Campaign Desk

11:10 AM - June 2, 2010

Another Take on the Times’s Memphis Piece

And the Social Security connection

By Trudy Lieberman

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Last night c-span aired a debate among candidates for the Nevada senate seat where this issue was discussed in terms of expanding the retirement age but not even considering the possibility of lifting the wage cap on Social Security payroll taxes (http://www.c-spanvideo.org/program/id/224926). I did not watch the full debate, I wasn't even interested in c-span that night, it was just a channel flip. But I picked up on a few confusing concepts that made me wonder about c-span's own possible contributions to the confuse-America campaign. It was an election so the candidates seemed to be debating in buzz words more than about the basic concepts of the controversies around Social Security. For example one candidate loudly proclaimed, "There is no lock box!" And there seemed to be no dissent among the candidates about the wage cap, just a tone of acceptance about that position. I may have missed it so I don't know if the moderator laid out the issues by explaining the structure of SS or briefing the audience about differing interpretations about the "problem" or the solutions. But to me, who just landed on the program midway, it all sounded alarming.

So my two cents worth about this is that people are very confused about many things but particularly "the lock box" and the concept of SS as a ponzi scheme (I did not hear ponzi scheme in the debate but I had already heard it a few times over the last few weeks). Also, it was a shock for me a few yrs ago to learn about the wage cap when Bush tried to privatize SS.

So I just want to mention that people really do not understand. If your earnings are always below the wage cap, then how would you even know that a cap exists at all? And the lock-box thing mystified me for a long time but I now perceive it to be savings in the form of United States Treasury bills. So when I hear "There is no lock box" I hear "There are no treasury bills" (or bonds or whatever) and that just seems wrong, but maybe I'm wrong. And I used to feel anxiety about the ponzi scheme because of the baby boomers but then I learned that the SS tax was raised in anticipation of the boomers. So now I perceive that the boomers should not even be an issue at all, because we prepared for their impact, and that's the reason why the trust fund is solvent until 2030-something and that the nation's real financial crisis is coming from healthcare and the wars. But individuals do face a genuine personal crisis about retirement but that is because of the unreliability of 401Ks and the loss of traditional pensions, which forces a more intense reliance on SS for which the program was never intended. I have also heard that the wage cap causes SS to be a very regressive form of American taxation and to me that is the real issue. But what do I know.

So. Just as sports, tv news, tabloid shows, and even home-decorating shows, always come back from commercials with repeated recaps about simple things that just happened, it might be worth reminding audiences about the very basic concepts about Social Security. I think this can be done neutrally but I also think that since it's a very charged ideological issue there will be few attempts to brief the public rationally and fairly. But if they were to try, the public needs better understanding at least of the lock box, ponzi schemes, treasury bills, wage caps, and why SS is not a welfare program (right, it's not?).

#1 Posted by MB, CJR on Wed 2 Jun 2010 at 05:18 PM

Good points all. We'll try to do in the next several weeks.

#2 Posted by trudy lieberman, CJR on Wed 2 Jun 2010 at 07:21 PM

"lock box", "ponzi scheme", "worthless IOUs", are common lexicons in reference to the Social Security Trust fund. "The money has already been spent!" Duh - all borrowing works this way. Its like saying your bank is running a ponzi scheme because they spent all of your deposits. The next time a politician uses one of these terms, just ask for all of his cash - after all they are only notes issued and backed by the Treasury - which of course means they are just "worthless IOUs"!

#3 Posted by DB, CJR on Wed 2 Jun 2010 at 11:50 PM

Social Security was established with a retirement age of 65 when average life expectancy was only a few years beyond 65. It has increased significantly since then and the birth rate has declined dramatically since then. The result is that a smaller number of contributors (relative to beneficiaries) and, and will be, funding benefits over a longer period of time. The age for full benefits has increased only slightly since inception (the Moynihan "fix") and the result is a system slowly, but inexorably, heading for financial disaster. We can raise the tax rate, raise the wage cap (but remember that wage cap is currently tied to benefits), raise the retirement age, lower benefits, change the cost of living escalator calculation, or consider investing the system's revenues in potentially higher return assets (the Bush privatization/partial privatization) solution, but we must eventually do something very major and treating social security as the "third rail" of American politics only will worsen the problem when we're forced to address it.

#4 Posted by jerry, CJR on Thu 3 Jun 2010 at 02:31 PM

The crash, which is only half done (if we're lucky), has really opened the eyes of the self-described "middle class." Investments thought to be secure--stocks, real estate--were shown to be anything but secure. Yet while regular idiots and self-reliant strivers have been suddenly impoverished, the million-bucks-a-day crowd has continued to prosper.

I cannot understand why people are not angrier. Or if they ARE angrier, why there is no significant move to charge criminally those responsible. They are not hard to identify.

Once they are in the dock, the financial system can be overhauled, rather than band-aided, as has been proposed, for these criminals' benefit.

From there it's a downhill run to stop the wars and reform the military budget (reduce it by thirds, in several steps). Use that $800b in annual savings to redeploy our people, and our capital, towards the things we need to sustain society. The idea that an engineer in his 50s can't find work in his field is as scandalous as the trend, over the past decade, of employing perfectly servicable physicists at useless and/or predatory hedge funds.

But the age at which one may collect Social Security should be raised (along with the wage cap). The idea that SS (and its "disability" sister) can or should be used to plug the wage gap is small-time, crisis thinking, and is ultimately unsupportable. The fixes we need are much more sweeping.

#5 Posted by edward ericson, CJR on Fri 4 Jun 2010 at 11:49 AM