Eyes on the Prize: a social security summary

[Hannah Bell]

We have had twenty years and a billion dollars spent by Pete Peterson and friends telling the people that Social Security is going broke and will create huge deficits that will kill the economy and be a crushing burden to the young...

On the other side we have had Bruce Webb... showing that the reports of Social Security going broke are based on assumptions that seem unlikely...

Moreover he has shown that each year since we have been treated to the "we must fix (cut) Social Security NOW", "doing nothing now" has actually reduced the cost of any ultimate fix.

We have had professer Rosser show that even under the pessimistic assumptions Social Security with no changes at all will still be able to pay a benefit that is larger in real value than what retirees get today.

And we have had Coberly show that even under the Trustees projections... the ones that produce the "Five Trillion Dollar Unfunded Deficit!" ...the actual cost to each worker would be a raise of less than a dollar per week from time to time over the next seventy five years...

Then, we have the good people who want to "fix Social Security" by taxing the rich... either by raising the cap, or by dedicating the estate tax to pay for Social Security. These people do not know, or do not understand that this is exactly what FDR was careful NOT to do. He did not want Social Security to be "the dole" "so that no damn politician can take it away from them...."

And we have the eternal obfuscators who will come into any discussion and do everything they can to distract your attention from the basic fact:

Social Security is YOUR money. It doesn't cost "the government" a dime. Social Security is the ONLY way most workers have to save their own money, safe from inflation and market losses, so they can retire at a reasonable age. And the cost of keeping this insurance is so small no one would even notice it, if it wasn't for the Big Liars...

More here:

http://www.angrybearblog.com/2011/02/eyes-on-prize-social-security-summary.html#more

[CaliforniaPeggy]

1. Recommended.

Thank you for posting this, the truth.

[DJ13]

2. I dont consider raising the cap makes SS 'the dole'

In fact the cap has risen many times since FDR with no ill consequences save for the upper classes paying slightly more.

Perhaps raising it one last time to some compromise amount (say up to $200,000) and then indexing the cap to the CPI would put it into permanent solvency so it wont need to be raised for a long time is the answer.

[Hannah Bell]

3. The cap was set to cover 90% of wage income for a reason, and the reason was that covering *all*

wage income would indeed make it "the dole," as the top income tier would be covering the majority of the cost.

The cap is raised nearly every year to keep it at or near the 90% level. It is not about the "upper classes". The "upper classes" make most of their money from investment income, not wage income.

If you want to make the "upper classes" pay more (I agree), raise income & capital gains taxes & let them pay back the SS Trust Fund. Rescinding the Bush tax cuts on the top 2% will do it.

[Statistical]

6. The cap doesn't reflect 90% of wages as intended because the method for indexing the cap is flawed.

The cap was placed at 90% and it rises based on the change in MEDIAN wages. So if the poor wages, middle class, and rich class wages rise 5% then the cap rises 5%. The cap still represents 90% of wages.

What has happened over the last 20 years is wages for poor and middle class are stagnant and wages for rich have risen thus the cap keeps falling further behind. So if in say 2011 MEDIAN wages rise 1.2% but wages for the rich rise 4.8% then with current law the cap only goes up 1.2% and the % of wages covered slips further and further behind.

AARP (no enemy of SS) estimates that raising the cap to 90% and keeping it there (by basing the cap not on median wage increases but on the 90th % threshold) would close 23% of the unfunded gap. The CBO has similar numbers.

From CBO (note the changes are in % of GDP. Long run deficit of SS is roughly 0.6% of GDP)


Raising the cap to properly reflect 90% of wages close the 75 year funding gap between 23% (AARP study) and 33% (CBO analysis). Since SS intended for 90% of wages to be covered it makes no sense letting the cap continue to fall behind with an flawed metric (median wages) used to index the cap.

[Hannah Bell]

11. i have no problem with raising it to keep the 90% level. link for the source of your chart?

[Sherman A1]

4. I agree with you

my knee jerk reaction is to tax the rich and their corporations into the dirt and stomp on their useless carcasses, but I understand the logic that Hannah Bell presents.

That said we know that the rich have pretty much found "creative" ways to gather the benefits of the productivity gains over the last 30 years, leaving the worker bees with stagnation, so I think some adjustments to the wage cap are more than in order. That could come in a variety of means such as leaving the current cap in place with payments re-starting at say the $250K level and above (a donut hole so to speak) or adding in cap gains or something else.

[Statistical]

7. Donut hole is horrible political expedience.

Simply raise the cap to 90% of wages as it was originally intended.

The only reason to have a donut hole (as suggested by Obama) is to keep the "marginal rich" happy. It serves no other purpose whatsoever. It was proposed to avoid alienating voters who earn between $109K and $250K. Those voters also tend to be large campaign contributors. Lastly it gives Americans's hope. Most Americans will never make >$100K. They simply won't however many hope someday they will. People tend to dislike raising taxes on the band they can see themselves making someday. By "protecting the range between $109K and $250K it provides more a psychological boost. It only affects the "really rich" and thus is more palatable.

Donut hole is political expedience, nothing more.

There is no reason to complicate the system with a donut hole. Simply raise the cap to 90th % of wages. Done.

[Sherman A1]

10. Take a breath...it is just one idea among many

none of which will probably come to pass as it will just be more likely that we will see a cut in benefits by raising the retirement age or just cutting the numbers.

One could suggest exempting the first $30 to $50K as well to give relief to the lower wage earners (and yet that is simply just another idea, nothing more).

I think every dollar made should be subject to the SS tax (and as I said in my post, I would tax the wealthy into the dirt) , but that is just my thought.

This will not be settled on an internet discussion board.

[Starry Messenger]

5. k&r

[Enthusiast]

8. Thank you, Hannah Bell.

We seldom get to hear that social security is sound. This why I get so angry with President Obama. He could project his position on social security more forcefully. He is either solidly behind preserving it as it is, or, he is for making cuts and retirement age increases. But he remains non-committal.

[Autumn]

9. Big Liars... I like that. it describes

our current politicians to a T., Great article K/R

[Faryn Balyncd]

12. K and R

[FogerRox]

13. Its gonna take 27 yr recession to make Social Security go broke by 2037

When you read the SS Trustees report, they have 3 scenarios, 2 scenarios that show SS broke are based on extremely low GDP growth, the 3rd scenario uses fairly low GDP growth but shows SS is good thru 2085. As long as GDP averages 2.6% SS is good thru 2085

Hannah heres a diary I wrote about the Trustees Report...
http://www.dailykos.com/story/2010/12/17/929335/-Its-gonna-take-27-yr-recession-to-make-Social-Security-go-broke-by-2037

Heres the page that shows the scenario where SS is good thru 2085... . . . . . . READ IT FOR YOURSELF

http://www.ssa.gov/oact/TR/2010/IV_LRest.html#371491

KnR. thanks Hannah.