TM: Yes, there are two groups, broadly speaking. One group includes people who believe in a libertarian role for government. Government should be limited to things like enforcing contracts, maintaining roads and national defense. The second group believes in a more expansive role for government, but [one that is] limited nonetheless. They believe the government’s role in social policy should be limited to helping those who experience misfortune. This is the safety net group that believes in testing a peoples’ resources and assets before they can qualify for help.
TL: What’s the case for raising the retirement age?
TM: The obvious positive argument is the shift in longevity for some people. But that doesn’t mean raising the age is the appropriate response to Social Security’s fiscal future. There are other ways to adjust benefits and revenues. Longevity gains are unequally distributed. Americans with lower incomes benefit less. This solution doesn’t address one of the serious problems in the U.S.—the different ages at which workers become retired. Manual laborers leave the workforce far earlier than college professors. If anything, the benefit needs augmentation rather than reduction. And raising the retirement age is a benefit reduction.
TL: How does the idea of raising the retirement age fit in with the movement among European countries to increase their retirement ages?
TM: You need to look at this in context. The age for full benefits in Europe is lower than in the U.S. Many countries lowered their retirement ages to deal with persistent unemployment, and their benefits are typically more generous. We haven’t had that generosity in the first place. Small decreases in benefit levels in generous systems abroad is a poor object of comparison with the more modest level of Social Security pensions in the U.S.
TL: What do you say to young people who believe that Social Security won’t be there for them?
TM: They are being misled. If the proportion of Americans living beyond sixty-five is rising, as is the case, and if their voting strength will increase, as will be the case, why should their promised pensions be endangered? Put another way, if Social Security is a sacred cow, why will it be sacrificed when its worshippers are more numerous?
Trudy, your talking points on Social Security are getting tired and played out: Social Security is fiscally sound, the “trust fund” will save it, benefit cuts will force the elderly to eat cat food and conservatives are hell bent on destroying Social Security because it works. Lather, rinse, dry, and repeat as needed. Little surprise that you brought an expert, Ted Marmor, to buttress this ridiculous line of argument.
As in your previous article, however, this one has some rather glaring errors that are just too substantive to not address.
Social Security in 2010 reduces the deficit from what it otherwise would be; more FICA taxes are taken in than pension benefits paid out. But then revenues will be less than taxes paid until 2016. But that doesn’t mean people won’t get their benefits.
Uhh, that’s not going to happen in 2016, its happening today. http://www.nytimes.com/2010/03/25/business/economy/25social.html?_r=1
#1 Posted by Mike H, CJR on Wed 21 Jul 2010 at 07:28 PM
Pollyannish views to support a political point of view. As the professor alludes to, but glosses over, people are living longer increasing the amount of benefits that have to be paid out if the retirement age isn't raised. As neither he or Trudy mention, the birth rate is down so fewer workers (in relative terms) will be contributing to the system to fund payments to the retired. It is correct that this doesn't become an actual funding issue for quite some time, but waiting for the crisis to hit isn't exactly good policy. At some point (assuming longevity doesn't suddenly deteriorate), benefits will have to be cut in some fashion (such as delaying the retirement age or means testing, or absolute cuts) or taxes will have to be raised.
#2 Posted by Jerry, CJR on Wed 21 Jul 2010 at 08:33 PM
I just re-read your Nytimes article and a couple of things popped out. First, the report cited by the times is not from the Social Security Agency. Here is the trustee report:
http://www.socialsecurity.gov/OACT/TRSUM/
it says "First year outgo exceeds income excluding interest" is 2017.
Your NYtimes articel references this link:
http://www.cbo.gov/budget/factsheets/2010b/OASDI-TrustFunds.pdf
Which says "the system will pay out more in benefits than it receives in payroll taxes," but that's not all it says.
It has other revenues which exceed total outgo until, golly gee, past the time frame of the cbo report ending in 2020. You only have a small shortfall if you exclude interest from the trust fund surplus. Mind you, that's not the same as tapping the surplus, that's just including the interest. The biggest shortfall? In 2010 the shortfall will be 28 billion because of the recession, which translates into a 91 billion surplus if you include trust fund interest.
From 2016 to 2020 there are shortfalls. 2018 -36 billion, 2019 -57 billion, 2020 -78 billion.
Including interest those translate into surpluses of 124 billion, 113 billion, and 102 billion respectively.
These are using your cbo numbers.
So where is your crisis now? At worst, excluding trust surplus income, you have -236 billion more paid out than take in by 2020. Including that income, by your numbers, you have a 1.4 trillion surplus.
Who's got empty talking points again?
#3 Posted by Thimbles, CJR on Wed 21 Jul 2010 at 09:13 PM
Oh Thimbles! What am I going to do with you!
It has other revenues which exceed total outgo until, golly gee, past the time frame of the cbo report ending in 2020.
Herds of unicorns don’t fly over a clover filled pasture in Pennsylvania and defecate their magically laced manure to fertilize lush orchards of money trees. This “other revenue” is in the form of interest payments on bonds issued to the federal government. In other words, its money that comes from general revenues to pay for any shortfalls in Social Security. Just like we have now, not in 2017 or 2020.
These interest payments are not “taxes paid” as was said in the article.
Our “crisis now” is that there is no extra money in the discretionary budget to cover these interest repayments to the Social Security administration.
But I wont wait for Trudy to mention that …. just doesn’t jive with the story she wants to write.
#4 Posted by Mike H, CJR on Wed 21 Jul 2010 at 09:44 PM
The money exists to cover the interest payments, the Bush tax cuts will expire and there are plenty of revenues to be gotten in a 14 trillion dollar economy if the will to do so is applied. Even if the money didn't exist, it would cause a shortfall of 240 billion over ten years, according to your source... that's 1.7% of an annual 14 trillion dollar economy, never mind the revenues of that economy spread over 10 years.
That's NOTHING to hyperventilate about.
There are other fallacies of common wisdom worth trashing:
http://digbysblog.blogspot.com/2010/07/killing-zombie-lies-and-exploding.html
But the major one is that social security has an immediate crisis. No, it has bonds that pay out interest. It has bonds that it can cash in. It has other revenues other than payroll taxes. It has a base income which could be raised and I don't give a damn whether you don't like it or not, bare bones benefits should not get cut to preserve the income disparity of the complaining greedy few, who got tax cuts during the 8 years of Bush paid from FICA revenues. You keep defending that for some reason. I say fine, keep it up. You're going to get your income tax cut revoked and pay extra on top to top up fund shortfalls anyways.
A whole 240 billion over ten years, how will you survive.
#5 Posted by Thimbles, CJR on Wed 21 Jul 2010 at 11:11 PM
the gap in understanding and policy commentary between Mike H and Timbles/Jerry is worth noting even though no amount of dialogue is likely to bring their views closer together. One side regards interest owed to the Social Security system as a fiscal drain that is worrisome; the other side notes that this is owed the pension system because cohorts of workers paid taxes to fund pensions at the time in exchange for promises to have their pension financed in the future.
References to birds shitting in Pennsylvania does not add anything but an unfortunate odor to what should be serious commentary.
Ted Marmor
#6 Posted by Ted Marmor, CJR on Thu 22 Jul 2010 at 10:54 AM
One side regards interest owed to the Social Security system as a fiscal drain that is worrisome; the other side notes that this is owed the pension system because cohorts of workers paid taxes to fund pensions at the time in exchange for promises to have their pension financed in the future
These two items are not mutually exclusive. The interest owed to Social Security is both legally owed to the fund and a fiscal drain.
And Ted, it was a unicorn, not a bird.
#7 Posted by Mike H, CJR on Thu 22 Jul 2010 at 11:44 AM