The whole Social Security Shake and Jive has been pretty entertaining to watch. The core issue is how is a government, the revenue of which conservatives would like to pinch off like the head of a shrimp (POP!), going to meet is Constitiutionally-mandated obligations (Amendment 14) to the SS trust fund, the nearly two trillion bucks collected by the government and spent, among other things, blowing up Iraqis and making sure Florida sugarcane growers and destroy the environment at considerable profit. But (BUT!), you say, didn't the government buy Treasury securities with that money before they blew it like a sailor on shore leave? Well, sure, but riddle me this: who holds the note? GWB has a bunch of his wealth in these securities, but he holds the notes! The gummint holds the notes for the trust fund. GWB himself has hinted where this is all going in a
talk given at the Department of Commerce:
Some in our country think that Social Security is a trust fund -- in other words, there's a pile of money being accumulated. That's just simply not true. The money -- payroll taxes going into the Social Security are spent. They're spent on benefits and they're spent on government programs. There is no trust.
There is no trust.
No trust, no two trillion that you need to pay back, no problem.
There is
so more to it than just this, and I'd like to go into the relationship about availability of cheap oil energy to the growth of the economy and its relationship to this Social Security. So little time. However,
Josh Marshall is on top of this story (although without the energy underpinnings slant) and more. He's the guy from whom I've cribbed the
Constitutional responsibility and
I AIN'T PAYIN'.
4 comments:
I'm not sure how the 14th Amendment can be used to justify Social Security especially since the first section says that people should not be deprived of their property (income) without due process. I suppose JM is referring to the last section of said amendment and thus stretches the meaning of civil war pensions (specifically enumerated) to Social Security. That is pure ignorance.
Congress is required by this amendment to never repudiate the public debt. This is clearly a straw man argument since no one has ever sought in word or action to do such. Social Security recipients and participants do not hold in any shape or form public debt. The trust fund holds that debt. US Taxpayers (most) are non-voting and non-controlling members of that trust fund system (in which federal employees and elected officials do not participate, hint, hint) which is subject to Congress's whims. Should Congress (administrator of the trust fund) decide to cut benefits, that is their perogative, though they do so at risk to their electoral throats.
In fact, the problem has been that Congress continually expanded FDR's system without providing the means to support it. FDR's system was to be only a supplemental insurance system. He envisioned PERSONAL RETIREMENT ACCOUNTS himself! Shame on his party for failing his plan!
Roosevelt proposed that "the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans." He specifically said that in 30 years the need would arise to create personal accounts. That would have been about 1967. In 1965, what FDR said came true and instead of fixing the system, Congress, controlled by the party of entitlements, could only increase taxes. In 1937, the effective rate was 2%. It was increased to 7%. That might have fixed the problem, except Congress, kept increasing the benefits, while people kept living longer and longer.
In 1982, the program was once again in severe trouble. Did they then do what FDR asked? Nope, they raised taxes to 11.4%. Shocking. More than 1/10 of your check, right off the top, was going toward what can only be called a ponzi scheme. Again in 1990, they noted more problems, so they upped the rate, once again, to 12.4. Along the way, Congress also deemed to add on another 2.3% for various other programs, so that a full 15% of your check below approximately 90K. When the system started, it was 2% on the equivalent of 30K in today's dollars.
If we wanted to fulfill some type of promise (ignoring the promise of not confiscating someone's property) to the elderly, then we'd need to go back to the original system and cut benefits. The vast majority of elderly don't need it, but it does make for an interesting incentive when voting time comes along. Dole bravely ran on readjusting the index for SS to match with inflation (instead of faster than inflation) as a means to improve the system and was soundly defeated in Florida because his opponent went around telling seniors he was cutting their checks.
If the truth be told, many of the people drawing checks today never paid the fraction of their checks that taxpayers shell out today. They, not us, underfunded the system. Therefore, my proposal is that they also share in the solution.
My proposal is to cut benefits to SS to reflect the initial plan of FDR and then institute personal savings accounts, like FDR wanted, and even allow people to pay toward their mortgages, typically a guaranteed 5% return! For those seniors who need more help, they can be granted assistance based on NEED, not desire. Means testing should be instituted so that we're not dumping our hard earned money into slot machines in Vegas. Because as it stands, Vegas makes more money off of Social Security than Denny's Twilight Specials. The retired class has more desposable income in the country than any other age group. It is a crime to make low wage workers fund the second homes and cadillacs.
Of course, no politician would dare offer a fair plan lest the blue hairs cut his throat at the next election. So the first step is to trim the flow of blood, to take the reigns from congress. Because as Tocqueville said over 200 years ago, the US system of government will stand until the day the politicians realize they can bribe the people with the people's money. That happened somewhere between 1937 and 1965.
Of course, I suppose we could all demand that congress and federal employees participate in the system. Then, you'd see changes overnight.
JH,
Got no beef with most of your analysis, and give you a hearty rite on!
14th ammendment doesn't justify SS. I could be argued that if the so-called Trust Fund, the two trillion in Treasury notes were held by the Government in trust for the people who've been paying into it, that you can't say it doesn't exist (There is no Trust). Unless, of course, you can make the argument that this was never the case, and there is no trust. Which, right or wrong, Bush and Co is trying to do. They should be (in an ideal world) honest about it.
Your plan is fair and logical, but as you note, the real problem is a political one. I don't think the rhetoric on either side of the asile has been honest to date.
Do you think we can get the Chinese to buy 4 trillion in paper that promises more paper down the way to finance the transition to the current plan?
Even if we could, I think that the my way or highway approach of the administration has polarized the Democrats and left any meangingful reform stillborn. Which is unfortunate, because I don't expect to see much of the 12.5% thats routed to the gummint in my name.
I don't think there is going to be a Libertarian revolution under the AARP's watch during relatively prosperous times. Now, if we see $150 barrels of oil...
Well, if we were to do an accounting of the money paid by present retirees, they'd find out that they are over drawn. Most of the Trust Fund was created post 1990 when taxes were raised. The trust fund was almost zero in 1983. So, if we did a fair accounting of the system, you'd find that a majority of that trust fund comes from the taxes of those who haven't retired yet. Which means that those who are drawing now have overdrawn their benefits, they underfunded the system. You'd also find that those who retired in 1965 were the ones who made out like bandits, they took much more money than they were supposed to (congress jumped into the vote buying business about that time with Welfare and with increasing benefits). So any retired person who now tells me that we owe it to them would only be able to argue that morally because they payed for someone else, we should pay for them.
I'm not sure I like that argument and I hope to God that it will leave a bad taste in my mouth if one day I use it. I can't say never because my Dad was one of the biggest Reagan supporters until he started drawing benefits and now he is fully behind the party of infinite entitlements. Such is the plight of integrity and I'm not sure I can blame people who are worried but I notice my Dad and a lot of other Dads blow a lot of money. And everytime I drive by Seminole Casino, I see miles and miles of retirees lining up to dump their checks into a black hole.
Let's help the seniors who need it and force those who don't need it to pay back into the system. How hard is that to support?
Well, if you're principled, rational, and fair, not hard at all. But, combine a deeply engrained entitlement sensiblity with an expanding demographic and the one of the most powerful political organzations in the US, and you've got trouble.
Is some sort of federally administered, manditory insurance program that keeps seniors from living in abject poverty a good idea? Probably. Is that what we have? Hell no. The Social Security Shuck and Jive (both sides of the asiles) is not about getting one, either.
In some sort of federally administered, manditory investment program that supplants traditional pensions a good idea? Maybe. About this, one thing is clear. The current ponzi scheme is not sustainable without knocking the cap off of the payroll tax, raising rates, or coming up with some other source of revenue.
If the insurance scheme and the pension scheme are going to be conflated, then the risk has to be carefully managed. There is no reason that this risk cannot be pooled among all of the participants. The private account thing is needless rhetoric that confuses the issue.
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