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View Diary: Insolvency, tax cuts, military spending and social security (188 comments)

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  •  Hmmm. (0+ / 0-)

    I'm not sure how much of this I agree with. SS was overfunded for decades because everybody recognized that there would be a huge influx of retirees (compared to the number of workers) when the Baby Boomers started getting old--i.e., now--and to soften that blow to the workers who would ordinarily have had to fund those retirees, Boomers paid more into the fund that they themselves would draw out. That the fund in which these extra $ was put has been borrowed against (and that's what has been done, after all, since the funds were replaced with interest-bearing bonds, iIrc) merely means that the money is there in a different form. The only crisis exists because now those bonds need to be cashed in, and Republicans/conservatives don't want to honor that debt.
    As far as FDR's point goes, it really is irrelevant to today's discussion, imho, and in any case got solved by the increase in the taxes mentioned above. The economics work, actually; it is the politics that are messing things up.

    "Lone catch of the moon, the roots of the sigh of an idea there will be the outcome may be why?"--from a spam diary entitled "The Vast World."

    by bryduck on Tue Apr 24, 2012 at 05:25:03 PM PDT

    [ Parent ]

    •  Overfunding: the problem, not the solution (0+ / 0-)

      The FDR quote remains utterly relevant. Because he understood the economics, which is the same as it was then. To be unpleasantly blunt:
      You don't.

      Pivy bringing up the gold standard is a very red herring. What FDR & Gulick say is very modern MMT / "fiat" money thinking. The errors you make, seen everywhere nowadays, are from gold standard / commodity money / modern mainstream quackonomics thinking - which gets it wrong even if there IS a gold standard.

      The everything-backwards-quackonomists successfully brainwashed "everybody" in 1983 with a massive propaganda campaign so that "everybody recognized" that black is white, that up is down. Academic economics had been corrupted long enough, too many people who understood real economics had died off or retired.

      FDR saw the economics happen in real time. Part of the reason for the 1937-38 Roosevelt Recession was mistaken accounting for Social Security taxation, which took dollars out of the economy at a time when they were sorely needed - an experience FDR & Gulick allude to.  The Big Trust Fund - the impossible prepayment - the Greenspan/Reagan tax hike in miniature. Difference is 45 years later the quacks convinced everybody to cut their own throats in 1983, and continue to for thirty years, because they wanted to have a feudal society.  While FDR realized the mistake in months, and reversed it, because he didn't like feudalism. If one wants to have a Giant Teddy Bear Trust Fund , the sensible thing is to put magic 10% or whatever bonds in it -  Robert Eisner's  idea , see also Why it’s So Hard to Sign Progressive Petitions    

      The tax increase, the overfunding was NOT the solution
      It is & was the problem!!

      There WAS no problem to be solved.

      Germany remains on an FDR style pay-as-you-go plan, because it is the HIGHEST feasible, non-destructive rate of taxation. And it works just fine. Far better than the 1983 plan, which amounted to massive welfare-for-the-rich. The government spending characterized as "borrowing from SS" was the very necessary solution to the big problem created by SS overfunding "solution". There had to be welfare-for-somebody, or the economy would have collapsed because of the destructive "solution". Reagan & Greenspan said; Welfare for the rich!  Could have just rebated the dollars back to the workers they had been ripped off from, in effect returning SS taxation to sane levels. States cannot "prepay". They cannot save up their own money. A major Trust Fund of a country's own money is nearly always cover for a scam.

      "Soften the blow?"  That's like asking:  Would you rather be beaten with a baseball bat now - or 30 years from now, when you will probably be wearing armor (have money) that will really soften the blow? Anyone would say, 30 years from now, please. And then in 30 years, say, 30 years after please, ad infinitum. Greenspan / Reagan overfunding inflicted an utterly unnecessary, extremely damaging blow aimed straight at the working / middle class, and was quite successful in destroying it, and creating the worst 30 years in US economic history - even before the crisis!

      In real terms, the "blow" cannot be softened. If there is a geezer boom, because there was a baby boom long ago, society is going to have to devote that much more resources to the geezers - or grind them up into Soylent Green. Just like it devoted more resources to the geezers when they were babies - and that was a time of great prosperity, partly BECAUSE of the baby boom, because modern economies are demand-constrained.  Equally, the geezer boom might have become a time of excessive prosperity for the lesser people, and that is what the oligarchs fear above all.

      A pay-as-you-go system is macroeconomically neutral, just tracks real resource flows. So what if the tax might become higher 30 years from 1983?  People would have been much richer. The economy would be that much more financially stable, more equitable if we had kept the FDR plan.  It is much easier to pay a $10,000 tax out of a $100,000 salary than a $1,000 tax out of a $20,000 salary.  The SS Trust Fund is an accounting record of the destruction of the middle class.

      And now the thugs, whose mindless greed is boundless, who never stop making their Big Lies ever more outrageous, ever more innumerate, want to  rob working people once more by cutting benefits, by not (quasi) "returning" people's hard-earned, cruelly stolen money.

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