The idea of raising the age at which workers can collect benefits from Social Security is very much in play.
Mitt Romney told the Detroit Economic Club in February that he will “slowly raise the retirement age” for Social Security. The president, meanwhile, declared in his acceptance speech last week that he is still eager to reach an agreement on the principles laid out by his deficit commission, aka the Simpson-Bowles Commission. And in its final report, the co-chairs of the commission, Alan Simpson and Erskine Bowles, recommended gradually increasing the age from 67 (for those born after 1959) to 69. Because they propose linking the retirement age to gains in longevity, it could go even higher. Along with that rise would also come a change in the early retirement age—from 62 to 64, or higher.
To promote an honest debate about such a change means that journalists must help citizens understand what it entails, which is a lot tougher than it first sounds.
Moving up the age for collecting benefits may sound easier to swallow than some other proposed changes for Social Security, like cutting cost of living hikes for all beneficiaries. On the surface it seems to make certain sense, since people, on average, are living longer (although, in truth, longevity gains have mostly benefited white men; for women of color with low incomes, for example, average life expectancies have declined since the 1980s).
But what is not well understood is that raising the retirement age results in a benefit cut. A law passed in 1983 raised the age from 65 to 66 now and eventually to 67. That change will result in an average cut of about 13 percent for retirees. As the accompanying chart shows, raising the statutory retirement age to 69 would result in a another cut of around 13 percent. That’s a very large cut.
Explaining how raising the retirement age equates to a benefit cut is tricky, as The Associated Press discovered a few weeks ago when it reported on its own survey about preferences in dealing with the financial problems of Social Security, under, at one outlet, the headline, “Narrow majority supports raising taxes, retirement age, to save Social Security.” Most Americans, according to the AP survey, said raising taxes and raising the retirement age were preferable to “cutting monthly benefits.” The AP made that point in its lede, giving readers a clear impression that increasing the retirement age was not a cut. But it is.
The AP gave the same false impression in one of its survey questions. In our CJR Dart to the AP the other day, we reported that raising the age and cutting benefits across the board are mathematically indistinguishable from one another.
In responding to our post, reporter Stephen Olemacher, who wrote the story, pointed out that the AP did tell readers—toward the end of its piece—that “raising the retirement age is a benefit cut for future generations, because they would have to wait longer to qualify for full benefits.” But that statement confuses rather than clarifies. And in an emailed comment, Olemacher argued, incorrectly, that “raising the retirement age does not by itself result in lower monthly benefits.”
We went back to Nancy Altman, a respected Social Security expert who co-directs the advocacy group Social Security Works, and asked her why raising the age is a benefit cut. Contrary to what the AP reported, she said, “with all due respect to Mr. Olemacher, raising the age does result in ‘lower monthly benefits’ than one would receive under current law.” The chart Altman prepared, below, shows how much of a benefit reduction people retiring at different ages would experience.
Click on image for larger version.
It’s important for people to understand that workers have an option to claim benefits, starting at age 62 or at a later age of their choosing. It is best to think about Social Security benefits in terms of a range of ages when you can collect them. If you claim benefits before what Congress defines as the “Retirement Age,” your monthly benefits are reduced. If you claim them after you reach the statutory age, they will be higher.
It would have thought it obvious that if you raise the retirement age, people will receive benefits for fewer years and therefore collect less (unless there is an offsetting increase in annual benefits). In other words, a benefits cut.
#1 Posted by foosion, CJR on Thu 13 Sep 2012 at 07:49 AM
Why does SS have to be complicated? Our tax-economic system desperately needs to be simplified and made TRANSPARENT! We shouldn't need "experts" to try to explain how we are being manipulated and exploited - using words that don't tell us that we are being manipulated and exploited. // Jean Clelland-Morin
#2 Posted by Jean Clelland-Morin, CJR on Thu 13 Sep 2012 at 10:54 AM
This feels sort of like bad journalism. It's a "benefits cut" in that total dollars distributed to a person will be less. Yes, that's the point. But it's not a "benefits cut" as in you'll get less for each year you're alive. Using that term is part of the problem - it adds to confusion, rather than reducing it.
#3 Posted by Bill Shander, CJR on Thu 13 Sep 2012 at 02:53 PM
Bill, foosion, you're not getting it. You will not only receive benefits for fewer years, but the monthly and yearly benefit you receive will also be lower. Look at the chart.
Even the worker who retires at 70 will receive about $2000 less per year.
#4 Posted by Julie, CJR on Thu 13 Sep 2012 at 05:59 PM
Has there been any studies done as to whether or not employers are now or will be willing to retain or hire older workers? I would think that the answer to that would be an important component and I am not hearing anyone discuss it.
I just cannot see companies being willing to hold onto expensive (wages, healthcare, etc.) employees when they can be easily replaced by someone much younger, healthier and cheaper.
#5 Posted by Chandler, CJR on Thu 13 Sep 2012 at 06:35 PM
One out of six Americans is on Social Security disability.
Social Security retirement paid $100 BILLION more in 2012 than it paid in 2008 (that's a 20% increase in just 4 years).
Those of you who think benefit cuts aren't coming are deluding yourselves.
The commie gravy train has derailed.
Life expectancy in 1940 = 62.9 years
Life expectancy in 2010 = 78.7 years.
The leftists can pray to the Gubmint Money Fairy all they want, but she won't be able to sprinkle Magic Retirement Cash is sufficient quantities to sustain benefit payments to an entire nation for 15 extra years.
At some point, we're going to have deal with the arithmetic.
#6 Posted by padikiller, CJR on Thu 13 Sep 2012 at 07:36 PM
In Lieberman Liberal La La Land, we only talk of "benefits". Never taxes.
Another day, another story about the "tragedy" of cutting Gubmint benefits.
Last we heard... Trudy was relating the woeful tale of a hapless lady who chose to take early retirement, and was then forced to endure the torture of working part-time in a gift shop as she alternated between her Palm Beach home and her summering in the Outer Banks. She has a hard time paying the satellite TV bill, remember? The HORROR of it!
Benefits are magic in Lieberman Liberal La La Land. They don't require funding. And providing them doesn't cost anybody anything.
There is no cost to anyone in taking the money to pay for these benefits, but there is no end of tragedy in reducing benefits.
We're not going to see a "Trudy's People" story on the working slob who sees 13 percent of his paycheck going to pay retirement benefits to people who are better off than he is. You know... They guy who used to make 18 bucks an hour plus overtime before the "Obama Recovery" and who now makes 10 bucks an hour and who can't keep up with the bills.
We're not going to see Trudy describing this guy's kids shopping at Goodwill so that his paycheck can fund disability checks for mooches working the system.
Because these people don't exist in Lieberman Liberal La La Land.
#7 Posted by padikiller, CJR on Thu 13 Sep 2012 at 10:44 PM
Question, how does the American formula for calculating retirement benefits compare with other countries? It's a broad question but I'm looking for perspective about American retirement in comparison with other countries that seem to do it better than we do. For example, we know that other countries provide universal healthcare less expensively and more effectively but they also (seem to) make better provisions for retirement, education, parental leave, and Germany is better than us at managing unemployment and retaining its manufacturing. Those countries make different trade-offs in order to make all that happen but I don't understand exactly how their deals are different from ours---I just know that my European friends go on vacation no matter what. So I'm interested in hearing more about these important issues with an international perspective.
#8 Posted by MB, CJR on Fri 14 Sep 2012 at 02:44 PM
The answer is pretty obvious. The other countries don't spend near a trillion annually on military Keynesianism:
http://www.youtube.com/watch?v=_dQzvc-BVGI
And they don't allow a medical system to inflate costs like America's does:
http://m.motherjones.com/kevin-drum/2012/04/how-keep-healthcare-costs-high-one-easy-lesson
And there's also the whole 'if you fund a program out of middle class wages, then take policy steps to repress wages and labor bargaining power in order to beat up the inflation boogeyman, the levels of benefits which used to be sustainable stop being so. At which point you have the choice to either tax the middle class more - which we can't because the bankers and lawyers like Padi have killed the middle class, cut benefits - which we can't do because the bankers and lawyers like Padi have put the country into a deleveraging binge making entitlements one of the pumps keeping the organs of the economy working, or we can raise taxes on the folks who've gotten all the wealth and income gains since it became policy to kill the middle class.
And this is a very unpopular idea amongst the bankers and lawyers like Padi who believe they've stolen their money fair and square.
#9 Posted by Thimbles, CJR on Sat 15 Sep 2012 at 11:03 AM
The problem with Thimbles' Robin Hood commie wealth-snatching is that Social Security is supposed to be an insurance program.. NOT a welfare program.
However, if you want to turn it from an entitlement program into a welfare program... That at least makes logical sense (though it is practically a stupid idea, as all welfare programs are). But at least it makes logical sense:
1. Other people have stuff we want.
2.We don't want to work to get it.
3. We want the Gubmint to snatch it for us.
4. This is a just outcome, for Reason 1, Reason 2, etc...
This is at least a logically consistent plan to ruin an economy in a collectivist manner.
What Social Security is now is a rapidly failing unjust insurance scheme.
The leftists know that if they nix the entitlement aspect (as Thimbles suggests) that the welfare program will fail. They also know if they keep the entitlement aspect, then Social Security will never become the wealth-snatching commie work alternative that they desperately want it be.
So they play both sides of the fence.
When it comes to benefits, SS is an entitlement in leftie land. It's an insurance scheme. You only get what you've put into it.
But when it comes to PAYING for it.. Well, then... It magically transforms into a welfare program and then we start hearing the pleas for social justice and the talk of thievery and vampirism.
#10 Posted by padikiller, CJR on Sat 15 Sep 2012 at 02:55 PM
"The problem with Thimbles' Robin Hood commie wealth-snatching is that Social Security is supposed to be an insurance program.. NOT a welfare program."
And that is what it turned into, a 2 trillion dollar welfare program for rich people's tax cuts.
Until that 2 trillion dollar debt is paid, you can set the payroll tax to zero, not reduce a dime of benefits, collect 100% of the annual cost out of federal income tax revenue, and the program would still not be a welfare program.
Because... YOU OWE THAT MONEY.
Once the people who've paid into the system collect what they're owed under the social contract which took 2 trillion out of their working life income, then you can change the tax / benefit scheme to whatever you like to reflect the needs of the elderly within a paygo program.
Or you can demagogue about Robin Hood and his merry men stealing from the rich to give to the mooching elderly.
But you don't get to do that while you owe 2 trillion dollars. You ain't the robbed here. The middle class, who were promised by Reagan and Greenspan that their social security was taken care of, is.
End of story.
#11 Posted by Thimbles, CJR on Sat 15 Sep 2012 at 08:46 PM
Actually, Julie, you're not getting it. Look at the chart again. If you retire at 67, you get 1000 per month that year, 1080 the following year, etc. If you retire at 70, you get 1000 that year, 1080 the following year... The monthly amounts DON'T change - you just start later. cc foosion
#12 Posted by Bill Shander, CJR on Sat 15 Sep 2012 at 10:31 PM
$2 Trillion is just about what the federal government spent on welfare since SS reform.
The "poor" people owe us the SS trust fund money, not the "rich", using this kind of logic.
Of course, I speak (partly) in jest.
The crazy, silly, nutsy growth of the federal government is to blame for sucking up trust fund money. Without doubt. Including welfare for the "rich" as well as the "poor".
We have a spending problem, not a revenue problem.
And clearly, tax increases to sustain the crazy exponential growth in entitlement spending will kill the economy and will therefore be counterproductive.
The future is about as clear as it can be.
Entitlement spending WILL be cut, and I predict it will happen sooner, rather than later.
Higher retirement ages, means testing, opt-outs, etc...
No way to avoid it at this point... Not even if the GOP takes power and manages to slash federal spending. It's just a third-grade math problem.
We are going in the hole to the tune of more than a TRILLION dollars for each and every one of the four years of the "Obama Recovery".
The Gubmint Money Fairy has run out of free money to sprinkle on the masses.
Time to pay the piper.
#13 Posted by padikiller, CJR on Sat 15 Sep 2012 at 11:38 PM
"$2 Trillion is just about what the federal government spent on welfare since SS reform."
You got a cite for that?
Then, after that, maybe you can find a cite for how much the Reagan tax cuts cost since reform. It was under them that deficits tripled.
And then we can talk about the Bush tax cuts, because deficits under them really really exploded (which you can't blame on the wars since those were fought off budget until Obama brought them back on).
I'll put my trillions taken by the rich against your trillions by 'the moochers' and we'll see who's got the higher pile.
Not that it matters since, again, the taxes that were collected under Reagan and Greenspan were done so for a particular program to guarantee retirement benefits at a particular level. THE PEOPLE ARE ENTITLED TO THEM. These moneys could have been used to rebuild roads, bridges, dams, solar power generators, a smart power grid, stuff that generates revenue.
It was used to fund tax cuts.
The current aging population of the american people are the nation's creditors. They are owed 2 trillion.
Until that borrowed money is paid back, you can't call anything to do to support that program 'a conversion to welfare', just like you can't call someone's wages getting garnished to pay debt a robbery.
The nation owes that money. It has to get that money from the people who took it, who have it.
End of story.
"The "poor" people owe us the SS trust fund money, not the "rich", using this kind of logic.
Of course, I speak (partly) in jest."
Oh no. This is what republicans actually believe. The poors are the problem, not the corrupt, banal evil that is the rich. You see it in their policies, you see it in their attitudes, you see it in their speech.
Republicans only care about the people who need care the least. They care about preserving privilege, not rights, not contracts, not even the basic property of the middle and poor classes.
And welfare, of the nation or otherwise, is something they'd dispose of if they could. And if they can ever suppress enough votes, they will.
But if they can buy enough votes from both parties to make the democrats do the dirty job, they don't mind doing that either.
#14 Posted by Thimbles, CJR on Sun 16 Sep 2012 at 02:38 PM
Just remember, deficits to these folks are just a means to an end. From the beginning,just means to an end.
#15 Posted by Thimbles, CJR on Sun 16 Sep 2012 at 02:42 PM
It's a game to them. You can't play their game.
#16 Posted by Thimbles, CJR on Sun 16 Sep 2012 at 02:53 PM
On another topic, innit neat how we can do a whole story on how broken occupy wall street is:
http://usnews.nbcnews.com/_news/2012/09/16/13891055-one-year-later-what-ever-happened-to-occupy-wall-street
With no mention of the wildly repressive tactics used to break it? The word 'violent' shows up twice:
“Another point of contention was whether the movement should embrace violent tactics.
These big arguments took up a lot of time and energy for months over whether the tactics should remain strictly nonviolent,” said Todd Gitlin, a professor of journalism at Columbia University who wrote a book on Occupy. “ … the turning inward of energy was not constructive.”
And other than a side comment about them getting 'booted out' there's nothing. Certainly no discussion about why people might be considering violence after watching grandmas get their faces doused in pepper spray.
It's fun watching the history get written over within a year.
#17 Posted by Thimbles, CJR on Sun 16 Sep 2012 at 03:16 PM
There are two basic flaws in Thimbles premises:
1. That raising tax rates arbitrarily automatically raises revenue, and
2. That tax cuts require funding.
The first flaw is subject to debate and disagreement, but there is no question that determining the "ideal" tax rate to maximize revenue is a complicated business. Taking the case to its extremes, on Thimbles' side of the argument, a tax rate of zero will obviously result in zero revenue. However, it is also true that exceeding a certain rate will also result in diminished revenue - e.g. a tax rate of 100% would keep everybody from working and would also result in zero revenue (or at least very close to zero).
The tax rate that would maximize revenue can't be reduced to a fixed number because it depends on too many constantly changing parameters - employment rates, inflation rates, savings rates, etc...
So it is a bit simplistic, especially in a horrible economy, to propose a fix that involves an arbitrary tax increase.
Thimbles' second mistake is not really debatable. Tax cuts don't need to be funded.
The first issued to be addressed is whether or not the tax cuts actually resulted in loss of revenue. Many people (including Obama, apparently, as they are now the "Obama tax cuts" instead of the "Bush tax cuts") contend these cuts actually increased revenue by stimulating the economy.
But more fundamentally, tax cuts don't cost anything. When Joe from Sheboygan gets his overtime cut at the spark plug plant, he doesn't "fund" the decreased revenue and the shareholders of the plant don't get any of Joe's money, Joe curtails spending if he's smart, or he runs up the credit cards if he's stupid.
Similarly, when Congress runs up the credit card after cutting revenue, the taxpayers aren't to blame, except in the general sense that all voters share the blame for electing idiots who spend money they don't have.
We don't have a revenue problem. We have a spending addiction. The Gubmint has grown way, way too big in both absolute and relative terms.
As I noted earlier (and as leftist conveniently ignore) ONE OUT SIX AMERICANS IS ON SOCIAL SECURITY DISABILITY.
This is just a ridiculous, stupid, nonsensical, idiotic and plainly unsustainable situation.
Entitlement reform is going to happen, no matter how many years go by when Democrats continue to ignore the arithmetic or refuse to pass budgets.
#18 Posted by padikiller, CJR on Sun 16 Sep 2012 at 05:05 PM
And as for the "Occupy Wall Street" silliness...
On the anniversary of the purported "occupation" the organizers managed to summon a force of a whopping 300 people to commemorate the "movement".
Utterly underwhelming in terms of import to anybody. They'd get more people than this to turn out for a Girl Scout car wash in Flagstaff.
The fact that the Hissy Fit got any press at all on "Topless Kate Sunday" is a testament to the leftist leaning of the MSM.
#19 Posted by padikiller, CJR on Sun 16 Sep 2012 at 05:15 PM
"There are two basic flaws in Thimbles premises:
1. That raising tax rates arbitrarily automatically raises revenue,"
Jesus Christ. You're really going to rebut with the napkin scrawlled argument? Supply side economics has not been shown to work ever. And even if it had been shown to work in the transition from the "highly socialist" 70's to the "morning in America" eighties it wouldn't work now.
The problem now is not too much government, too much labor, too much regulation, and not enough low taxes. The problem now is that money has stopped circulating. People who make products do not have the income to buy products and the people who have siphoned off most of the money and most of the income don't need these products.
Lacking a consumer base that isn't saddled with debt, production goes idle, unemployment goes high, tax revenues collapse, death spiral begins, excetra excetra... This happens EVERYWHERE that it's tried.
The truth is tax cuts aren't free. No lasting government ever taxes close to 100% so that the incentive for all activity goes to zero - it's an absurd case. Therefore few governments ever recover revenues lost to tax cuts because most governments were never allowed to get that absurd to begin with. What we see with supply side tax cuts are transfers of income to the wealthy. Particularily the douchebag wealthy like Mitt Romney who benefit from a tax code which incentivizes debt and management fee bs over actual productive work (which supply siders believe is inflationary. You guys hate work and the workers who do it)
#20 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 01:42 PM
No what's free in this environment is government spending, because a stimulus to the economy lowers unemployment, which lowers the supply of labor, which forces wages up (with the right policies), which raises tax revenue. Would government spending result in a deficit? Perhaps, but the deficit would exist if the government chose not to spend, regardless. In this environment, spending is cost neutral - it's free.
This was how corporations used to be compelled to invest. There used to be tax incentives for corporations to invest in America. When there's a tax incentive, corporationsinvest because to them the money would be lost to the tax man anyways. Investment becomes cost neutral, free.
Supply side gives the money away without condition based on the assumption that it will be used for investment. Has it? No! It gets siphoned for executive and shareholder compensation until the loss of circulation breaks the economy. And, by then, the whole we need to make it easier for 'alphas' culture has taken such a root that it makes the necessary reversal of bad economics very difficult to pass through.
As Taibbi said, money doesn't sleep, it doesn't listen to appeals of logic and rationality, it doesn't care about anything but it's own short term increase. Greed guides its way and it is constantly seeking to erode the barriers to its appetites.
Even as its appitite threatens to swallow its own wealth.
#21 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 01:55 PM
Which it does.
If you want economic growth, if you want income growth, if you want stable productive growth, you vote democrat:
http://www.slate.com/slideshows/news_and_politics/the-great-divergence-in-pictures-a-visual-guide-to-income-inequality.html#slide_10
As Tomasky recently put it:
http://www.thedailybeast.com/articles/2012/09/06/the-24-and-the-42-million-and-basic-competence.html
"Since 1960, Republicans have controlled the White House 28 years, and the Democrats 24. And in those years, Democratic administrations have created 42 million jobs, and Republican ones 24 million jobs. This, according to a Bloomberg analysis of BLS data, is accurate and true.
It's a devastating set of numbers--and by the way, the stock market has performed better during Democratic tenures as well, as another Bloomberg analysis showed that returns on investment under Democrats have done about nine times better than under Republicans). And yet, no one in America knows. No one. Why why why why why haven't the Democrats spent years pounding this home? This should be the first talking point out of the mouth of every Democrat who ever goes on TV to discuss anything. "
If you are interested in being poorer, but having more relative wealth than your neighbors, vote republican and fiddle as Rome burns.
#22 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 02:22 PM
Here's why voting republican remains attractive enough though putting the country in charge of complete idiots leaves the whole poorer:
http://www.telegraph.co.uk/science/science-news/3315638/Relative-wealth-makes-you-happier.html
And here's why someone like Romney can say with a straight face that someone making 250 grand is middle class:
http://krugman.blogs.nytimes.com/2011/01/12/why-does-inequality-make-the-rich-feel-poorer/
When these people make 250 grand, they feel middle class. When a teacher makes a fifth of that, when a social security recipient has to make do on a smaller fraction of that, they feel like those people are looters and moochers of the system.
This is yet another way supply side economics screws up a nation's elite perspective.
#23 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 02:31 PM
"2. That tax cuts require funding...
Thimbles' second mistake is not really debatable. Tax cuts don't need to be funded."
The level of stupidity... Okay, sorry everyone, this will be my last post for the day in this thread. I know I'm hogging the mike a bit. Bear with me.
Let's say guy has a family. He's working eight hours a day in an office for 800 a week, but he'd rather be painting. His job, however, pays the bills.
One day, he decides to tell his boss ,"I'm going to part time." His boss says, "You're only going to be making half the income." He says, "That's okay, I'm going to sell paintings."
So he gets half the income and he sells a painting a week for 50 bucks. Does this affect his bills? Does this affect his family's requirements? Does a responsible parent do this?
Does a responsible government do this? Responsible actors account for their decisions. If they decide to take half the income, they make a better plan than the credit card to cover the difference.
Republicans don't. They claim that by cutting government revenue in half, they can starve the beast. What they end up doing invariably is starving the children, starving the needs of the population for good governance, disaster management, effective education and economic policies, etcetera.
And when you've cut through the bone as to the requirements of the easy-to-kick-around poor population and the hard-to-notice-at-the-time-but-long-term-essential needs of the nation, and you're left with the stuff you can't cut, you borrow your ass off.
That is what unfunded, unaccounted for, tax cuts bring.. Only an idiot would argue the point after watching republican performance since the eighties.
#24 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 03:02 PM
Once again...
Thimbles' assertion depends on the assumption that lowering tax rates decreases revenue.
Such is not necessarily the case. Indeed, the argument against raising tax rates is that by stifling the economy, higher tax rates will result in decreased revenue.
#25 Posted by padikiller, CJR on Mon 17 Sep 2012 at 07:01 PM
Sigh.
Once again, Val's supply side nonsense assumes a ludicrous government that taxes away upwards of 90% of everyone's wealth in order for the blessed tax cut to result in more revenue - something not possible within a democratic system which depends on the consent of the governed.
In every case we've seen in multiple countries with non-absurd governments - particularily the US - the tax cuts result in reduced revenue and exploding deficits.
http://www.usgovernmentrevenue.com/revenue_chart_1970_2017USb_13s1li111lcn_F0fG0f
This is one of those FACT thingies you yap on about, except this one has the added benefit of having a basis in reality so it's a little different from your usual fare.
The FACT is that we've seen how government spending can end a depression (US depression) and how cutting it can make it worse. (US depression - 1937 / England, Ireland, Spain, etc now). Government spending in this low interest rate environment is free, considering the negative rate of return creditors are willing to accept and the fact that the impact of the borrowing on the deficit would be no worse than the impact on the deficit by plummeting tax revenues in a broken economy.
http://economix.blogs.nytimes.com/2011/12/06/raising-taxes-on-the-rich-not-whether-but-how/
"Careful studies by the Congressional Budget Office and others show that certain spending programs are highly stimulative, whereas tax cuts provide very little bang for the buck...
Keep in mind that these results are symmetrical. A policy with a high multiplier, such as government purchases, will reduce the gross domestic product by exactly the same amount if it involves spending cuts. A tax cut with a low multiplier will have an equally small negative economic effect if it is instead done as a tax increase.
This would suggest that one of the worst ways to cut spending, from a macroeconomic point of view, would be to do it the way Republicans proposed last week: by cutting government employment. Judging by the table above, cutting taxes for lower- and middle-income people and paying for it with higher taxes for higher-income people, as Democrats have proposed, is unambiguously stimulative."
The government has a spending problem, it needs to spend more.
#26 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 09:32 PM
Which is not to say it doesn't have a revenue problem.
Supply side economics claimed that tax decreases release economic activity and tax increases reduce it.
We saw that tested under Bill Clinton and GW. Bush.
The results are in (ooo look at the pretty graph). From the economix link above:
"Republicans often say that tax evasion and avoidance by the wealthy would cause revenues to fall, rather than rise, if their taxes are raised. But according to the Tax Policy Center, rates higher than the current top rate of 35 percent accounted for 29 percent of individual income tax revenue as recently as 1986, during the Reagan administration.
Recent studies by Peter Diamond and Emmanuel Saez and by A.B. Atkinson and Andrew Leigh find that increasing the top income tax rate would raise net additional revenue at least until it reached 63 percent and probably much higher."
What? Sorry, what was that about the napkin again? Tell me more, I need a laff.
"Nor is it correct that low taxes on the rich are essential for economic growth. Recent studies by Dan Andrews, Christopher Jencks and Andrew Leigh and by Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva show that while tax cuts for the rich have raised their share of aggregate income, they have not raised the rate of economic growth."
Sooo then, we know that tax cuts on the rich lower revenue and the inverse is true. We know that the level required for taxes is likely to be high. We know that a country that is in an economic ditch basically can't lose money when it's spending it to dig itself out.
What else can we learn?
http://economix.blogs.nytimes.com/2012/03/13/would-a-higher-top-tax-rate-raise-revenues/
"On Friday, Prof. Allan Meltzer of Carnegie Mellon University, a well-known conservative economist, offered a commentary in The Wall Street Journal arguing against policies to equalize the distribution of income.
His key piece of evidence is the chart below, from a study by the Swedish economists Jesper Roine and Daniel Waldenstrom, that shows the share of income accruing to the top 1 percent of earners in seven Western democracies. They all follow the same trend line, Professor Meltzer says, and it proves that “domestic policy can’t be the principal reason for the current spread between high earners and others.”..
[H]e seems to have missed an important implication of his own conclusion.
If the rich are going to continue to get richer in low-tax countries and high-tax countries alike, then it must mean that high tax rates have far less of a disincentive effect on the rich than conservatives like Professor Meltzer continually proclaim.
He asserts that we should not raise tax rates on the wealthy, as President Obama has proposed, because it won’t do anything to reduce the share of income going to the ultrawealthy and thereby equalize the distribution of income. For the sake of argument, I will concede the point.
But there is another very good reason to raise taxes on the ultrawealthy: the government needs the revenue...
If, as Professor Meltzer has shown, the rich get richer regardless of the tax rates, there is no economic reason not to raise the top rate. Perhaps unwittingly, his research confirms that of other economists who say that we could get substantial additional revenues even if the top rate doubled."
We have all the empirical and logical evidence in the world that we should be using tax revenues and tax incentives upon the rich to compel investment in American economy / workers. You've got a napkin.
#27 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 10:02 PM
The problem is that the data does not bear out Thimbles' claims:
In 1980, the top 5 percent paid 37 percent of federal income tax. Today, the top 1 percent pays 37%. The top 5 percent pays 57 percent.
So much for the notion of the "rich" dodging the tax burden.
It is also undeniably true that federal revenue increased substantially after the "Bush" tax cuts in 2003. Some much for the claim that cutting tax rates automatically reduces revenue.
The Robin Hood notion of snatching money won't fix anything. It doesn't create wealth... It diminishes it.
What we need to do is simple. We need more wealth. And only work creates wealth.
So what we need to stop paying people not to work. PERIOD.
THAT will fix things. THAT will restore the middle class and raise our standard of living. THAT will make American products and services globally competitive.
To simultaneously advocate for the perpetuation of a permanent welfare class and to also bitch about "income inequality" is just plain silly. Welfare begets inequality.
#28 Posted by padikiller, CJR on Mon 17 Sep 2012 at 10:04 PM
"It is also undeniably true that federal revenue increased substantially after the "Bush" tax cuts in 2003. Some much for the claim that cutting tax rates automatically reduces revenue."
Dude, people can look at the us revenue graph. Despite the fed and your banker friends inflating a housing bubble based on conning securities buyers and pension funds on the low risk nature of high risk mortgage debt, government revenue didn't touch the levels reached in the late 90's until 2006 despite a 5% increase in population and a 25% increase in GDP which cratered a year later.
Revenue to GDP:
http://www.usgovernmentrevenue.com/revenue_chart_1980_2010USk_13s1li011mcn_F0f
The growth in GDP did not compensate for the loss in revenue.
Period.
Why? Because tax rates for the rich have a small effect on GDP but a large effect on government balance sheets. Period.
"In 1980, the top 5 percent paid 37 percent of federal income tax. Today, the top 1 percent pays 37%. The top 5 percent pays 57 percent."
That's because the top 1% percent went home with over 240% more than they did in the 1980's.
http://www.motherjones.com/politics/2011/06/speedup-americans-working-harder-charts
As I have explained many times on this site, American workers' productivity and their wages went up in direct relation until the eighties.
Then the 1% told workers if he can't put the wealth in his pocket, he will move the factory to China or Mexico. Yay supply side economics.
You can't complain about paying 37% of the federal costs when you've pocketed 90% of the gains. You'd think 240% increase would be reward enough.
PS. Note how repressive tax rates are a disincentive and yet repressive working conditions/wages are just part of a free market freedom that's free free free? If repressive conditions don't affect an employees productivity, then why would repressive taxes affect the rich? And if repression does have an affect, then why are you so hostile to the idea of workers being better rewarded for their labor?
"The Robin Hood notion of snatching money won't fix anything. It doesn't create wealth... It diminishes it."
Except you won't find a single republican who disputes government spending raises GDP, creates jobs, and improves the economy.
Otherwise, you wouldn't see every one of them crying about sequestration's coming effect on the military budget.
#29 Posted by Thimbles, CJR on Mon 17 Sep 2012 at 11:20 PM
Last note - I swear, Charlie's got a couple of pieces:
http://www.esquire.com/blogs/politics/occupy-anniversary-12795934
"There was a lot of talk in the run-up to the anniversary about how the movement had "changed the national dialogue," but that it had failed to affect the politics of the country the way that, say, the Tea Party had. (Joe Nocera in the Times seemed unusually sad about this.) But, let us be serious. What success the Tea Party had — which consisted in the main in electing enough cranks and nutballs to make the United States ungovernable for two years — it enjoyed because so much of that movement was in simply rebranding the right-wing politics toward which the Republicans were headed downhill on a scooter anyway...
Even if Occupy wanted a place in the Democratic Party, where on earth would it be? In an administration that's staffed the Treasury with the Goldman Sachs All-Stars? In a Congress bought and paid for by the sharks and sharpers who haven't yet found their place in the government? In an electoral politics that had been transformed into a morass of anonymous corporate money?...
There are too many powerful people in this country who don't see the danger in treating most of the population like moochers and wage slaves. There are too many powerful people in this country who don't see the simple fact that Occupy is by far the most polite response they're likely to see to a general consensus that the system is being rigged to produce another Gilded Age plutocracy...
So happy birthday, I guess. Somewhere, a dialogue is being changed. Maybe that's enough."
So, on the topic of social security, I keep saying the story being missed in its discussion is without social security, where are people getting their retirement income?
It's not like the elites are going to let private pensions do the job:
http://www.esquire.com/blogs/politics/roger-goodell-nfl-referee-lockout-2012-12758487
"That Roger Goodell, lord high commissioner of the National Football League..
is giving the game away on how exactly the people who pay his salary feel about people who work on salary generally in this country...
In facing a pension freeze, the NFL refs have plenty of company. Corporations across the country have been trying to switch their employees from traditional defined benefit pension plans to cheaper, less reliable defined contribution plans...
"From the owners' standpoint, right now they're funding a pension program that is a defined benefit program... About ten percent of the country has that. Yours truly doesn't have that. It's something that doesn't really exist anymore and that I think is going away steadily."
This is the technique that has worked — alas, too successfully — for the one percent in almost every industry in America. People don't really have pensions anymore because the financial-services industry helped the one percent loot them for the benefit of folks like Willard Romney, which they were able to do because they were encouraged to bust unions and force people into 401K's, which sank with the rest of the economy while they were stealing everything that wasn't nailed down...
Defined-benefits pensions "don't really exist" anymore because of deliberate acts of politicians that encouraged their wholescale destruction by American business. We didn't "evolve" from them to 401K's. We got them stolen out from under us."
Powerful people in this country consider getting old a "publicly subsidized vacation" and they want to cut it and every program that would enable it. In their world, we all have it too easy.
#30 Posted by Thimbles, CJR on Tue 18 Sep 2012 at 12:11 AM
Honestly, I thought of sticking this in another thread, but no, the 'moocher class" tax discussion belongs here. Here is your 47%, America, who will supposedly never vote Mitt.
http://digbysblog.blogspot.com/2012/09/whats-fair-share.html
"When all federal, state, and local taxes are taken into account, the bottom fifth of households pays about 16 percent of their incomes in taxes, on average. The second-poorest fifth pays about 21 percent
We don't know what Mitt's been paying in taxes all these years, but we do know what he paid in 2010: 13.9%"
13.9%. What a gdamn moocher.
Ps. Mitty is padi's kind of people:
http://m.motherjones.com/politics/2012/09/secret-video-romney-private-fundraiser
Ps people. It's with this context in mind that you should review Mitt's "I’m not concerned about the very poor. We have a safety net there,” statements. We know he sets the middle class around 250 grand, how far down from that does he set 'the poor', since it compromises 47% of America to him?
It is scary how powerful and numerous the complete d-bag population is on the right wing.
#31 Posted by Thimbles, CJR on Tue 18 Sep 2012 at 02:26 AM
Just awesome.
http://thinkprogress.org/economy/2012/09/18/864291/romney-the-47-percent/
"“These are people who pay no income tax,” Romney continued, in a video posted by Mother Jones. “My job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.” But who are the 47 percent of Americans who currently have no federal income tax liability?
Mostly, they are either too poor to qualify for even the lowest tax bracket (but still pay federal payroll tax, and state or local sales taxes, gas taxes, and excise taxes), or they benefit from tax credits for the working poor, the elderly, or students, as these charts from the Tax Policy Center show. Only 7 percent of the country is non-elderly and has no federal tax liability, and most of them make less than $20,000"
The guy, and guys like him, are just fools. They really don't know how to talk in public, which makes sense since they despise it:
http://nymag.com/daily/intel/2012/09/real-romney-is-a-sneering-plutocrat.html
"It seems unavoidable now to conclude that Romney’s embrace of Paul Ryanism is born of actual contempt for the looters and moochers, a class war on behalf of his own class."
#32 Posted by Thimbles, CJR on Tue 18 Sep 2012 at 11:05 AM
In a sense, the change in the conversation occupy brought is responsible for this kerfuffle.
About a year ago, the slogan was "We are the 99%!"
Breitbart and his army of drool came out with the counter slogans "STOP RAPING PEOPLE!" and "We are the 53%!"
This is what happens when a presidential candidate huffs too hard on the tea bag.
#33 Posted by Thimbles, CJR on Tue 18 Sep 2012 at 12:09 PM
This is in response to MB's question about international comparisons. Even without the cuts currently being phased in by increasing Social Security's statutorily defined Retirement Age to 67, Social Security's benefits are extremely low by international standards. They rank toward the bottom when measured against the percentage of wages replaced by old-age benefits provided by other developed countries
#34 Posted by Nancy Altman, CJR on Tue 18 Sep 2012 at 02:32 PM
KaBLAM!
http://www.usatoday.com/news/opinion/forum/story/2012-09-17/social-security-cuts-broke/57801378/1
"According to a recent report from Boston College's Center for Retirement Research, many Americans are not saving a sufficient amount to fund retirement. The move away from traditional "defined benefit" plans to "defined contribution" 401(k)-style plans, for those fortunate enough to have employer-supported retirement plans, has not succeeded in providing for a secure retirement. With median retirement account balances of only $120,000 for those close to retirement, many people will find it difficult to maintain anything resembling their current lifestyles throughout their post-work lives — even with Social Security and Medicare.
For decades, the burden of retirement saving and planning has been shifted onto individuals, having them accumulate money in 401(k) plans and Individual Retirement Accounts (IRAs), instead of the defined benefit programs which were common only a couple decades ago. The results have not been good. People fail to save enough, and one crisis, such as spell of unemployment or bad health, can lead them to empty out their retirement accounts, despite the significant penalties for doing so.
This reality has inspired proposals for new forms of retirement accounts, with various means of funding and varying degrees to which the programs are mandatory, but we're missing the simple answer.
We already have an excellent, if not especially generous, program in place. Workers contribute during their working lives in exchange for a promised benefit level during their retirement years. This program is called Social Security...
The goal of a retirement system should be to ensure that retired people have sufficient income to live out the remainder of their lives without a radical reduction in quality of life after they stop working. Our current system, a modest mandatory government retirement program combined with individual savings, is failing to do that. Strengthen Social Security now, not by cutting benefits, but by increasing them."
Good on USA today!
#35 Posted by Thimbles, CJR on Wed 19 Sep 2012 at 02:43 PM