Wender is also off the mark in her examination of Social Security’s shortfall. She reports correctly that Social Security payouts exceeded non-interest income in 2010 and 2011. But why gloss over the role of interest? In 2011, for example, the system had a $69 billion surplus when all of Social Security’s income, including interest on its reserves, is counted. To ignore interest earnings is like saying Warren Buffet shouldn’t count interest and dividends in calculating his income. Wender concedes there is “extra” money in the Social Security “bank account,” but says “the number of beneficiaries will continue to grow at a substantially faster rate than the number of covered workers.” Apparently to prove her point, she writes:
The Board of Trustees estimate that in 2033 all the money in the Social Security “bank account” will be depleted. This means that workers in their forties fifties [sic] today may not have access to the Social Security benefits that they’ve paid into when they retire.
Aside from the mistake in logic—workers can’t pay into a benefit—Wender has contradicted her own description of the system’s pay-as-you-go feature. If workers are still paying into the system, which they will be, how can the system be depleted in 2033 in the manner she suggests? Indeed even in 2033—with no fixes at all from Cogress—the trustees say there will be sufficient funds to pay 75 percent of the benefits, and perhaps close to 80 percent, according to Congressional Budget Office projections. And as Baker points out, “because benefits are projected to rise through time, this would still be a larger benefit than most retirees receive today.”
Yahoo advises that its “Just Explain It” series decodes the jargon “so the stories you read become relevant and understandable and you can impress your friends at your next dinner party.” We suggest readers forget about this one and impress their friends with a good bottle of wine.
Related posts:
What a higher retirement age really means
How to measure the worth of Social Security
A dart to the AP—and a laurel
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"It is social (or group) insurance..."
Why has the program been increasing the general deficit since the 2010 Obama-GOP tax deal if the FICA taxes are just insurance premiums?
"It is like traditional employer group pension plans..."
No, it isn't, because private sector pension plans are not "pay as you go." They invest in real assets, like property or the stock market, unlike Social Security.
"requirements for [disability benefits] are very strict."
Then why are the number of people on these benefits soaring? See this story:
http://www.washingtonpost.com/opinions/social-security-disability-program-reveals-budget-quagmire/2012/02/10/gIQA261V9Q_story.html
"A declining proportion of workers to beneficiaries doesn’t automatically mean Social Security can’t support its beneficiaries because workers become more productive over time"
Well, of course it doesn't mean SS can't support its beneficiaries. You can always support them by just soaking current workers for more. To say that the burden won't increase on the current worker because the current worker can be expected to produce more is pretty small comfort. That just means that workers can expect stagnant incomes.
#1 Posted by Brian Dell, CJR on Wed 14 Nov 2012 at 11:36 PM
"Why has the program been increasing the general deficit since the 2010 Obama-GOP tax deal if the FICA taxes are just insurance premiums?"
Two fold answer, one - republican obstruction won't support stimulus of any kind, even the kind they take credit for, unless it somehow starves the beast. Even with the economy sputtering after their 2000-2008 frat boy party, they can barely bring themselves to support this starve the beast stimulus because, unlike the bush tax cuts, the FICA reduction benefits the poors more than the rich.
Two - the program is going to take out of the general fund since Alan Greenspan and Ronald Reagan 'fixed' the programs premiums to contribute to the general fund to the tune of 2 trillion dollars (to offset the Reagan tax cuts for the rich). If you borrow twenty bucks from me on Monday and I ask you to buy me a five dollar sandwich on Wednesday, it takes a pretty lousy person to lecture me on on the cost of borrowing instead of just buying the sandwich and marking his tally down to fifteen owed.
"No, it isn't, because private sector pension plans are not "pay as you go." They invest in real assets, like property or the stock market, unlike Social Security."
Sorry, which type of pension plan are you talking about?
Because defined benefit plans, like social security, are one type of animal and defined contribution plans, like 401k's, are well...
http://www.marketwatch.com/Story/story/print?guid=2F56BBA0-2AA6-11E2-825A-002128040CF6
Which is why we have to watch for democrat groups, like Simpson Bowles and the third way, who propose slowly shifting social security towards the defined contribution model.
"Then why are the number of people on these benefits soaring? See this story:"
Not a story, an op-ed by Robert Fricken Samuelson. (Really? him? What, was the heritage foundation too busy?)
DI costs have been going up because
a) baby boom people are getting older
b) women are doing harder work, getting similar workplace related conditions
c) disabled people have it tough getting gainful employment when times are good, since 2008 times haven't been good.
You'd be better off reading this:
http://www.cbpp.org/cms/?fa=view&id=3818
"Well, of course it doesn't mean SS can't support its beneficiaries."
Here's the thing people don't understand. Yes, the worker to retired ratio is swelling, but that is a temporary surge. After that, social security's costs stabilize and we can make small adjustments in funding to support beneficiaries at the required levels.
These adjustments should be happening at the top of the scale, by lifting the cap on payroll taxes and sticking a capital gains transaction tax, since - though Trudy's right in saying productivity of the worker has grown - the rewards of productivity have surged to the top and corporate where FICA was designed not to touch.
Therefore, there is a revenue problem which is very fixable. But there are people who are only interested in treating it as a spending problem because they don't like what the government is spending it upon.
We don't treat the military this way, we don't treat fiscal support for banks this way, we certainly don't ask questions about how badly tax cuts are going to hurt the generations of children to come, no this is how we treat social programs that support the most vulnerable.
And it's by how we treat the most vulnerable that we measure who we are as people.
#2 Posted by Thimbles, CJR on Thu 15 Nov 2012 at 02:39 PM
And if this old story of Marcus Stephens is any measure:
http://www.esquire.com/_mobile/features/era-big-government-marcus-stephen-0400
Americans, as a people, are pretty awful.
#3 Posted by Thimbles, CJR on Thu 15 Nov 2012 at 02:48 PM
"These adjustments should be happening at the top of the scale, by lifting the cap on payroll taxes and sticking a capital gains transaction tax, since - though Trudy's right in saying productivity of the worker has grown - the rewards of productivity have surged to the top and corporate where FICA was designed not to touch."
http://news.firedoglake.com/2012/11/16/mark-begichs-plan-to-stop-the-effects-of-inequality-on-social-security-finances/
"See, we have a payroll tax funding Social Security that gets capped at around $113,700 a year. That means that every dollar above that cap gets untaxed to pay for Social Security. When inequality widens, as it has, more and more compensation goes untaxed, draining the Social Security system of funds. Historically speaking, at least 90% of compensation gets captured by the Social Security system. Today that’s down to about 82%, the last I read.
So to the extent that Social Security needs to be fixed – and by “fixed” I don’t just mean brought into a 75-year balance, but made more adequate so less seniors slip into poverty – you need to raise that tax cap and capture more income. Sen. Mark Begich (D-AK) has an excellent piece of legislation that would do just this."
#4 Posted by Thimbles, CJR on Fri 16 Nov 2012 at 05:50 PM