Reply #126: Ars longa, vita brevis est

[davekriss]

Life is so short yet the right-wing memes still come flying in. O well, here I go again...

Social Security is fiscally sound, it is the general budget that is in crisis. And why is the general budget in crisis? Two GWB tax cuts that primarily benefitted the top 1%, cost $2 trillion by 2010. One immoral, illegal, and unnecessary war in Iraq, cost $1.2 trillion. One unregulated economy so we see again the collapse that follows the excesses of the Guilded Age and Roaring Twenties, costs $10 trillion in evaporated wealth. Shock Doctrined, post-collapse benefits to the financial elites on Wall Street, cost $700 billion plus $8 trillion in taxpayer-backed loans by the Federal Reserve. Take all these and more and presto we have a crisis in the general budget.

Social Security meanwhile continues yearly to generate a surplus. The surplus is invested in Special U.S. Treasury Bonds. The yearly surplus was Greenspan's idea in 1983, so we've been building this surplus for many years. It will reach $2 trillion at its peak. That surplus will pay for full benefits until, depending on which conservative economic assumptions you adopt, either 2042, 2052, or through the entire planning period ending in 2075.

If GDP grows at 1.8% over this period (as opposed to its historical average of nearly 3%), then the social security "crisis" begins in 2042; if GDP creeps up to 2.5%, then the crisis begins in 2052; if it creeps up to its historical average, then there is no crisis and in fact benefits can be increased along the way.

So all this talk about reining in "entitlement spending" (as if, by inserting the word "entitlement" ahead of "spending" it is somehow morally diminished) is a ruse, a shell game played by elites to save their financial position on the backs of everyday Americans. Don't fall for it! If too many younger Americans drink the kool-aid, then yes indeed they will steal the trust fund for their own benefit.

There are problems once we need to start redeeming bonds from the trust fund to meet payment obligations. If you take that $2 trillion surplus, ignore the 2% interest paid on the bonds, and assume straight line redemptions, then if you assume a GDP of 1.8% this will require raising an additional $80 billion in general revenue each year. If you assume a GDP of 2.5%, then only $60 billion will be required. Not much in a general budget topping $2 trillio yearly.

Cutting benefits as a way to trim this incremental commitment amounts to defaulting on the Special U.S. Treasury Bonds purchased all these years with real cash extracted from our paychecks. These Bonds are just as real as the Treasury Bonds sold to the Chinese and Japaneses, to the Royal Family in Saudi Arabia, to the top 1% of Americans who own 68% of all the Bonds sold. Why default on Bonds held in trust for everyday American people and not those held by financial elites around the world? The answer is because it is easy. We rarely bite. We drink the kool-aid and settle into our comfy sofas to watch the latest episodes of "reality" TV. We are anesthesized into inaction, hypnotized into dry sponges, asleep with eyes open, exceedingly ready to absorb right-wing memes that enable the already advantaged to take further advantage.

Perhaps instead we insist that our government raise the $60 - $80 billion in additional funds -- STARTING in 2019 -- by raising the top marhinal FIT rate to 50%, by reducing the exemption of the estate tax to $1 million, by reining in some of the 750+ military garrisons we maintain around the world. We spend $650+ billion on the military, HSA, and myriad security programs (e.g., the CIA, DIA, etc.). Can $60 to $80 billion starting in 2019 be found somewhere in that fat budget?

So I don't believe for a second that we can't continue Social Security as now planned. You shouldn't believe otherwise, too. It has been and should be the third rail in American politics, even for newly elected Democratic Presidents.

The demographic challenges by class and raise are other matters (interesting to me because I haven't thought of it that way) and tell me we should also insist on a reduction of the retirement age, not elimination of the program.