Merry Christmas and Happy Festivus

JollyBuddah is just a blog alias. Ain’t no biggie. If pragmatism is dishonest then I plead guilty. If I could wave a magic wand and eliminate all dishonest politicians that would essentially abolish government. In the meantime, I accept the government set up by our founders for the precise reason that we will never have a “government of angels”.

I have no illusions whatsoever about electing the “right” politicians. I would like to see some sort of parliamentary type reforms that would give us a political system more like Canada’s, where four to six political parties can their candidates elected to office. My rationale is not for particular policy preferences, but because I believe it would result in a diffusion of power, which would be good for citizens and bad for political power brokers.

Your suggestion that S.S. benefits be means tested has been attempted, and as I mentioned in a previous post:

To answer your specific question Micah, the program is not means tested because that would erode the broadspread political support that S.S. has in the general population. That is why Ted Kennedy is the most adamant opponent to means testing. The supplemental retirement portion of S.S. is also responsible for it’s broad support in the general public.

I suspect that this idea will continue to be blocked by a majority of Democrats. There is a group of Democrats that Josh Marshall over at Talking Points Memo is calling the [Fainthearted Faction http://www.willwilkinson.net/flybottle/?p=593#comment-3167 Gary - or JollyBuddah - or whatever you decide to change your name to next, I wasn't criticising your influence but your personal choice to engage in dishonesty. I know you're not that influencial - if you were, you probably wouldn't be talking policy wonkery with me on a Friday night. And you were indeed honest about the true nature of Social Security, but then you proceeded to endorse the current deceptive system as it exists. That is not honest. I'm afraid your criticism of my plan suffers from the same flaw of many statist utopians (utopians because they recognize that government is rife with failure and corruption while at the same time claim that if we could just elect the right politicians or implement the right policy, things would be all better and government would work again, even though its never worked as planned in the past) - an unwillingness to address my arguments directly, but to instead attack empty strawmen. My proposal is significantly different from the Cato proposal in that I propose means testing, thereby excluding a large portion of the population from withdrawing benefits. Now, you can claim that this plan "doesn't intersect with the real world" because it might be politically unpopular among those who have been lied to for their entire lives about the nature of Social Security. That much is true, and I agree, my proposal is not likely to be accepted any time soon. (Then again, people said the same thing about Cato's and now look how far they've gotten.) But what you cannot claim is that my proposal would exacerbate the unfunded liability problem. The plain fact is, it wouldn't, because it writes off the government's liability to pay the wealthy and much of the middle class completely, by means testing them out of the picture. This satisfies both a libertarian and an egalitarian notion of justice, and should satisfy nearly everyone concerned, except for those who wish to force people to save for savings sake, and those who are more concerned with winning elections than doing what they know is right. The fundamental problem is that a free market without a government is a non-sequitur. It can't happen. Of course, despite the fact that I am indeed a market anarchist, my proposed solution is far from my desired goal. It is not a solution devoid of government, and it preserves the stated function of Social Security that your yourself argued for - namely, that the program should be a considered a social welfare program and not a retirement program. And that is precisely what I have proposed. Now you are trying to contradict yourself because you don't like where your own logic leads. Too bad. Pick a side and stick with it. Don't dilly dally. Money will never flow from the rich to the poor. In the real world the rich benefit from government welfare just as much if not more than poor people and always will. Incidentally, I agree with this, which is yet another reason to oppose government in all of its forms, because it is always the rich and powerful who rule over the poor and politically insignificant. But the least self-professed Democrats and other leftists can do is stop supporting the very policies they recognize as regressive. You can't seem to bring yourself to do that, despite your anti-market credentials. Strange. We will never stop corporate welfare, which to the best of my knowledge does not go to poor people. The best we can do is slow it down. Agreed. But starving the beast is a utopian pipe dream. It must be killed entirely. Gary – or JollyBuddah – or whatever you decide to change your name to next,

Trust fund assets are invested in government bonds: Social Security trust fund assets, currently worth over $1.5 trillion, are invested in special, non-tradable government bonds. Each year the U.S. Treasury issues these government bonds, up to the amount of the Social Security trust fund surplus, to be added to the account. The bonds earn an interest rate comparable to the market interest rate for tradable government bonds. During 2003, the effective annual interest rate earned on all bonds held by the trust funds was roughly 6.0%.

Social Security is not going broke …

LLOYD: Okay, here’s the plan: We borrow a few bucks — just a small loan — from the briefcase, and we check into a cheap motel.

HARRY: Sounds good.

LLOYD: And we’ll keep track of the money we spend with IOUs.

HARRY: We’ll be meticulous – right down to the last penny.

LLOYD: That way, whatever we borrow we can pay back.

HARRY: Absolutely. We’re good for it.

LLOYD: You know, as soon as we get jobs.

HARRY: It’ll come right out of our first paycheck.

Taken from my post:

Just when I thought you couldn’t get any dumber, you go and do something like this… and totally redeem yourself!

See if this blog post will help. I just posted it a few hours ago.

I can hardly be held responsible for politicians lying to the American people. I’m afraid it has become a hallowed practice in both parties.

Sure you can be held responsible for the lies because you continue to support the same dishonest policy throughout the rest of your post. You realize that hiding the true nature of Social Security is the only way that it can continue to receive political support. If people realized what a rip-off the program really is, and how much more they could earn if they could keep their own hard-earned money instead of being coerced into handing it over to government planners for “safekeeping,” how many people do you think would continue to support the system? If you think the system is such a great deal, and so popular with the masses, why not make participation voluntary and let people exit if they want?

The rich may get a slightly better deal than poor people and African American males. That’s life.

No, that’s a direct result of the system that you support. Under my type of proposal, that would no longer be the case. People would own what they earn rather than having it taken from them only to be partially given back later (and only if they live long enough), with more money flowing from the poor to the rich than the other way around.

Don’t apologize or excuse what you consider unjust – oppose it.

First, I would protect Social Security from the grubby hands of politicians in both parties with a lockbox. Social Security problem solved.

Here’s a better idea: Why not protect the right of people to own property and do with it as they see fit from the grubby hands of politicians in both parties? Social Security problem solved.

The advantage of my plan is that it focuses on actual people and what benefits them, rather than what benefits a government program that doesn’t.

The “trust fund” is not a metal box like Fort Knox where bars of gold boullion are stored, but it is not a meaningless construct. Our government, under both Democratic and Republican administrations, has taken the FICA payments of wage earners and used it for other nefarious purposes. In exchange, our government has issued bonds, which are a promise of future redemption based on the full faith and credit of the U.S. government.

The bonds or treasury notes held in trust by the Social Security trustees are just as valid as treasury notes held by individuals or foreign governments. They are a promise to pay even though they are not hard assets.

President Clinton proposed investing 15% of the S.S. reserves in the stock market. Republicans opposed Clinton’s idea because they didn’t want him getting credit for making S.S. completely solvent forever. The proposal itself suggests that S.S. trust funds are negotiable bonds that could me offered on the market. Although I have not seen any discussion of the actual type of bonds the trustees hold, I assume that is because they are identical to any other government bond or treasury note.

If Bush and the Republicans wanted to, they could take our FICA payments and invest them in the market just as Clinton suggested. As Daniel Gross points out in his Slate Article linked text The Unlocked Box: How Bush is plundering Social Security to close the deficit the S.S. surplus will be close to a trillion dollars over the next ten years.

Clinton’s proposal to invest 15% of the reserves in the market, and my proposal to invest current FICA payments in a safe market fund basket, are both alternate possibilities to Bush’s decision to spend those payments. That means the Bush administration is choosing to borrow one trillion dollars from the S.S. trust fund, and the U.S. government is obligated to repay it on his behalf.

Micha: I’m afraid your S.S. proposal is as vague as President Bush’s proposal. I searched through the thread and didn’t see a real proposal, just suggestions.

So in other words, let all of us who know better lie to the American people in order to get them to support a program that really is nothing more than welfare for the elderly, whereas we will make them believe they’re actually saving their money in a retirement investment program so that they will support it.

I can hardly be held responsible for politicians lying to the American people. I’m afraid it has become a hallowed practice in both parties. Social Security is not just a welfare program, it is the largest and most successful welfare program ever devised by man. The supplemental retirement feature is a brilliant feature that gives the program widespread political support.

Or as Orwell put it so well:

“In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia.”

A perfect description of our last election.

Payroll taxes represent a larger portion of a middle to lower class worker’s income than an upper class worker’s income. Further, the poor, who tend to have lesser access to health care compared to the rich tend to live shorter lives and thus collect less. The same is true regarding African American males.

Social Security is somewhat regressive, but not onerously so. The truth is it’s a pretty good deal for everybody. Administrative costs are extraordinarily low and benefits are quite reasonable for the price. The rich may get a slightly better deal than poor people and African American males. That’s life. I don’t know any aspect of modern life where that’s not a reasonably accurate generality. The rich get richer and the poor get poorer, especially under a Bush administration. That’s hardly a unique criticism of S.S. that justifies any particular course of action.

Even without knowing what your proposal is Micha, I am partial to my own proposal of Social Security Plus. First, I would protect Social Security from the grubby hands of politicians in both parties with a lockbox. Social Security problem solved.

Second, I would implement a Thrift Savings Plan linked text that is also suggested by The National Center for Policy Analysis linked text

For more details, I have a rather long diary at MyDD linked text that I believe would be quite rude to post in its entirety here. Since it is not my blog, but rather a diary I don’t believe this is whoreblogging, although I’ve never been exactly sure what that is.

In anticipation of accusations that this is another big spending liberal welfare program and we can’t afford it, please visit this link linked text comparing the unfunded S.S. liability to Bush deficits.

My proposal for Social Security Plus will cost far less than extending Bush’s tax cuts. It dramatically raises the appallingly low savings rate of Americans, which is probably the single most effective step we could take to strengthen the U.S. economy. Finally, it is a simple choice between tax cuts for the top 10% or a genuine retirement system for the bottom 90%. I report, you decide.

To answer your specific question Micah, the program is not means tested because that would erode the broadspread political support that S.S. has in the general population.

So in other words, let all of us who know better lie to the American people in order to get them to support a program that really is nothing more than welfare for the elderly, whereas we will make them believe they’re actually saving their money in a retirement investment program so that they will support it.

An accurate description of politics in general, I might add, consisting of little more than deceit and theft perpetrated on the ignorant.

Or as Orwell put it so well:

“In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia.”

I’m not sure what you mean by your suggestion that poor people pay into the program to benefit the wealthy. Everybody pays 6.2% on the first $87,000 of their income into S.S., which is matched by their employer.

Payroll taxes represent a larger portion of a middle to lower class worker’s income than an upper class worker’s income. Further, the poor, who tend to have lesser access to health care compared to the rich tend to live shorter lives and thus collect less. The same is true regarding African American males.

Some complain that S.S. payments go to wealthy retirees who do not need it, but the theory is that they paid into it at the same rate as everybody else so they deserve the benefit.

But this theory is obviously false. As you yourself just stated, SS is a welfare program, not a retirement program.

Let me ask you as an honest individual and not as a political strategist: What objections would you have to my proposed reforms compared to the current system?

Then it’s a DAMN EXPENSIVE one, absorbing 1/8 of most people’s income (yes, the worker pays ALL OF the employer’s “contribution,” even if he doesn’t understand that, or ever touch the money).

There is no SS “Trust Fund.” Or rather, there is, but it means literally nothing.

Let’s start at the beginning. Exactly what is a bond? A bond is a promise of one entity to pay an amount of money to another on a specific date in the future, typically with interest. Sometimes it’s backed by collateral, sometimes not. Right?

So the SS “Trust Fund,” a *part of the Federal Government*, has some “extra” money laying around after honoring current obligations. It “loans it” to another *part of the Federal Government* and gets some bonds, which it lays aside. OK, great.

Now, when the time comes in 2018 or whenever, the “Trust Fund,” *a part of the Federal Government*, send the bonds to another *part of the Federal Government* and asks for the cash.

But the latter HAS NO CASH, and no assets, other than the ability to borrow or extract the money from citizens. So it has to tax somebody currently, or borrow from yet a third party, to fulfill the obligation.

It’s not like the money originally loaned goes into constructing a building or something, creating an asset which throws off income.

It’s exactly the same as if I “funded” my retirement by writing myself an IOU with my right hand and put it in my left pocket. $1,000,000 or $5,000,000 or $1,000,000,000,000, it makes no difference. It MEANS NOTHING.

Or, I could loan money to my wife, and she could pay me interest every year and eventually return me the principal. But if we always put all our assets and income in the same pot, the transactions don’t MEAN ANYTHING.

By analogy, the “Trust Fund” could therefore be $1 or $1,000,000,000,000,000,000 . It is an utterly meaningless construct.

Let’s start at the beginning. Exactly what is a bond? A bond is a promise of one entity to pay an amount of money to another on a specific date in the future, typically with interest. Sometimes it’s backed by collateral, sometimes not. Right?

So the SS “Trust Fund,” a *part of the Federal Government*, has some “extra” money laying around after honoring current obligations. It “loans it” to another *part of the Federal Government* and gets some bonds, which it lays aside. OK, great.

Now, when the time comes in 2018 or whenever, the “Trust Fund,” *a part of the Federal Government*, send the bonds to another *part of the Federal Government* and asks for the cash.

But the latter HAS NO CASH, and no assets, other than the ability to borrow or extract the money from citizens. So it has to tax somebody currently, or borrow from yet a third party, to fulfill the obligation.

It’s not like the money originally loaned goes into constructing a building or something, creating an asset which throws off income.

It’s exactly the same as if I “funded” my retirement by writing myself an IOU with my right hand and put it in my left pocket. $1,000,000 or $5,000,000 or $1,000,000,000,000, it makes no difference. It MEANS NOTHING.

Or to try it another way, I could loan money to my wife, and she could pay me interest every year and eventually return me the principal. But if we always put all our assets and income in the same pot, the transactions don’t MEAN ANYTHING.

By analogy, the “Trust Fund” could therefore be $1 or $1,000,000,000,000,000,000 . It is an utterly meaningless construct.

TITLE I- GRANTS TO STATES FOR OLD-AGE ASSISTANCE
TITLE III- GRANTS TO STATES FOR UNEMPLOYMENT COMPENSATION ADMINISTRATION
TITLE IV- GRANTS TO STATES FOR AID TO DEPENDENT CHILDREN
TITLE V- GRANTS TO STATES FOR MATERNAL AND CHILD WELFARE
PART 1- MATERNAL AND CHILD HEALTH SERVICES
PART 2- SERVICES FOR CRIPPLED CHILDREN
PART 3- CHILD WELFARE SERVICES
PART 4- VOCATIONAL REHABILITATION

In it’s initial form, and to a very large degree today, S.S. was an insurance program to provide a modest level of support for people who were incapable of providing for themselves. It is a welfare program, not an investment program. It has been modified over the years, and most people think of it as a source of supplemental retirement income because (a) the majority of people are fortunate enough that they never need the disability benefits portion of the program (just as the majority of people do not ever receive the benefit of any insurance policy), and (b) for their own reasons the Democratic party, Republican party and the media have all allowed the public to believe myths about the program.

To answer your specific question Micah, the program is not means tested because that would erode the broadspread political support that S.S. has in the general population. That is why Ted Kennedy is the most adamant opponent to means testing. The supplemental retirement portion of S.S. is also responsible for it’s broad support in the general public.

I’m not sure what you mean by your suggestion that poor people pay into the program to benefit the wealthy. Everybody pays 6.2% on the first $87,000 of their income into S.S., which is matched by their employer. Some complain that S.S. payments go to wealthy retirees who do not need it, but the theory is that they paid into it at the same rate as everybody else so they deserve the benefit.

Bernard: The Social Security surplus over the next ten years will be approximately $1 trillion. In about 2018, S.S. benefits will exceed FICA payments into the program by a small, but increasing amount. In 2042, according to projections by S.S. actuaries, the “trust fund” will run out and S.S. will be “bankrupt” because the program will only be able to pay 75% of the S.S. obligation promised to retirees.

First, nobody puts much faith in 40 year forecasts for economic growth. The question is why believe there is a crisis based on a forecast that uses a 1.6% base growth rate? If we have 2% economic growth over 40 years, S.S. continues to run a surplus. Problem solved.

If the U.S. actually experiences 1.6% economic growth over the next 40 years, S.S. is the least of our problems. Try plugging in a 1.6% growth rate to the CBO deficit projections over the next ten years and see what happens to our budget deficit. Of course, if the CBO projection of 2.5% over the next ten years is accurate, then we would need to experience .6% growth over a subsequent ten year period to balance out to 1.6%. Once again, if that happens, S.S. is the least of our problems.

For a comparison of S.S. and Medicare unfunded liability problems Kevin Drum provides an excellent graphic: linked text That is why any analysis that combines S.S. and Medicare into a single program is misleading. Medicare is in far worse shape than S.S.

Another great graphic from Kevin over at Political Animal shows that in the last ten years the so called S.S. crisis has actually been getting pushed furthur into the future. linked text

Once again, if we have even a 2% growth rate over the next forty years, which is low by historical standards, there is absolutely no S.S. crisis. Maybe we should fix Medicare, which is broken, and in worse shape since Bush and the Republicans passed their Prescription Drug Benefit program for the pharmaceutical companies.

You claim that social security is ameliorating the wider fiscal crisis claimed by the paper Will references because it takes in more than it’s putting out. If you read the measure they use again, “Fiscal Imbalance”, you’ll see that the calculation is based both on present and projected future cash flows. The long-term obligations tied to the current social security setup are a significant factor.

Secondly, where did Will ‘concede there is no crisis’? You appear to have read between the lines and found something which wasn’t there.

If investment for retirement is not its purpose, why structure the system as it is currently structured? Why not means test benefits, restricting them only to truly needy elderly, and fund it from general revenues, as other welfare programs are structured? Why make poor workers pay a large percentage of their income so that the wealthy (who tend to live longer) can reap the benefits?