Last week Reuters sent out a fine piece by Emily Kaiser that helped readers understand what the Social Security fight is all about by giving them enough context and history to get the gist of the debate—if it can be called that—and moving beyond the one-sided framing that has characterized almost all of the reportage over the past fifteen months. The story went well beyond what is meant these days by “he said/ she said” balance.
Kaiser dug into the Social Security archives and brought into her narrative, beginning her story this way:
In 1983, a civil servant named Robert Ball worked a political miracle: he convinced Republican Ronald Reagan to raise taxes and Democrat Tip O’Neill to accept trims to Social Security.
The system was in crisis then—months away from being unable to pay benefits—when Ball came to the rescue, helping to fashion the compromise that resulted in a gradual increase in the age for full benefits from sixty-five to sixty-seven. Ball had spent most of his career in Social Security, serving as commissioner under three presidents and as a member of the Greenspan commission that got kudos for saving the program. He knew his stuff. “Everyone gives Alan Greenspan the credit, but Robert Ball was a great public servant and deserves much of the credit,” Obama’s budget director, Jack Lew, told Kaiser. “He’s one of my heroes.”
Kaiser brought many voices into her story, which gave it texture. After setting up the piece with historical context reaching back to the deliberations of the Greenspan Commission, establising the parallels with the Simpson-Bowles fiscal commission, and noting the lack of a Ball-like figure today, Kaiser tackled the rhetoric which has dominated most of the discussion around Social Security—whether a trust fund exists, or whether, as Nebraska senator Mike Johanns asserts, “it’s just paper.” She gave good space to the arguments of Eric Kingson and Nancy Altman, co-directors of Social Security Works, a group that opposes cutting benefits and privatizing the program. Kingson, who served on the staff of the Greenspan Commission, said Johanns’s “just paper” argument calls into question the value of every Treasury bond held by every pension fund, bank, or foreign government.
Kaiser also presented the arguments of Michael Tanner, a senior fellow at the libertarian Cato Institute, who told Reuters that there may be some social obligation to ensure seniors don’t fall into poverty, “but I don’t think there is any societal obligation to provide simple retirement benefits. That’s something that the private sector is fully capable of providing.” Kaiser missed here, failing to offer background on Tanner and Cato. Tanner directed Cato’s Project on Social Security Privatization in the mid-1990s. That project sent William Shipman, a principal at State Street Global Advisers, an asset management business that would benefit from Social Security privatization, and Jose Pinera, the ex-labor minister of Chile, which had privatized its retirement system, around the country preaching the virtues of privatization.
At the end, Kaiser kicked her story back to Ball. His son explained that his father would not have approved of the recommendations to cut benefits. A few months before he died in 2008, Ball wrote in The Washington Post: “What was right in 1983—-a balanced package of benefit cuts and tax increases as part, roughly half, of the final agreement—would be wrong today.”
Coincidentally, over the weekend I was cleaning files and came across a letter Ball had sent me in December 2004 when Social Security was also under attack. He wanted to share his proposal for bringing Social Security into balance over the next seventy-five years and for adding a new system of supplemental savings accounts to counter the privatization efforts of George W. Bush. Ball also included what he called “A note on the misleading use of accurate statistics.” Sounds kind of familiar, doesn’t it? He was talking about the shifting ratio of workers to retirees, a point Kaiser made in her piece, implying that was part of the problem. Said Ball:
The plain fact of the matter is that Social Security faces an eminently avoidable long-range funding shortfall, not an inevitable collapse brought about by unmanageable changes in the historic ratio of workers to beneficiaries. Those who advance that argument are using an accurate statistic to make a highly inaccurate charge.
Ball was always accessible to reporters looking for background and understanding. I was flattered to be on his mailing list. Journalists have heroes, too.
For more from Trudy Lieberman on Social Security and entitlement reform, click here.
Kingson, who served on the staff of the Greenspan Commission, said Johanns’s “just paper” argument calls into question the value of every Treasury bond held by every pension fund, bank, or foreign government.
Sorry, but that’s bullshit. A treasury bill is an asset the “special” bonds issued by the Social Security Administration are not. An asset is something that is transferable to anyone: real estate, stocks, bonds, a case of scotch, or a treasure bond. I could take an ordinary treasure bond and use it as collateral on a loan, redeem it at any financial institution anywhere in the world, or count it as an asset on a balance sheet. The special issue bonds held by the Social Security Administration are not assets! No one from the SSA can sell these bonds on the open market and, contrary to what Kingson claimed, they cannot be redeemed unless congress specifically authorizes it.
As far as Kaiser failing to offer background on Tanner and Cato .. why is that relevant when she didn’t offer any background on Social Security Works? You have two distinct and separate standards for sourcing in articles and it would seem that this has more to do with the ideological bent of them.
Its interesting to read what qualifies as a “good” Social Security story. Evidently a “good” story is one that reinforces this author’s point of view and prominently regurgitates the talking points of organizations like “Social Security Works” and downplays the talking points of place like Cato.
#1 Posted by Mike H, CJR on Mon 11 Apr 2011 at 01:54 PM
Mike wrote: Evidently a “good” story is one that reinforces this author’s point of view and prominently regurgitates the talking points of organizations like “Social Security Works” and downplays the talking points of place like Cato.
padikiller responds: You've got that right.
Trudy thinks "good" reporting is any single-sourced, single-point of view story that agrees with her liberal worldview.
It will be a snowy day in the Hot Place before you see her acknowledge the Reality with regard to Social Security funding - namely that the IOU's in the SS trust fund are not real assets as treasury bills are. That little slice of reality doesn't play well in her liberal arithmetic.
#2 Posted by padikiller, CJR on Mon 11 Apr 2011 at 03:47 PM
"The special issue bonds held by the Social Security Administration are not assets! No one from the SSA can sell these bonds on the open market and, contrary to what Kingson claimed, they cannot be redeemed unless congress specifically authorizes it." Mike H.
It would be useful if Mike H had a clue as to the workings of the Social Security Trust Funds. Yes, the notes held by the Trust Fund are Special Issue and cannot be marketed. They represent an obligation of the general government budget to the Trust Fund. They are an accounting mechanism. They account for the FICA funds, in excess of benefits paid ina given year, that were then used for other general budget purposes, like buying an F22 or waging war or paying the salaries of the Paul Ryan and his ilk. This is all spelled out clearly in the Social Securrity legislation. What Mike H and his cronies =want to imagine is irrelevent. The Trust Fund can only invest in America. It cannot put its excess resources from FICA revenue into any other investment vehicle because none is as safe as the USofA and none is as secure given that it is "In God We Trust" Thank goodness its not in Mike H or the idiot Padikiller that we need to trust. Nor for that matter any individual elected official with malicious intent and a liar's heart.
#3 Posted by Jack, CJR on Mon 11 Apr 2011 at 06:51 PM
Jack wrote: Yes, the notes held by the Trust Fund are Special Issue and cannot be marketed. They represent an obligation of the general government budget to the Trust Fund. They are an accounting mechanism. They account for the FICA funds, in excess of benefits paid ina given year, that were then used for other general budget purposes, like buying an F22 or waging war or paying the salaries of the Paul Ryan and his ilk...
padikiller responds: Somehow, Jack thinks I'm an idiot for agreeing with him.
The IOU's in the trust fund don't represent a capital investment in anything. They don't represent any equity in any real estate or tangible property. They don't represent an obligation from a profitable or money-making enterprise. They don't confer any rights to creditors and they don't confess any judgment in case of default. Instead, they represent a non-transferable, unassignable and entirely unenforceable obligation from a debt-ridden, money-losing government.
Any honest reporting should make this reality crystal clear.
#4 Posted by padikiller, CJR on Mon 11 Apr 2011 at 08:45 PM
Elsewhere on this page, CJR's robo-Left writers cite David Cay Johnson's piece on how the poor bear a higher marginal tax rate than the rich, without grasping very firmly the fantastically regressive nature of Social Security taxes, nor the explosion of state and local taxes (encouraged by "matching grants" from Washington, most obviously Medicare) in creating the problem they profess to deplore. In all of Lieberman's pieces extolling Social Security, I can't remember seeing a line acknowledging that FICA is the most regressive tax in the US, confronting that inconvenient with courage, and acknowledging that in the real world, there are real trade-offs.
#5 Posted by Mark Richard, CJR on Fri 15 Apr 2011 at 07:35 PM
Okay, the conservative parade had its fun, you guys can stop now.
Social Security was originally designed to be a pay-as-you-go program which paid out benefits in proportion to earners' contributions (therefore the FICA cap to limit maximum payouts). It functioned pretty well until the 1980's when different demographic trends emerged (swelling aged population) at the same time as inequality trends also began to surface (the deindustrialization of American labor and the leveling out of the once rising middle class) this meant that the percentages being collected from present laborers did not fund the obligations of retired ones.
That is when the conservatives (Reagan and Greenspan) got together and fixed the system by raising payroll taxes to account for the shifts in labor and demographics.
But Reagan and Greenspan faced another problem - they had cut taxes for the corporations and wealthy so deep that the country was bleeding money. The expected "supply side" gains did not materialize and they loathed the idea of putting taxes back where they found them, so they came up with another solution. They raised FICA taxes above what social security required to pay for the deficits created by their tax cut voodoonomics. They claimed it would be so that Social Security would have money to face the next demographic challenge (the boomers) and they used that money to patch up government deficits.
Conservatives created the regressive system while promising to save the progressive system of social security. Remember that. Those promises are real liabilities, money collected in past to be paid out in future. Remember that.
Now conservatives, after passing the Bush tax cuts, using conservative economic policies to create a few decades of zero wage growth for the lower 80%, cutting corporate tax revenue down to pennies, and blowing a government surplus in spite of the approaching baby boom retiree wave, want to renege on their promise made by Alan and Reagan in the 1980s.
Why? Because they know they can't keep all their tax cuts in place and honor their promises without massive borrowing. Something has got to give and they would rather it was the poor whom they never tire of giving the shaft to.
Liberals claim that the trust fund is real because it collected real revenues used to purchase real treasuries. Liberals know that the FICA is regressive and that it accounts for half of government revenue, but that it is money devoted to the non-productive population's care and that there aren't other humane alternatives as has been shown in our catfood past.
Conservatives want to raise regressive taxes to offset wealthy tax cuts and then cut the programs those regressive taxes pay for when their bills are due. They use progressive programs to engineer regressive outcomes.
The only economics these reverse robin hood jackasses know is bad faith economics.
#6 Posted by Thimbles, CJR on Fri 15 Apr 2011 at 09:14 PM
Interesting idea.
http://digbysblog.blogspot.com/2011/04/breaking-contract.html
#7 Posted by Thimbles, CJR on Fri 15 Apr 2011 at 09:15 PM
Thimbles:
Ten paragraphs, and I can't decipher your position here.
Are the IOU's in the trust fund real assets in your estimation, or not?
Because if you claim they are, I'd like to know why.
They have no instrinsic value. They aren't transferable, They aren't enforceable in any court. They confer no title to any property of any kind.
If these count as "assets" in your book, I'd like to see your reasoning.
#8 Posted by padikiller, CJR on Sat 16 Apr 2011 at 08:40 AM
PS Thimbles..
If these kinds of IOU's do count as "assets" for you, let me know...
I've got a bundle of them that I can sell you half price!
#9 Posted by padikiller, CJR on Sat 16 Apr 2011 at 08:45 AM
The assets in the trust fund represent real obligations conservatives created by mandating payroll tax increases in order to engineer a social security surplus. This is money working citizens have paid and are owed back.
That surplus was plugged into government securities that will be redeemed as necessary by the government of the United States just as any other treasury. Your point about "transferability" is not relevant.
http://www.ssa.gov/oact/progdata/fundFAQ.html
All government bonds and securities are bets that the caretakers of the world's largest economy will be able to extract revenues to pay the obligations owed by the security. Liberals did not create these obligations; your tax cuts for the wealthy / tax increases for the middle class, did. Once the government has created these obligations, it is bound to honor them or default on them under great penalty. You and your friends want to pretend the system is broken in order to "fix" the system in a way that protects your tax bracket, but the government still owes the money that was paid in exchange for promised benefits.
You keep trying to change the promises instead of accepting responsibility for the promises you conservatives made 30 years ago. Man up. Until things like the Bush tax cuts are repealed and and cheap loans from the treasury and federal reserve stop being made to your wall street friends (who use worthless houses based on fraudulent paperwork valued at mark to bubble market prices as collateral) I'm not interested in discussions about how bad the shape of Social Security is right now. Government seems to manage all the will and capital in the world when it comes to the priority of your rich friends, but went it comes to a basic safety net on which all of us rely, suddenly we're told to believe there's no money and no way to get more.
Until the caretakers of the world's largest economy declare bankruptcy, there is no reason to not expect them to paid out what they owe. And before America declares bankruptcy, there's a lot of other options it can exercise.
http://www.offthechartsblog.org/top-ten-tax-charts/
#10 Posted by Thimbles, CJR on Sat 16 Apr 2011 at 11:17 AM
Thimbles...
We're at the same place.. We both recognize that the trust fund securities are simply IOU's that lack any enforceability. And that in the event of default - the trust fund is screwed. You call these non-transferable, non-enforceable securities "assets" and I don't, but at least we both recognize them for what they are.
There are three ways I see the trust fund will be able to deal with the problem in the long terrm.
1. The government will learn to spend within its means, thus ensuring that fund will persist and grow in a healthy fashion - Chance of this happening? Nil, in my opinion.
2. The government will default amid chaos or revolution - Chance of this happening? Real, but slight.
3. The government will rely on inflation to render the "assets" of the trust fund worthless, thereby devaluing benefits. Chance of this happening? Nearly certain, in my estimation.
The special obligations in the trust fund pay low fixed interest rates established by law.. Congress can (and I believe, will) devalue the trust fund simply by keeping this rate well below inflation for a few years.
The old folks won't see a "default" and they may get raises once in a while, but that won't do them any good when gas costs $30 a gallon or when a Snickers bar costs $10.
#11 Posted by padikiller, CJR on Sat 16 Apr 2011 at 12:43 PM
Or, and I'm just being crazy here, people just might demand enough cuts in defense spending and enough increases in taxes (like the elimination of the Bush tax cuts) to pay the demanded year to year costs of the program, which will amount to a few hundred billion or so per year (pennies in a multi-trillion $$ economy), until the fund is exhausted and the pig in the snake is digested (boomers) and then Social Security will be converted back into a pay as you go system.
All of this consternation is over the fact that Social Security has been a revenue generator money maker for the government since 1982 and it's been very convenient for people (mainly conservatives) to use that revenue to offset their own pet expenses without demanding the revenue to cover them. That age is over - whoopdeedoo. Now it's time to man up and pay the expenses of the program while getting proper revenues to fund the government. No more really low corporate taxes, no more huge tax cuts for the rich, probably sometime down the road you're going to have to put in place a consumption tax.
These aren't big deals. These are the things grown ups in government do when they want a stable fiscal foundation for their governments.
Conservatives have been playing their little two santa claus games with the public for long enough:
http://www.commondreams.org/view/2009/01/26-0
It's time to grow the hell up.
#12 Posted by Thimbles, CJR on Sat 16 Apr 2011 at 06:34 PM
Thimbles:
Which alignment of the planets do you predict will have the citizenry lining up to see defense cuts coupled with tax increases?
I think we need to place this possibility in the "ain't gonna happen" bin...
In the end, I don't see anyway that the trust fund can persist unscathed...
#13 Posted by padikiller, CJR on Sat 16 Apr 2011 at 08:07 PM
You'll be amazed how quick the planets align when grandma and grandpa come to live with you for lack of better fiscal options and an ever growing delay before full benefits kick in.
#14 Posted by Thimbles, CJR on Sat 16 Apr 2011 at 09:02 PM
padikiller,
You have opinions without any valid support. All Treasury notes have the same intrinsic value, that the USofA has promised to repay that debt. Do you hold any T-Bills? There are about $14Trillion of such debt outstanding. Only a small portion of that is held by the Trust Fund. Virtually every pension fund and bond fund holds such debt. So too do many other sovereign nations, such as China, Japan, Korea, Britain etc. They trust that the US government will repay that debt. The Social Security Trust Fund does so by legislative requirement. Your trite denials of the government's intent to repay its legitimate debt holds no water. It is your opinion with no basis in fact.
"Which alignment of the planets do you predict will have the citizenry lining up to see defense cuts coupled with tax increases?"
Another false assumption on your part. Only that very small portion of the citizenry that has enjoyed the greatest share of the Bush tax holiday for a decade have any resistance to a tax increase. That's natural enough since it is their share of the tax burden that has been lightest for the past ten years and is the only sector of income earners with any reasonable amount of income that has escaped taxation. Military spending is probably the one most favored target of the general public in regards to spending cuts. it is only our current elected mis-representatives, who have lied through their teeth top gain electoral victory, that stand between the preferences of the vast majority and its enactment into law.
#15 Posted by Jack, CJR on Sat 16 Apr 2011 at 09:08 PM
Are you guys on crack?
First of all.. An "asset" is defined as something that can be exchanged..
The IOU's in the Trust Fund do not meet this definition, but playing word games won't accomplish anything. We all agree that they amount to nothing more than an unenforceable promise. The question is how, or if, these obligations will be met.
Secondly... Defense spending has risen every year for the last umpteen years and there is nothing happening on the global scene to indicate that it will be reduced any time soon. Indeed, now that Obama now has us engaged in a third war (er, I mean "kinetic action"), spending can only increase, at least for the foreseeable future.
Most importantly... If you eliminated the defense budget entirely... We would still have a deficit greater than any deficit under any previous administration (a TRILLION dollar one, as a matter of fact).
You need to lay off the crack pipes and rethink the problem a little, fellas.
#16 Posted by padikiller, CJR on Sun 17 Apr 2011 at 03:34 AM