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God save Social Security from its friends. Because they don't understand the harm that they are proposing in putting forth 'progressive' 'fixes' to Social Security 'crisis'.

In 1999 a couple of little known economists (and not well enough known even now) named Dean Baker and Mark Weisbrot published a book called Social Security: the Phony Crisis. The introduction is on-line and linked. While a lot has happened since 1999 the fundamental thesis of 'Phony Crisis' has held up very well - Social Security is not broke, faces no crisis, and needs no particular change in its current financing structure. And what it certainly DOESN'T need is any proposal to extend FICA rates to capital gains or indeed even lifting the current payroll gap more than marginally.

Now this will seem like heresy and indeed like treason for a guy that is Founder of the dKos Social Security Defenders Group and indeed has the effrontery to use socsec dot defender at gmail as one of his mail accounts. I mean doesn't this guy know ----- (fill in the blank) about Social Security? Well oddly I do. In particular I have studied the numbers. More heresy below the Orange Squiggle of Obvious Sellout by Traitor Bruce.

The first thing for Progressives to realize is that the claim 'Social Security doesn't contribute to the deficit' is dead wrong. Not wrong in spirit mind you, but wrong as a pure matter of definition of 'deficit' and 'contribute'.

In point of fact Social Security has been running surpluses (as that is defined in federal budget reporting) every year since 1983. And STILL projects to run surpluses for a few years coming. Which is to say that using the top line number EVERYONE in the media and in CBO scoring to measure 'THE deficit' Social Security is 'contributing' to it. By REDUCING IT.

Now I can sense people shaking their heads out there. Because as informed people understand Social Security is officially 'off budget' and so can't contribute to deficits. Well it turns out that the first part of that is true. Social Security is by law 'off budget'. Moreover Social Security is by law prohibited from borrowing from the public to finance benefits should current revenue and assets ever fail to cover those benefits. In fact under that same current law such an event could only be addressed by an immediate cut in benefits so that the outgo met the then current inflow of revenue. And it is that projected overnight cut in benefits of around 25% in or around 2033 that is the very definition of 'crisis'. But the fact that Social Security is legally off-budget and prohibited from borrowing doesn't mean it can't 'contribute' to 'deficits' or 'debt'. While it would seem to follow it just doesn't.

The key to unraveling this is to understand the nature of the Social Security Trust Funds (there are two). The first SS Trust Fund was formally established with the Social Security Amendments of 1939 not to be any kind of investment fund or pension fund but instead to be a reserve and buffer for what was otherwise a Pay-Go Insurance Plan. While it is true that the law has required that all Social Security revenues in excess of current benefits be held in interest earning securities it turns out that the bulk of those earnings have to be retained simply to maintain the mandated level of reserves. Moreover there would actually be an active danger to Social Security if the level of reserves gets too high above that mandated minimum, and I would argue that the Trust Fund has been too close to that 'too high' level for years now. At least on a combined basis. Because as alluded to there is no 'Trust Fund' but instead two Trust Funds. And it turns out that one is currently drastically underfunded and has been while the other one is relatively flush.

All of this is probably so dense as to seem gobbly-goop. And maybe not worth any Kossacks wasting time on. Because this poster has GOT to be wrong here. Because everyone knows Social Security is funded by regressive taxation and the right answer is to restore progressivity by raising the cap or extending taxation to capital. Why it is a no-brainer!!

Well except some people with very fine brains designed the cap and the principle of not extending FICA to capital back starting with the CES in 1934. And produced what has been the most popular government program maybe in history, enough that it was once dubbed 'The Third Rail of American Politics' because anyone who dared touch it would be electrocuted electorally. But now a bunch of progressives seem to have bought into the right wing messaging of 'crisis' and are advocating 'fixes' based on what is still a Phony premise.

Social Security doesn't need a dime from billionaires. It just doesn't. Now food stamps, and infrastructure, and universal health care, and early education, and investments in climate change amelioration all need more than a dime from those billionaires. In fact I would happily return to Kennedy or Eisenhower top taxation rates to extract those dimes in many multiples. Just don't screw with a Social Security system that was designed on purpose NOT to rely on those dimes.

My motto: "NO to Chained-CPI, NO to Scrap the Cap, NO to 'Fixes' to a 'Crisis' that DOESN'T EXIST". Don't buy into Phony Crisis.

Slings and arrows welcomed in comments. Because I know this won't go down well.

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Comment Preferences

  •  Tipped and Rec'd (4+ / 0-)
    Recommended by:
    Puddytat, maryabein, whaddaya, Lucy2009
    •  Indeed 'Jobs, Jobs, Jobs' (12+ / 0-)

      Examination of the numbers shows that Social Security would self-fund under current financing if Real Wage simply kept pace with historical averages.

      Which is a round-about way of saying "More Jobs. At Better Wages."

      Minimum wage is part of that. Keeping the Fed mindful that it has two mandates: controlling inflation and limiting unemployment and not just the former. And there are dozens of other solutions to the now 30 year trend of income inequality that should be pursued for their own sake. Which as a bonus would fully fund Social Security's current benefit formula and allow room for enhancement besides.

      Social Security thrives when the working class and the middle class don't fall behind while the top 1% reap all the gains from productivity. 'Progressive' fixes to Social Security are starting at the wrong end. The 'Crisis' such as it is has been empowered by technocratic neo-liberalism that puts forth all kinds of gimmicks to get around the simple reality:

      More Jobs. At Better Wages. And most everything gets better. Including Social Security.

      SocSec dot.Defender at - founder DK Social Security Defenders Group

      by Bruce Webb on Tue Nov 05, 2013 at 11:06:55 PM PST

      [ Parent ]

  •  The SSI surplus has been funding tax breaks (3+ / 0-)
    Recommended by:
    Puddytat, Amber6541, Lucy2009

    The SSI system has been providing the backup funding in the US budgets to provide tax breaks for the wealthy since the Reagan years.  

    This is becoming an issue, since the time to pay those breaks back as in raising taxes on the wealthy to a level that will sustain America's government operations, is coming due.

    That, alone, drives the budgetary hyperventilation on the right wing over SSI.  

    Shortchanging the worker, even when they have a legally binding contract/pension and 40 years of loyal service and contributions is not enough for the right-wing zealots.

    Let's hope 2013 is the year of 'getting a clue on the GOP'

    •  Nope that is a myth (4+ / 0-)
      Recommended by:
      Puddytat, tardis10, whaddaya, WiddieDawg

      The amount of excess SS revenues in excess of benefit payouts during the Reagan administration were negligible in comparison to either the tax breaks he handed out or the defense spending he indulged in. This was largely due to the fact that the 2% FICA increase put in place as a result of the 1983 'reform' legislation was phased in over a 10 year period.
      The actual sums raised in excess of benefits can be derived from this table in a couple of ways:

      One you can subtract total cost from tax on payroll. Or you can include total tax revenue by including tax on benefits, largely but not entirely collected from the same people who benefited from the tax breaks you reference. Either way the net amounts were tiny in relation to the overall financing of the system.

      The whole notion of the 'Great Reagan Raid' is popular among progressives but in the cold light of day it is just derived from the Wing-nut narrative around 'Phony IOU' in regards to Trust Fund assets.

      In fact since there is a legally mandated minimum level of reserves measured as a percentage of next years cost and known as 'Trust Fund Ratio' and set at 100, the fact that total Trust Fund reserves at the end of 1988 were only by that metric 41  you could argue that Reagan didn't tax workers ENOUGH and as a result borrowed TOO LITTLE from Social Security. Exactly the opposite of the conventional narrative most of us lefties hold so dear.

      One of only many, many oddities in Social Security financing.

      But there was no Reagan Raid. For that matter there was no Johnson Raid as a result of putting Social Security  On Budget. Because this same table shows that Social Security was rapidly going into the red at the same time the change was made and so actually exacerbated deficit numbers mostly coming from Vietnam spending and not concealing them as the conventional narrative would have it.

      Now Bush II raided Social Security to pay for HIS tax cuts. Or at least used SS surpluses to disguise their impact. But realistically there were no such surpluses until late in the 90s, during the Reagan and Bush I years the Trust Fund just barely recovered to a state of minimal solvency as that was and is measured by current law. That is there was nothing to steal and so nothing stolen.

      SocSec dot.Defender at - founder DK Social Security Defenders Group

      by Bruce Webb on Tue Nov 05, 2013 at 11:36:07 PM PST

      [ Parent ]

      •  And not that it is important as such (5+ / 0-)

        But 'SSI' does NOT stand for 'Social Security Insurance' and the use of it to represent the system more properly known as OASDI (Old Age/Survivors and Disability Insurance) has led to untold confusion.

        Because it turns out that a lot of lies told about Social Security by wing-nuts are in fact often true about the program officially known as SSI or Supplementary Security Income. For example many Fox viewer types insist that immigrants can turn around and bring over their elderly parents and immediately have them start collecting Social Security. Well that is not true at all, you need to have the equivalent of 10 years of contributions to collect even a penny from OASDI and those elderly immigrants wouldn't qualify. On the other hand under certain circumstances they WOULD qualify for SSI.

        So please progressives avoid the use of 'SSI' as an acronym for Social Security at all costs. It seems innocent enough but once again amounts to buying into the enemy's messaging. They are already getting tens of millions of dollars from the billion dollar to be Peter G Peterson Foundation to sell us a certain line of lies about Social Security. There is no need to throw your own two cents onto the pile with sloppy language and references.

        SocSec dot.Defender at - founder DK Social Security Defenders Group

        by Bruce Webb on Tue Nov 05, 2013 at 11:43:07 PM PST

        [ Parent ]

  •  Thank you (6+ / 0-)

    The 1% won't be satisfied until all social programs are ended, and the 99% become serfs.

    Every single time I walk into a fast food place in the morning or a Wal Mart and see an elderly worker, I ask them about why they are working when they should be enjoying retirement.  NOT ONCE has a single one told me that they enjoy working.

    They work because they have to, because their pension was stolen by their company, because their retirement savings, while never enough, were lost by Wall Street Investors who took them not only for decades in fees, but took every last penny to gamble with.  I get told about medical bills for a sick spouse, prescription costs, rising food prices, and the escalating cost of rent.

    And now they want to take their Social Security, too, by pretending that the system is "broke".  BS.

    We've always got plenty of money for war, drones, military contractors, and unnecessary and massive surveillance program, private contractors, and military bases all over the world.  Nobody ever tells the Pentagon that we're "broke".

    I don't care how much propaganda they have spewed at us for decades or how much louder the microphone they broadcast it is.  It's a lie to hoodwink America into giving up every last nickel to the hands of the greedy.

    There already is class warfare in America. Unfortunately, the rich are winning.

    by Puddytat on Tue Nov 05, 2013 at 11:53:39 PM PST

    •  I had a friend in Everett Washington (3+ / 0-)
      Recommended by:
      whaddaya, milkbone, Puddytat

      Got out of the Army after Korea and went to work for a Door Company in his home town. Not a lot of money but it came with a pension, enough to lve a reasonably comfortable life for a veteran and life-long skilled worker . Unfortunately after John had worked for the company for almost 40 years and was THIS close to that pension the company went bankrupt and took the whole pension fund down with it. Leaving John to live on his Social Security. Which wasn't much at all.

      People who knew John back when he was on the job never would have described him as happy go lucky. In fact he was kind of a morose kind of guy on his best day, at least after his wife died. But at least he had his pension to look forward to. Until he didn't.

      'Bitter' doesn't even begin to describe my friend. He did everything right, went off to war, came out as a Sergeant, put in his time working hard physical work for decades. And got chewed up and spit out. So nobody blamed him for being an even more pissy old man than his natural temperment would have made him anyway. Which is saying something.

      SocSec dot.Defender at - founder DK Social Security Defenders Group

      by Bruce Webb on Wed Nov 06, 2013 at 12:07:25 AM PST

      [ Parent ]

      •  Sounds a lot like my late aunt (2+ / 0-)
        Recommended by:
        Amber6541, Bruce Webb

        who worked for a canning company over 40 years.  A divorce left her caring for her 3 kids with no help at all from her alcoholic ex.  She was very close to retiring when the can company also declared bankruptcy taking her pension.

        She lived on Social Security alone and died because she didn't make it to age 65 and the Medicare that would have enabled her to see a doctor and get treatment for what turned out to be severe high blood pressure.  She was a month away before she had a massive and fatal stroke.

        She always said she was fine and feeling good.  I now know she likely wasn't.  

        She was grateful that she had a place to live with one of her sons who paid the mortgage himself and shared the rest of the household expenses with her.  Otherwise, she couldn't have lived on that Social Security check alone.

        Someone once said that a society should be judged by the way we care for children and the most vulnerable.   We're failing that test in this country big time.

        There already is class warfare in America. Unfortunately, the rich are winning.

        by Puddytat on Wed Nov 06, 2013 at 11:13:19 AM PST

        [ Parent ]

  •  Social Security assets vs Phony IOU's (3+ / 0-)
    Recommended by:
    tardis10, dwellscho, whaddaya

    The Social Security Trust Fund was established on Jan 1, 1940 and from the beginning was mandated by law to invest all income in excess of current benefits in securities fully guaranteed as to principal and interest by the Federal government. This just codified a practice already in place since the program was set up pursuant to the Social Security Act of 1935.

    Since in practice securities "fully guaranteed as to principal and interest" by the Federal government means principally Treasury Bonds and Notes and since any issuance of a Bond or Note in exchange for excess SS revenue can be seen as borrowing from the Trust Fund (that is a Bond or Note is just a promise to repay borrowing with interest) the whole idea that the Trust Fund can even be 'raided' is meaningless. Gore's use of the term 'Lock Box' did untold mischief because it led people to believe that Trust Fund assets could be locked away in a way that they couldn't be borrowed from by the Feds. When in fact the law since 1939 and practice since 1935 made that borrowing an absolute obligation on the part of the Trustees.

    Social Security holds $2.8 trillion in the safest asset that has existed in the 78 years since the establishment of Social Security (though Republicans threatening default in 2013 didn't help much). By definition every penny of the money which funded those assets was 'borrowed'. Because that is exactly what you do when you buy a Treasury. The idea that this process either started with Reagan or was somehow illegitimate and amounting to criminal theft or fraud is simply to misunderstand the state of current law as it has existed for decades.

    SocSec dot.Defender at - founder DK Social Security Defenders Group

    by Bruce Webb on Tue Nov 05, 2013 at 11:56:23 PM PST

    •  Absolutely right! (2+ / 0-)
      Recommended by:
      whaddaya, Tweedledee5

      I talked to several former social security trustees.  The system has always redeemed the "special bonds".  If it didn't that would amount to a default.  

      I agree with you 100% that Al Gore's lock box was idiocy.  Perhaps that is just one reason why Gore didn't win big over Bush Junior.  If you "locked up" the money exactly where would you lock it?  In a bank vault?  It's just plain silly.

      Indeed, all that is wrong with social security is the salary cap.  The problem is that the longer we delay raising the cap, the more difficult it will be to make up the projected short fall.

      As far as the demographics argument goes,  there are many who think that if the immigration issue was solved that issue would become insignificant.  Perhaps that is one reason why the right wing does not want to do anything about immigration (along with outright racism).

      "The real wealth of a nation consists of the contributions of its people and nature." -- Riane Eisler

      by noofsh on Wed Nov 06, 2013 at 04:18:44 AM PST

      [ Parent ]

      •  "Longer we wait" is ALSO a myth (5+ / 0-)

        Along with the idea that the only solution is a cap increase.

        First take the series of Social Security Reports back to 1997. In each one you will have solemn language from the Trustees to the effect that "sooner is better than later" and that the cost of delay will be an ever greater fix. The problem is that their own numbers didn't show that. Instead as we did nothing from 1997 to 2004 the cost of the 'fix' going forward actually shrank from 2.22% of payroll to eventually 1.89% as the date of Trust Fund Depletion was pushed out from 2029 to 2042.

        In 2004 I dubbed this the 'Nothing Plan' and pushed hard at the idea of " 'Nothing' -the proven Social Security Reform Plan ". Because the "cost" of doing Nothing was to see Social Security's accepted crisis point, that of Trust Fund Depletion and mandated subsequent cuts in the benefit formula, being pushed out at a rate of more than a year per year. A rate that suggested that Crisis would never actualy come and indeed by some projections would have Social Security OVER FUND.

        Now as it turns out that progress stalled in 2005 and by 2007 was beginning to move in reverse. And right now that 2042 date has deteriorated to 2033 and the actuarial gap crept up to 2.66% of payroll. Which some might take as proof that "Sooner is better than later". But me, I would point out two things first. One even now you would have to balance out the slight deterioration in Trust Fund outlook as against the negative effects of any fix amounting to 2% of payroll, whether that fix came on the benefit side or the income side or both. In effect doing Nothing still delivered the equivalent of a 2% of payroll tax cut to the economy. Now the incidence of that tax cut would depend on which fix you had foregone, in the case of most Scrap the Cap formulations that would have been on the upper middle class (and not the plutocrats). Would this have been the right macro policy given the economy since 2007. Which brings me right back to the biggest point. What exactly has been happening since 2007? Maybe an unemployment driven continuing recession that has suppressed demand? And what pray tell would be the solution to THAT?

        How about More Jobs. At Better Wages.

        We CAN afford to wait on Social Security. What we can't afford to wait on is a program focused on creating employment, income and demand for workers. If we do that, if we get Real Wage growing at around the 1.5% pace it historically did rather than the 1% rate the Social Security Trustees project going forward then Social Security funds under its currrent revenue formula. Including the cap on contributions.

        Raising the Cap is the wrong solution to the wrong problem. In large part because it gives the actual 1% a free pass under most formulations and creates a huge bureaucratic nightmare under those formulations that would have it attach to gains from capital that would actually affect them. In contrast proposals to tax most capital gains and most assuredly 'carried interest' at regular marginal tax rates could easily be done within the current tax system and would raise huge amounts of money which we could devote to bebuilding physical infrastructure and feeding and educating our kids. And in the process create More Jobs. At Better Wages.

        I am all for Progressive Taxation. I am an unreconstructed New Dealer who venerates FDR. And God knows he didn't have a problem with high rates, even before WWII the top rate was pushed to 80% and topped out at 94% at the height of the war. And you can throw me right back into that briar patch.

        But consider this. Social Security was considered then and now as the Crown Jewel of the New Deal, FDR's pet project if you will. And as marginal tax rates increased from 63% in 1932 to 94% in 1942 guess what percentage of that new income tax that FDR devoted to Social Security? Zero, zip, nada. And that wasn't because FDR didn't care about Social Security or was hesitant to tax the rich. No it was because he and his made a conscious decision NOT to tap that income stream for Social Security.

        Why? Well I would tell you, but this comment is too long already. So let me answer a question with a question: Why do the Scrap the Cap advocates thing they are smarter than FDR, Frances Perkins and the rest of the New Deal Brain Trust?

        SocSec dot.Defender at - founder DK Social Security Defenders Group

        by Bruce Webb on Wed Nov 06, 2013 at 06:14:13 AM PST

        [ Parent ]

  •  Only Republicans stand in the way of chained CPI (3+ / 0-)
    Recommended by:
    Bruce Webb, whaddaya, Tweedledee5

    It seems to me that the only obstacle in the way of chained CPI is the Republicans not wanting to raise tax revenue. If the Republicans were to agree to increased tax revenue in return for chained CPI and, more important, the political uppercut of splintering the Democratic Party, nothing would get in their way.  

    Obama wouldn't. His own budget proposal includes chained CPI in return for tax revenue.

    Harry Reid wouldn't. He also has put chained CPI on the table in return for tax revenue.

    A large chunk of Dem senators wouldn't. Last I checked, the Sanders resolution against chained CPI in general doesn't have Dem senators rallying behind it (in contrast with the Sanders amendment, which mentions only disabled vets and their survivors but which the Sanders outfit presented to the public as protecting social-security recipients in general).

  •  I'd say the Begich/Brown proposal (1+ / 0-)
    Recommended by:
    Bruce Webb

    is smart politics. And,in that it mildly addresses the need to increase benefits for the bottom tiers, a wee bit more reality based than the other political narratives swirling about SS reform.
     Thanks for all you do keeping the actual facts straight,Bruce. (and educating me) But I'm unconvinced that this is an era in which the straight facts matter as much as they should.

    "George RR Martin is not your bitch" ~~ Neil Gaiman

    by tardis10 on Wed Nov 06, 2013 at 07:45:53 AM PST

    •  You got that right (1+ / 0-)
      Recommended by:

      I am planning a series of posts to be published at Angry Bear and maybe cross-posted here that reduce this whole debate to a thought experiment/gambling game which I am going to place on the distant yet oddly earth-like planet I am calling Trafalmadore (and yes that name is stolen from Kurt Vonnegut, what of it?)

      The inhabitants of one part of Trafalmadore are organized into a polity called the United States of Trafalmadore (which cheeses off all the rest of the inhabitants of the planet, who however are outgunned by the UST).

      The UST is a democratic republic which has established an income security program for retired cititzens called Total Security or TS for short. The game requires the citizens of the UST to come up with a solution to a medium term funding shortfall in TS and starts with a radically simplified set of assumptions and then builds on layers from there.

      It will be a fun game for the whole family. If your family is a bunch of numeric logic geeks. Look for it at a blog in your local Blogoverse. Or maybe right here. We will see how it goes.

      SocSec dot.Defender at - founder DK Social Security Defenders Group

      by Bruce Webb on Wed Nov 06, 2013 at 09:10:05 AM PST

      [ Parent ]

      •  God Bless You,Mr. Webb ;) (0+ / 0-)

        Hope you choose to cross-post here as well as Angry Bear. (either way,I will read it) Sounds like a project that deserves many eyes.
        Montana Wildhack

        "George RR Martin is not your bitch" ~~ Neil Gaiman

        by tardis10 on Wed Nov 06, 2013 at 09:20:12 AM PST

        [ Parent ]

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