the EITC, on the other hand, are "giving away money", since the recipients have done nothing to earn an entitlement to the funds they receive. Obviously, the recipients of these funds are not wealthy, though many of them are baby boomers who have failed, frequently as the result of bad decisions they made in their lives.

Both of the entitlement programs are progressive, to one degree or another. Social security benefits are proportionately greater relative to "contributions" for those who earned lower incomes during their working lives; and, 85% of SS payments are subject to income taxation, for those who also saved and invested during their working lives. Medicare "contributions" are collected from 100% of salary, regardless of income; Medicare benefits are the same for all, regardless of "contribution" history.

Why do folks who can't believe there is a medicare/social security problem also tend to be those who buy into man-made global warming where minor tweaks to an incredibly complex model produce all sorts of results, some of which are relatively benign?

Well our hostess is someone who believes that both AGW and entitlement programs are a problem and I’m sure she’s not the only one.

I tend to think the answer to your question may largely be because people who think that Medicare/Social Security are in bad shape tend to be people who think that entitlement programs are too expensive right now and fear that if they continue to grow as projected (or worse), any shortfalls in the future will lead to them consuming even greater shares of the economy via large tax increases. On the flip side, entitlement insolvency “deniers” tend to be people who think the current programs aren’t expansive or generous enough (look at the people proposing to put everyone on Medicare) and don’t want to do anything that might lead to rethinking them.

As far as AGW, IMO the people who were pushing for and are the most vocal proponents of the theory tend to be people who already start from a position of being mistrustful of capitalism, industrialization, and/or the United States and more likely to be predisposed to having even more constraints put on them. Even if AGW didn’t or doesn’t exist, they’d probably still favor a lot of the policies they’re pushing for under some other rationale. The more “free market” proponents of AGW tend to be people who want to get ahead of what they may see as an almost inevitable regulatory regime and hope to mitigate it with more “market friendly” alternatives like carbon trading. The skeptics of AGW tend to be people who are mistrustful of the motives of the proponents (it doesn’t help when they resort to propaganda like the Stern Report or attempt to intimidate their opponents), think that given the track record of previous big government initiatives the “cure” is worse than the “problem” (or that mitigation may be better than prevention), or think that more likely than not (see global cooling) the “problem” will self-correct or be something beyond the control of man.

Thorley Winston:

As far as AGW, IMO the people who were pushing for and are the most vocal proponents of the theory tend to be people who already start from a position of being mistrustful of capitalism, industrialization, and/or the United States and more likely to be predisposed to having even more constraints put on them.

Thorley

That would be Margaret Thatcher then, when she was Prime Minister? The first world leader to say that it was a threat, and something needed to be done about it?

Or David Cameron, the current leader of the Tory Party?

Or Lord Brown, the former CEO of BP?

Jason,

One problem with your suggestion is that it gives *increasing* payouts to people the further they are over the retirement age. This is inappropriate for two reasons:

(1): Those people have already gotten more out of the system. The typical 70 year old has gotten far more in payments than the typical 67 year old, without having actually paid any more in.

(2): The older you are, the less time you have left to live. Therefore, the older you are, the less need you have for money.

Another problem is that the payouts are FAR too large. $500k to a 70-year-old? The average SS payout is only $12,000 per year, and the average 70-year-old has less than ten years to live.

Valuethinker, do you know what "tend to be" means?

But on His Lordship, I agree that one complicating factor is how these people deal with politicians. Even if a CEO of an oil company thinks AGW is B/S, he still has to kiss up so his company won't get unpopular and over-regulated. Or, he wants regulations, because he can get them to favor his corporation over competitors.

But adding to Thorley_Winston's point, AGW proponents typically are only satisfied by the most inefficient solutions that coicidentally accomplish other goals. For example, a simple carbon tax + carbon sink subsidy would sound like a logical solution, and the be most efficient way to reduce net emissions, but it's way too easy for greedy capitalists to adapt to. So it doesn't get any play.

'The projected point at which tax revenues will fall below program costs comes in 2017'

But, the problem will come earlier than that. In about three to four years when the SS surplus begins to DECLINE because the Boomers start to retire.

At that point congress will be faced with either cutting other spending or raising taxes to fund current programs. That should concentrate minds wonderfully, because the surplus will shrink each year.

Patrick R. Sullivan:

"At that point congress will be faced with either cutting other spending or raising taxes to fund current programs. That should concentrate minds wonderfully, because the surplus will shrink each year."

You talk as if there is some requirement that the budget be balanced. Actually the fiscal situation should improve in the next few years as the government comes to its senses and stops throwing away a few hundred billion dollars a year in Iraq. Anyone complaining about social security while ignoring the money being squandered in Iraq has no credibility with me.

"They seem to think that since Medicare is much larger and worse, Social Security isn't so much of an issue. They argue that since the GOP isn't talking about Medicare, then talk of SS reform is disingenuous."

Personally I talk about Social Security instead of Medicare, because the fixes to Social Security are fairly straight-forward. That isn't true at all of Medicare.

Dan,

The reason I picked age 70 as the maximum payout age was that I was under the impression that it was the age at which one was eligible for full benefits. It also has the salutary effect of reducing the number of retirees who get the full payout, thus reducing the cost of the program.

As for older people needing less money, tell it to the hospitals that are charging them way too much for a few more months of life. And if $500K is too much, pick another number. The idea was a suggestion, not a "take it or leave" it ultimatum.

Maybe $250,000 would be enough. I had thought giving enough to allow the oldsters to live off the interest and avoid claims that they were being robbed would be worthwhile, but I admit that I haven't run any numbers and don't have the expertise to do so. Perhaps a kindly economist who knows a bit about retirement and elderly medical costs will do so and share the results with us.

That would be Margaret Thatcher then, when she was Prime Minister? The first world leader to say that it was a threat, and something needed to be done about it?

Or David Cameron, the current leader of the Tory Party?

Or Lord Brown, the former CEO of BP?

So is this supposed to be some sort of rebuttal or were you hoping that people wouldn’t have noticed that in my very next sentence (which you cut out) I acknowledged that there were some “free market proponents of AGW”?

Of the three you mentioned the only one who would really qualify (Lord Brown made it his mission to have “BP” stand for “Beyond Petroleum” and “Swedish David Cameron” like much of the post-Thatcher Tory Party is to the left of Bill Clinton politically) is Margaret Thatcher and that was a unique circumstance given her desire to replace much of Britain’s coal-generated electrical power sources with nuclear power in order to (a) revitalize their nuclear weapons program and (b) to reduce the clout of the coal workers trade union to prevent a repeat of the 1970’s strikes which cost the opposition party the government.

Which probably explains why two days before she delivered the 1989 speech which first mentioned global warming, the UK blocked a proposal at a conference in the Netherlands to reduce “greenhouse gas” emissions by 20% and while at the same time pushing for "the biggest roadbuilding programme since the Romans" to facilitate the “great car economy."

Dan,

The reason I picked age 70 as the maximum payout age was that I was under the impression that it was the age at which one was eligible for full benefits. It also has the salutary effect of reducing the number of retirees who get the full payout, thus reducing the cost of the program.

As for older people needing less money, tell it to the hospitals that are charging them way too much for a few more months of life. And if $500K is too much, pick another number. The idea was a suggestion, not a "take it or leave it" ultimatum.

Maybe $250,000 would be enough. I had thought giving enough to allow the oldsters to live off the interest and avoid claims that they were being robbed would be worthwhile, but I admit that I haven't run any numbers and don't have the expertise to do so. Perhaps a kindly economist who knows a bit about retirement and elderly medical costs will do so and share the results with us.

Personally I talk about Social Security instead of Medicare, because the fixes to Social Security are fairly straight-forward. That isn't true at all of Medicare.

I have to slightly disagree. While Medicare is certainly more complicated because health care costs are harder to predict, I think there are two pretty straight-forward reforms that could fix much of the problem of both while minimizing the pain – phasing in a higher retirement age (while making allowances for the disabled who cannot work a couple of extra years) to take into account longer-life expectancies and means-testing (which is consistent with providing a safety net for the poor but not a subsidy for the wealthy).

Means-testing ought to be a no-brainer because you’d think that the same people who complain that the “wealthy” (which apparently means anyone earning 200K or more a year) don’t “need a tax cut” (i.e. keep more of their own money) should have not problem saying that these same “wealthy” don’t “need” a subsidy being paid for by workers earning far less than they do (i.e. take more of someone else’s money).

Dang, sorry about the double posting.

As for older people needing less money, tell it to the hospitals that are charging them way too much for a few more months of life.

There is no such thing as being charged "way too much" for a few more months of life, first of all. Like my dad says, if you think people are charging too much to keep you alive, stop paying them and try spending the money some other way. :)

Secondly, this is about retirement benefits, not medical expenses. Social Security doesn't exist to pay medical bills, it exists to pay for basic cost of living -- food, clothing, and shelter. It also does not exist to keep old people alive as long as is medically possible. The government exists to provide a safety net, not to allow the aging to cling to life indefinitely. The question to ask yourself isn't "how can society make sure an old guy has the $250,000 he needs to live an extra two months", but "why should society pay to keep a terminally ill man alive for two extra months". Anyone one of us can easily consume more wealth than we ever produced during our lifetimes, if given the chance -- medical technology can keep almost anyone alive almost indefinitely if you throw enough money at them.

Anyway, the only number that actually makes sense for a buyout is one that is less than the amount a retiree would have been paid anyway. So $100,000, at *most*, for a 70-year-old. It should really be even lower than that, since the person will be earning interest (while the government *pays* interest -- since the payout will be with borrowed money). Perhaps $80,000 or so.

As for older people needing less money, tell it to the hospitals that are charging them way too much for a few more months of life.

Wow, and with a straight face, too.

Really, that's another whole topic of discussion that entails not only hospitals that overcharge (perhaps some do, many don't), but also old people that overdemand months of life at extraordinary costs and/or families that demand it on their behalf, doctors that don't dare implement anything other than every possible expensive test and procedure in order to minimize their own malpractice exposure, a liberal tort system that enables said exposure, etc.

For now, let's just leave it that it can be very expensive to live beyond your threescore years and ten, and most old people want it whenever possible -- hence, persons over 70 are not automatically less expensive merely because their lifespan is nearly over.

I really wasn't trying to start an argument about cost of living vs medical costs, but I expect anyone faced with a mandatory buyout *will* make that argument. Further, the elderly won't have time to build up an HSA sufficient to cover their medical costs, so some accommodation will have to be made to take that into account if Medicare is supplanted at the same time as the buyout takes place. Maybe keep Medicare in place for the beneficiaries of the buyout and switch to the HSA/NIT program for everyone else?

I dunno.

I focused on "middle class entitlements" because it is the middle class portion of SS which is breaking the bank, and no good reason why anyone who makes a halfway decent living in his life should need the government to pay for his retirement.

We can easily afford to keep old people from living in cardboard boxes; we can't afford to pay people like my parents/stepparents (professionals all) so that they can have more disposable income to eat out and travel to Europe.

Therefore, these benefits hardly constitute "giving money away to wealthy baby boomers", except to the extent that paying the taxes to fund the entitlements were "giving money away to the government".

Frankly, I find the whole "I earned it by paying in" argument absurd. There is a serious problem with SS; somebody has to pay for it. The best people to do so are wealthy boomers who have plenty of money in their IRAs already, not young workers who will find it much harder to start IRAs because they're busy increasing the disposable income of old people.

Rob Lyman,

"Frankly, I find the whole "I earned it by paying in" argument absurd. There is a serious problem with SS; somebody has to pay for it. The best people to do so are wealthy boomers who have plenty of money in their IRAs already, not young workers who will find it much harder to start IRAs because they're busy increasing the disposable income of old people."

Frankly, I don't give a rat's behind what you find absurd. If you want to try to convert SS into a welfare program, by all means have at it. However, you will likely discover that there are a lot of folks who did not volunteer to participate in SS, or in Medicare for that matter. We and our employers were told that we must pay into the system; and, that we would recieve specific benefits when we retired or reached 65 year of age.

I acknowledge that those benefits were not guaranteed. However, I believe the federal government should be very reluctant to begin abrogating its commitments to a very large segment of society. We were all young people starting out when we began paying SS and Medicare taxes. Those taxes didn't make it any easier for us to save either, especially since there were no IRAs and 401Ks when we started trying to save for retirement; the retirement vehicles available to us initially were all taxible. I am sure you would like us to solve your problem for you. We'd like you to solve it for yourselves.

If you want to be angry at someone or something, try focusing on Franklin Delano Roosevelt and the "New Deal" or Lyndon Baines Johnson and the "Great Society" and the Unified Federal Budget.

During the years when I was "contributing" to SS and Medicare, the systems were in surplus "big time". However, the federal government, which has a virtual monopoly on "rat holes", has disbursed all of the surpluses down them over the years. They did not disburse any of them to me. Now, it appears, recovering the money from the rat holes has become a problem. Too bad; so sad!

You would be very wise to consider these issues prior to voting for someone who promises universal health care, or a "living wage" for all, or some other "Ponzi scheme". The time to "pay the piper", no matter how long deferred, is unavoidable.

Ed,

Let's be clear: are you saying that you want the SS/Medicare that's coming to you?

I am sure you would like us to solve your problem for you. We'd like you to solve it for yourselves.

The thing is, the only problem my generation has is the generation before it -- which supported the government as it wasted their savings. The only reason we might have a problem with our retirements is that they expect us to pay for theirs. Why should we want to do that?

Frankly the "we expected our retirements to be paid for" argument doesn't hold any water, since it has been known for decades that the retirement of the Boomer generation was going to destroy the Social Security Ponzi scheme.

Ed,

I'm not sure who you think you're discussing this, but the person you're responding to is not me.

1) I'm not "angry" at anyone, but I am annoyed at people who have plenty of money demanding I pay higher taxes than they ever did because, apparently, they paid taxes. Really, who hasn't paid taxes in their lives? That and death are inevitable; I'm not sure why it gives you or anyone else a claim on my money.

2) You're right that the surpluses were pissed away. Your solution to that problem is "screw you younger workers!" and "think about who you vote for"? Given that I wasn't born when these decisions were made, and you (I'm guessing) have been around longer than I have, perhaps you could consider taking some of the responsibility for the decisions made long ago here? You had more power to prevent this problem than I did.

3) The fact is that SS funds have gone into the general fund since the very beginning. That means your income taxes were lower than they would have been had SS taxes been truly "saved" or "invested" rather than spent. So the argument that "I paid into SS, I deserve to get something out" only works if you account for the lower income taxes you've been paying all those years. When you pony those up, we'll talk.

When you get right down to it, this is a question of a) who should get entitlements from government and b) how it should be funded. Dividing the inflow of money in certain ways doesn't really change the fact that there's a problem, it's been well known since long before I could vote, and nobody has done a damn thing about it. The fact that there is a special tax funding SS doesn't actually "entitle" you to anything (in a moral and practical sense) any more than the fact there's a special tax on cigarettes "entitles" smokers to free tobacco in retirement because they've "paid into the system for years."

I am sure you would like us to solve your problem for you. We'd like you to solve it for yourselves.

See, that's exactly how I feel about retirement for everyone. Want to quit working and goof off? Fine, save up. Don't take my money because you're too lazy or irresponsible with your money.

But since 2003, the projected point at which SS tax revenues fall below outflows has moved up a year, to 2017 from 2018;

Actually - it has moved up five years, to NOW + 10 from NOW + 15.

the projected point at which the trust funds are exhausted has moved up a year, to 2041 from 2042;

Actually - it has moved up five years, to NOW + 34 from NOW + 39.

"If you want to try to convert SS into a welfare program, by all means have at it." Too late - by about 70 years. A year or so after the program was started, Congress changed it so people who were retiring then would get a significant monthly SS check - thereby transferring money from workers (wealthy or not) to mostly impoverished old people. That made it a welfare program - and it also meant that from there on out, it would be a Ponzi scheme, paying earlier members directly from the payments of newer members, rather than investing the money paid in to fund later payments, like every legal private pension plan must do.

Second, the ratio of money paid-in to money paid out varies greatly with lifetime earned income. A part-time or part-year minimum wage worker gets several times as much back for every dollar paid in as I do. So it's either a scheme that transfers money from the rich to the poor - that's welfare - or it's so badly run that no one or only a few percent of the lowest paid workers will get back what they put in - and that's robbery.

And none of this was a secret. Too many people of my generation and earlier generations believed the bull manure the politicians were spreading, but anyone that bothered to think for themselves knew the truth. In the 35 years I have been voting, I cannot recall a single Republican or Democratic candidate that was honest about SS.

Klug,

Damned straight, I do!

Dan,

You seem to forget that we paid for the prior generation's retirement as well; and, beginning in 1964, for a Medicare system they had not "contributed" to prior to that.

Also, most corporate fixed benefit retirement program benefits were calculated based on SS + the corporate contribution.

I suspect that if you had paid the premiums on an insurance policy and the insurance company later decided not to provide benefits because "you didn't need them", or because they had already spent the money on other things, I suspect you would be upset. I realize that SS is not really "insurance", but it's "close enough for government work".

Rob,

1) It gave your grandparents and/or parents (and mine) a claim on my money.
2) SS and I were born in the same year. I voted against those who created Medicare. I have voted all my adult life against supporters of creeping socialism in the US. Fat lot of good it did!
3) No. It means the government spent more than it took in because it believed it could. After the adoption of the FY 1969 unified budget (Thank you, LBJ), it just did a better job of hiding it.

"The fact that there is a special tax funding SS doesn't actually "entitle" you to anything (in a moral and practical sense)..."

You'll have to take that up with FDR and LBJ, both of whom sold the programs as "entitlements". However, there are those in our society today who believe it is OK to "stiff" those who also saved and invested while they worked and "don't need" what they were told they were entitled to receive. That may be expedient, but it is hardly MORAL!

I don't know what Social Security Trustee's Report Bruce Webb is reading.

The whole one, Jane, including the assumptions about future economic conditions, and all three scenarios. I suggest you do the same.

So Ed, your "moral" claim to my earnings is based on campaign promises made by people born before my grandparents?

SS is a mess. Somebody is going to get screwed no matter what happens. I think the moral course is to screw those who can afford it best--those with a lifetime's worth of savings, and in most cases the ability to continue working. You seem to think the most moral course is to screw those with both 1) the least money and 2) the least responsibility fot the mess.

I'm no philosopher, so I guess I can't offer an expert opinion on that choice.

Assuming Ed is ~>70, I don't think anyone on this board would supporting cutting his benefits. Presumably, he's got the demographic advantage when it comes to voting, too.

However, if you're healthy and 50 and have only saved the national average of $50K for retirement, you should be on your own. I'm guessing that the actual demographic numbers would advocate pushing that number up, while most voting would advocate pushing that number down.

Let me put it this way, Ed: I know that I will never see a single red cent from Social Security. Enjoy it.

Klug,

With the availability of defined benefit retirement plans, Roth IRAs, regular IRAs, 401k and 403b programs, Keoghs, etc. it is difficult to imagine being 50 with only $50k saved for retirement. It would scare the hell out of me!

I was raised to "pay myself first", putting funds into savings and investments before spending on other things. With the advent of 401k plans, we contributed the maximum percentage the law permitted. We began funding IRAs as soon as they became available. We also invested after tax funds in the market.

We saved like there would be no social security when we retired. Fortunately, SS still exists. We could live without it, but that would adversely affect our quality of life.

Rob,

"So Ed, your "moral" claim to my earnings is based on campaign promises made by people born before my grandparents?"

My moral claim to your earnings is the same as your parents and grandparents moral claim to my earnings. Mine is based on 40 years of paying the annual maximum into SS and of paying Medicare on my total income. I did what was required of me by the 2 programs; now, it's their turn.

klug:

"Let me put it this way, Ed: I know that I will never see a single red cent from Social Security. Enjoy it."

People "know" all sorts of things that aren't true.

Rob Lyman:

"So Ed, your "moral" claim to my earnings is based on campaign promises made by people born before my grandparents?"

When you become a citizen of the United States you inherit assets and liabilities. It's a package deal you don't get to accept the assets but not the liabilities. Among the libilities are the government bonds in the social security trust fund (most of which are considerably more recent than your grandparent's generation). If you don't like the deal you can always emmigrate.

Mr. Shearer: I plan to retire in 2046 or thereabouts. What do you think is the likelihood that I will receive benefits from SS?

We could live without it, but that would adversely affect our quality of life.

This is my point about morality in nutshell: Paying for your SS will adversely affect my quality of life, and you have yet to explain why your life should be improved at my expense. For me personally, I expect that I can well afford it, as you say you can. But there are plenty of other young workers who are struggling to get by, and I don't see how you can make a moral claim to their earnings merely because somebody else took your earnings. I don't see why your "too bad, so sad" line shouldn't just as well apply to you as to them. You're wealthier than they are and you have had a lifetime to save for yourself.

You seem to forget that we paid for the prior generation's retirement as well; and, beginning in 1964, for a Medicare system they had not "contributed" to prior to that.

I'm not forgetting it, I just don't care.

So you got screwed out of your money. This is my problem... why? I didn't take your money. Why should I let YOU screw ME out of MY money?

So you got screwed out of your money. This is my problem... why? I didn't take your money. Why should I let YOU screw ME out of MY money?

Talk is cheap. Action, as always, costs something.

Ed Reid isn't doing anything to you, nor is his logic unsound -- he's taking advantage of an opportunity while it lasts, having paid what was required of him in order to do so. If you happen to disagree with the terms thereof, take it to your elected representatives; they're the ones who are in the position to do something about it.

Klug, taking a SWAG and ignoring SS death and disability benefits I would say 70%.

AM,

I don't think anyone has asked Ed to voluntarily give up his SS checks. We're just asking him to recognize that in taking them, he's taking money he himself says he doesn't need from people who are (in all probability) poorer than him. All while (again, in all probablity) being able-bodied enough to work if he wants to enhance his "quality of life."

And that's a pretty crappy thing to do, when you think about it, whether or not someone "promised" you you could.

I feel really crappy this AM!

Somehow, I don't think the Lyman "do without and save your money while you are working so you can do without your SS payment when you retire since you won't need it" ethic is going to be very popular. However, if the SS payment is not there when you retire, as concerns Klug, then it would have been prudent to plan not to need it. One thing is reasonably certain; $50k at 50 is not on the path to independence from SS.

I gather that Klug will take SS if it's there in 2046. Since Rob (and possibly Dan) won't, there should be enough to provide Klug's benefits.

Ed: No, assuming that I've saved enough (and I actively save), I don't plan on taking SS. But again, I reiterate that I don't think it will be there. And Mr. Shearer's 70% SWAG doesn't make me feel any better. Besides, SS is there to make sure you don't eat cat food for dinner and I think I can pay for that on my own.

A lot of this boils down to generational philosophical questions: 1) Who should I rely on for my retirement income and medical treatment? myself/my children/the government and 2) Can I trust a promise that is made 30+ years in advance (i.e. pensions/SS/Medicare, etc.)

For myself and my generation, at the back end of Gen X, the answers are 1) myself and 2) No. According to the actions of many Americans, the answers are 1) the gov't and 2) Yes. I don't think that's very wise.

"Now it's my turn"...how many college freshmen died in hazing rituals while their abusers were thinking just that?

I have always wondered about this business that Social Security pay-in should be "invested" and that the current pay-as-you-go system is a Ponzi scheme.

Social Security is huge. Where would all of the money get invested? In our own economy? In overseas investment markets?

Social Security is supposed to be in financial peril because an ever increasing number of old people will be drawing on the payroll tax inputs of a smaller number of working young people. But somehow, people who have invested in the stock market through 401K and other plans with an eye towards retirement, must believe that the high price of stock investments will be maintained while there will be a shrinking pool of young people to buy those stocks from them.

Finally, while there are philosophical-libertarian arguments against government programs like Social Security, there is the pragmatic argument of moral hazard. The moral hazard of AFDC was claimed to be the breakdown of traditional family units. The moral hazard of fire insurance or auto insurance is that the insured may feel shielded from financial harm and may let down their vigilance against unsafe conditions. The moral hazard of health insurance is that people feel that they can smoke or put on weight or not exercize without recrimination.

What is the moral hazard of Social Security? What does it induce people to do that is either detrimental to themselves or to society that they would not have the tendency to do if Social Security is not in place? Are people saving and investing less? Then is the cost of capital for necessary infrastructure or industrial capacity higher because Social Security is in place?

Does the Social Security stipend create a culture of crime and indolence among seniors? Are there senior housing complexes that are police no-go zones on account of rampant crime? Or is it more that Social Security creates a sense of entitlement among old people that they drive slow in the left lane blocking traffic and browbeat retail clerks for perceived slights?

In other words, how would life for retired seniors and working young people be different in the absence of Social Security?

Ed: I'd rather be right than popular. And no, I won't take money from the government I don't need. But if I were in charge, it would be a means-and-ability tested system anyway: only poor people who can't work would get it. Essentailly like the SSI program within SS.

Paul: the moral hazard of social security is the same as most handouts to anyone who isn't really poor: that well-to-do and politically influential seniors will vote themselves a pay raise (or, at least a non-pay-cut) at the expense of young people.

There's also the "I won't bother saving because I'll get Social Security angle," but I suspect people who think that way are too dumb to actually save successfully anyway.

And you do have a good point about 401(k)s losing value because there are fewer buyers, but the real problem is actually a subtly different: who will provide the goods and services to all these indolent old people?

It's one of the reasons I think childbearing should be society's default position, and childlessness looked on as a form of free-riding.

I don't think anyone has asked Ed to voluntarily give up his SS checks. We're just asking him to recognize that in taking them, he's taking money he himself says he doesn't need from people who are (in all probability) poorer than him. All while (again, in all probablity) being able-bodied enough to work if he wants to enhance his "quality of life."

And stemming outward from this recognition, you hope to gain...Internet Special Olympics medals?

As I already stated, take it up with your elected representatives. They're the ones who are in a position to make a meaningful change in the system.

And that's a pretty crappy thing to do, when you think about it, whether or not someone "promised" you you could.

I would define "a pretty crappy thing to do" as attempting to lay the blame for SS's bad design at the feet of one person who compulsrily contributed in for many years, and now is voluntarily accepting a return back out. If the current generation of contributors have a problem with this arrangement, let them exercise the processes of the republic.

Incidentally, lest I give you fodder for more presumptions and probabilities, pelase note that I have no sympathy for SS as it is presently structured, and would be delighted to see it reformed. Like many other working young adults, though, I expect neither that nor a payout when I get there, and will structure my savings accordingly. If Ed Reid wants to continue taking my tax money under the procedures of a government we have both consented to live and work under, so be it.

Rob Lyman:

"... And no, I won't take money from the government I don't need. ..."

So you don't cash your tax refund checks?

OK, this is getting silly.

I am not on a personal crusade to cause Ed to renounce any SS that is coming to him. I am criticizing his attitude, which is captured in this direct quote: "too bad, so sad." I think that a lousy way to respond to the fact that his SS check is derived from regressive taxes on (statistically speaking) those who are less wealthy than he is.

I'm also calling attention to the fact that claiming one has some kind of moral entitlement to SS based on the fact that one paid "in" to the system is ridiculous because of the structure of SS. The "investment" in T-bills means only that older workers paid a greater proportion of the general federal budget through payroll taxes than is occurring today. I can't see how that arcane accounting/tax wonky fact means that today's workers should subsidize their decison to retire decades before they are actually too infirm to work.

If that makes me retarded, I can live with that.

Yes, I cash my refund checks, in the years I have them. But if someone were to point out that those checks were derived largely from taxes on those less fortunate than I (which they are not), I would not respond with "Ha ha, suckers!" which is roughly Ed's response.

SS to the well-off is basically no different from agricultural subsidies to Monsanto: a transfer of wealth from poor to rich enshrined in law by the superior political power of the latter. I have yet to see Monsanto justify this by claiming they paid "in" via corporate income taxes, or fret that an elimination of subsidies would harm their CEO's "quality of life." Mostly they put up a lame smokescreen about family farms. I will give Ed full credit here: he isn't hiding behind the truly impoverished and disabled, as some people in the SS debate do.

I don't think the Lyman "do without and save your money while you are working so you can do without your SS payment when you retire since you won't need it" ethic is going to be very popular.

It occurs to me that there was a time, not too long ago, when a man was expected to support his whole family, and taking of charity or "relief" payments from government was regarded as an emasculating admission of failure. Apparently today expecting a man to support himself is too much to ask.

That right there is the moral hazard of SS.

Rob:

I don't disagree with any of your points in general. But SS was never a welfare program whereby you paid your regular taxes and drew on the guvmint handout in a time of extreme need. It was bought, sold, and (not quite) paid for as a retirement benefits plan on which everyone has a right to draw out after having compulsorily paid in. If it had originally been plied as a tax increase with a benefit to those who actually needed it, we wouldn't be having this discussion; but to this day every worker can see, distinctly marked on each paycheck, which portion was deducted by the SSA.

For better or worse, "a retirement plan" is how most people are going to treat it, even those who have a somewhat clearer vision than others of what is taking place inside the enormous black box. And my suspicion is that it will only be changed only in response to a grassroots uprising, or its inevitable future bankruptcy.

AM,

If by "retirement" you mean "going to work at 18, outliving many or most of your coworkers, then quitting when no longer able to perform the demanding physical labor which sustained you, and dying a few years after that," then yes, SS was sold as a retirement program.

But if by "retirement" you mean "going to work at 25, working for 35 years, then quitting to take mountain bike tours of the Napa valley, and living 30 years past your quit date," then no, SS was never sold, and never could have been sold, as a retirement program.

Of course, every time I've called SS a retirement program, I've been yelled at by lefties who insist no, it's insurance. It says so right in the US Code!

I don't believe that SS ever defined the normal retirement age as "when no longer able to perform the demanding physical labor ...". It was also not sold to blacks males as "work till you drop, which will occur, on average, before you reach normal retirement age", which was then 65 (though that was the actuarial reality when the law was passed). SS specified a normal retirement age, which has been increased slightly for those now about to retire, but is still less than 67. It will probably be increased again before long.

Also, 25 + 35 = 60 + 30 = 90 (slightly beyond current life expectancy(65 + 18.7 = 83.7) for those retiring today). Obviously, you "feel" an 18.7 year retirement is too long, after a 40 year career. From where I sit, it looks like a plan.

Rob Lyman:

"SS to the well-off is basically no different from agricultural subsidies to Monsanto: a transfer of wealth from poor to rich enshrined in law by the superior political power of the latter."

This is not correct. Social security taxes and benefits taken together transfer wealth from the rich to the poor. If Ed is rich the benefits you want him to give up are probably just a partial return of the taxes he has paid into the system.

Ed, I have no feelings whatsoever on the appropriate length of retirement. I "feel" that you should take as long a retirement as you wish. I also "feel" you should pay for it yourself.

But I think it undeniable that "retirement" means something different today than when SS was created. If we returned to a retirement which was actuarially identical to the 1930's then the financial problems would be significantly abated, if not eliminated.

James: there you go with the lifetime calculations again. Today's SS recipients get their payments from the taxes of young workers. The recipients are on average quite a bit wealthier than the taxpayers.

Rob Lyman:

"James: there you go with the lifetime calculations again. Today's SS recipients get their payments from the taxes of young workers. The recipients are on average quite a bit wealthier than the taxpayers."

I was unaware that only young workers pay into SS. And I would like a source for the claim that the recipients are wealthier than the taxpayers. Is "wealth" including expected future earnings?

And if you really care about this you should prefer to pay the existing obligations by increasing the SS tax cutoff level or from income taxation rather than increasing the base payroll tax rate. Do you?

And how old does a tax refund have to be before you would refuse to accept it?

you should prefer to pay the existing obligations by increasing the SS tax cutoff level or from income taxation rather than increasing the base payroll tax rate. Do you?

I support both, with income taxes favored in my mind over payroll taxes, because of their progressivity and lesser impact on hiring. The SS cutoff is particularly dumb in my opinion. And of course, when the "trust fund" starts getting cashed in, the payments will be coming mostly from income tax, so I'll be getting my way automatically with no changes. Yippee! Can't wait to see the marginal rates go up.

Is "wealth" including expected future earnings?

Candidly, no, if for no other reason than you can't eat your expected future earnings beyond a very short time during which you can get credit. And while of course all workers pay taxes, the young ones are the poor ones, and also the ones who will be getting screwed by the eventual SS collapse.

And I claim that younger workers are less wealthy than retirees because the over-65 crowd is the wealthiest age cohort around. Mostly that's due to a lifetime of saving, which is of course to be commended.

I've never taken a tax refund that was older than the current year; I suppose if I could discover one from a couple of years ago, I'd probably take it. But as you doubtless know, I reject the whole notion of "in" and "out" in this context, and regard SS as simply a handout like any other, just financed in an unconventional way.

I consider the promised SS benefits to be a government obligation just like a long term bond. Since the government can pay them without undue difficulty I don't see any excuse for it not to do so. Perhaps you can make a case for making the system less generous in the future. And of course part of the reason the system is short of money is disability fraud, I have no objection to cutting disability payments to people who aren't disabled.