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View Diary: Mr. Roosevelt's Social Insurance (197 comments)

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  •  For starters, it was Greenspan's calculation (0+ / 0-)

    and even he did not foresee the magnitude of the shift of wealth away from that which is subject to SS withholding.  It is why there is a projected shortfall in later years to begin with.

    •  I don't quite buy that (1+ / 0-)
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      I know some top, top policy folk that agree with your analysis, but the data is kind of tricky.

      First of all in the first post Commission Reports the Trustees gave measures for 10 year and 75 year actuarial balance but didn't explicitly account for intervening sub-periods.

      The 1988 Report was the first I could find that explicitly modeled Trust Fund ratios in the intermediate years and showed a ratio of 0, i.e. Trust Fund Depletion by 2048.

      And by 1989  they projected Trust Fund Depletion in 2046, which by 1990 was revised down to 2043, 1990 Summary p.2 :

      Just four years later Trust Fund Depletion was placed in 2030.
      It is pretty hard to simply wave this thirteen year deterioration away as explained by unanticipated increases in income inequality particularly when the next three years only showed a two year deterioration to 2028. And then the seven years after that showed Depletion pushed out to 2041, only to plateau and ultimately settle back to the current 2036.

      So summarizing. By 1988 the Trustees already were projecting Trust Fund Depletion within the 75 year period even though overall actuarial balance was positive. Meaning they were aware that there was an unaddressed issue before mid-century. In the course of the 23 Report Years in between the projected date of TF Depletion moved strongly in then strongly out and then stabilized before edging down while never vanishing. In that sense you can hardly blame the shortfall itself on anything that happened after 1988 at latest, by then the fact was baked into the pie if not the timing. Nor do the fluctuations since seem to map very well with increases in income inequality in that the period of strong improvements in solvency occurred both in Clinton's term 2 and Bush's term 1. If the shortfall is mono-causal why didn't we see any such effects between 2001 and 2005?

      But slice it how you like this shortfall didn't come out of the blue, it may or not have been apparent to Greenspan in 1983, but then according to the (unpublished as yet) auto-biography of Bob Ball, who actually negotiated the deal on behalf of Tip O'Neill directly with Dick Darman of the WH (and not actually on the Commission) mostly the Commissioners including Greenspan weren't really up on the nitty gritty of the actuarial projections. Instead the Office of the Actuary at SSA scored proposals for 10 year and 75 year periods while keeping the intervening period inside their black box.

      So while the numeric case may be there that most of this effect was due to increasing income inequality, it is not the case that the fact of shortfall wasn't recognized early on. Which seems to put us in a cart before the horse situation with the effect (projected shortfall) coming before the putative cause (subsequent unanticipated growth in inequality)

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      by Bruce Webb on Sun Aug 28, 2011 at 12:40:22 PM PDT

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      •  I don't remember talking about "income inequality" (0+ / 0-)

        More specifically, then, what Greenspan's Commission did not adequately take into account was the shift of "income" to the untouchable "capital gains", which was brought about purely as a matter of political policy and exceeded the assumptions used by the commission in making its recommendations.

        Either way, there is a disparity between what Greenspan's Commission assumed, and reality as it exists today.  So, rather than "progressives" picking a number out of a hat, or arbitrarily deciding on the 90% figure, there is quite simply a shortfall due to inadequately compensating for economic factors that simply did not behave as expected the last time this sort of major study was undertaken.

        In an ideal world, a new commission would be appointed to study the situation and recommend the obviously minor adjustments needed.  Of course, I doubt if such a sensible approach would be viable in today's political climate.

        •  Couple problems there (0+ / 0-)

          First capital gains don't get included in covered earnings, meaning that overall shifts from wages to such gains theoretically would have moved the percentage up and not down. That is the top 5 and 2% grabbed bigger  shares not just of total income including capital gains but even covered earnings which exclude them. For example the income of most traders working for the Bankstas fall into the covered income category.

          Two you don't address an effect, i.e. shortfall already being predicted prior to 1988 by a proposed cause that iwas by your formulation unanticipated. That is there is a temporal mismatch between the projection changes and the underlying causes suggested to explain them. Unless we invoke the 'Blind Pig/Acorn' theory I see no explanation for the data series represented by projected TF Depletion.

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          by Bruce Webb on Sun Aug 28, 2011 at 04:31:58 PM PDT

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