Matt Yglesias

44 Responses to “Happy Birthday Social Security”

1. riffle Says:
   August 14th, 2008 at 7:31 am

   Older people are among McCain’s most solid voting blocs in polling. I have to believe that his true attitude towards Social Security would make some older folks think twice about that.

   He sure won’t be dumpster diving for food, with his wife’s fortune, whether he loses his Social Security or not.

2. bob h Says:
   August 14th, 2008 at 7:54 am

   And it is said that McCain has the advantage among over 65’s? Should not be too hard to do something about that.

3. taskerbliss Says:
   August 14th, 2008 at 7:54 am

   riffle is right on. Obama needs to play McCain’s take on social security over and over again, especially in FL where it might swing the state *and the election* to him.

4. superdestroyer Says:
   August 14th, 2008 at 7:55 am

   Look up the percentage of SS taxes that those over 75 paid during the lifetimes versus what those under 25 will pay in the lifetimes.

   The pay as you go function requires each generation to pay a higher percentage of their salaries into the system.

   The better question is what percentage of the GDP can be spent of pensions. As SS grows and people live longer, that percentage keeps climbing.

5. riffle Says:
   August 14th, 2008 at 8:08 am

   superdestroyer writes: “The better question is what percentage of the GDP can be spent of pensions.”

   Great question. If you want to see McCain pull his patented “I don’t have a clue how to answer this question” routine (grimace, rub chin, lift eyebrows, sigh, be non-verbal for ten seconds plus), then ask him that.

6. James Robertson Says:
   August 14th, 2008 at 8:12 am

   If you apply demographics and math, you’ll understand why there’s a problem. In the not too distant future, we’ll have too many retirees expecting too much money from too few workers.

   We don’t have the problems Europe has with their massively unsustainable systems (given their demographic challenges), but we still have a problem.

   This doesn’t have anything to do with whether the social security program is good, bad, or indifferent. It has to do with rather simple math. What I find amazing is how much yelping goes on when anyone dares to bring up the demographic problem.

7. DTM Says:
   August 14th, 2008 at 8:14 am

   I’m fairly confident Obama will in fact hammer McCain on Social Security, but there is really no sense doing that more than a few weeks before the election.

   superdestroyer,

   I think we will gradually have to retire a bit later on average in response to increasing lifespans. But it is worth noting that productivity gains do mean that people can work a shorter percentage of their lifespan and still achieve the same lifetime consumption rate, so in that sense productivity gains do allow a higher percentage of GDP to go to pensions if we so choose.

8. DTM Says:
   August 14th, 2008 at 8:18 am

   James Robertson,

   I don’t think many people mind if you bring up the future actuarial gap which is anticipated as a result of demographic shifts and then suggest that some sort of tweaking of Social Security will likely be necessary in order to close this gap.

   Now if you instead declare that this actuarial gap means that Social Security is in “crisis” and the only way out is to fundamentally restructure Social Security, then some people will get upset.

9. superdestroyer Says:
   August 14th, 2008 at 8:28 am

   If productivity gains were helping with pensions, then the SS tax would be going down, not up. Raising SS taxes means that outlays to current recipients is increasing faster than the in current intake from the 14% SS tax. As the number of retirees grows relative to current workers, the SS tax will go up (what is referred to as tweaking).

   Ever year a person is below the age of 65, SS is a worse deal to the point that the workers just entering the workforce are getting a poor return on their tax dollar versus those over 80 who paid little in but are receiving benefits many times what they have paid in.

10. DTM Says:
    August 14th, 2008 at 8:43 am

    superdestroyer,

    Productivity gains don’t automatically lead to lower payroll tax rates because they aren’t the only variable in the equation. It is indeed true that because people are living longer, pension benefits are de facto increasing, and funding those increased pension benefits is soaking up all the productivity gains.

    But as I noted, this is not an irrational choice of what to do with productivity gains. Basically, you can use productivity gains to work the same percentage of your life and consume more, which is what you would get if you used productivity gains to decrease the payroll tax while also pushing back the retirement age in response to people living longer. Conversely, you can use productivity gains to consume the same amount and work a lower percentage of your life, which is what you would get if you keep the retirement age the same but increase the payroll tax to pay for these longer retirements. And obviously, you can do a bit of both.

11. Cap and Gown Says:
    August 14th, 2008 at 8:49 am

    Social Security as passed in 1935 was not pay as you go. It was with the 1939 amendments that it was made pay as you go. What is most ironic about the 39 amendments was that it was business groups that pushed for the switch to pay as you go. They were afraid that the huge trust fund being built up would distort the capital markets and might lead to having the government end up controling investment decisions in the private sector.

    Please see either Jill Quadagno The Transformation of Old Age Security or Linda Gordon Pitied but not Entitled.

12. Ricky Says:
    August 14th, 2008 at 8:54 am

    Two solutions to superdestroyer’s problems.
    1. Pay people more. The demographics are one issue, but the other is that the only people getting more money after inflation over the past 20 years are the top 1 or 2% and they don’t pay but a small fraction of their income into SS.
    2. Raise or eliminate the income limit. If the rich won’t pay their workers more, then take it out of their paychecks.
    Either one of these would likely make SS solvent for the next century and would get us past that demographic issue.

    Looking at the current market I can’t see why anyone would think risking their entire retirement in the markets is a good thing. SS is insurance for your retirement not an investment vehicle. SS is about not starving to death when you can no longer work, not about gambling that the market will peak during the 25 years of your retirement. The reality is that SS allows those of us with a little extra money or a job at a generous company to take a little risk by investing in the market to aid in making our retirement more comfortable. Without SS most people would likely get a lot more conservative with their money and capital would trend toward less innovation.

13. Not as stupid as Will Allen Says:
    August 14th, 2008 at 9:03 am

    The problem with idiots like James Robertson yelping about “demographic issues” is that these are taken into account in the projections and those projections don’t actually show huge deficits unless one assumes that the economy will slow to such a great extent that investing your money in the United States will be a disaster.

    But then James Robertson is such a fucking moron that he doesn’t mind spending more than the entire projected deficit of Social Security on a plan to slaughter Iraqis because of the phenomenal danger Iraq posed to our national security. That there was never any such danger was obvious to anyone with at least a room temperature IQ, so his opinions aren’t worth the paper he used to wipe them up.

14. superdestroyer Says:
    August 14th, 2008 at 9:15 am

    ricky,

    Paying people more does not lessen the amount of GDP that would have to spent on pensions. As it would do is be inflationary and trigger additional spending on pensions. Also, private accounts have the same problems. If the elderly had invested their entire lives, most investment income would be going to the elderly.

    The real question is what percentage in future years is the U.S. will to spend on pensions and health care for the elderly. The next questions is what are younger generations willing to give up to hit those GDP numbers. In the 1950’s people were willing to pay 1% of the salary into SS. Now people pay over 7%. What are people willing to pay in the future.

15. SLC Says:
    August 14th, 2008 at 9:19 am

    The so-called pay as you go Social Security system is nothing but an accounting gimmick. If the employees contributions, the employers’ contributions, and the interest earned by those contributions are all considered, the average employee is fully funded by his/her contributions to the system for some 10 to 15 years into retirement. The problem is that the interest earned is from investment in treasury instruments. Treasury instruments consist of the government borrowing money from investors to pay for ongoing government programs, unlike investments in the stock market or certificates of deposit which are used to fund (hopefully) productive enterprises.

16. Chris O. Says:
    August 14th, 2008 at 10:12 am

    Social Security’s just one year older than John McCain! Now I see why he hates it: sibling rivalry.

17. SLC Says:
    August 14th, 2008 at 10:19 am

    In addition, I would also point out the big lie spread by fucktards like Larry “cokehead” Kudlow on CNBC that retirees get their contributions back in 2.5 years. He conveniently ignores the employers’ contributions and the interest earned in making this claim.

18. perfectlyGoodInk Says:
    August 14th, 2008 at 10:49 am

    Any program that directs so much money to so many people is bound to be “popular” with the recipients, who will also be more politically organized than the taxpayers. So that’s not really an argument over whether the program is desirable (nor, in this case, sustainable).

    BTW, I hate what an election year does to a blogger like Matt. Every single policy post is now within the lens of boosting his chosen candidate. Of course you like Obama, Matt. You’re a liberal. We get it.

    Please, more policy, less politics.

19. James Robertson Says:
    August 14th, 2008 at 12:33 pm

    I love the way some people go bats on an issue like this. Regardless of my position on Iraq, social security is what it is. The demographic issues confronting the program are there no matter what we do or don’t spend on any other program.

    The problem the system has to confront is simple: how to take a popular program and make modifications that don’t destroy political careers, while at the same time allowing the program to survive in an affordable way.

20. No Comment Says:
    August 14th, 2008 at 1:54 pm

    If a private company tried to run its pension pension plan like this, the employees and pensioners would be screaming, and rightly so. The government’s not a private company, but calling if the government were trying to run Social Security like a real pension plan it would look completely different.

21. DTM Says:
    August 14th, 2008 at 3:07 pm

    No Comment,

    Why do you claim that? Defined benefit plans work pretty much like Social Security, and that was the dominant form of pension plan before the relatively recent rise of defined contribution plans (such as 401Ks).

22. No Comment Says:
    August 14th, 2008 at 3:50 pm

    Why do you claim that? Defined benefit plans work pretty much like Social Security, and that was the dominant form of pension plan before the relatively recent rise of defined contribution plans (such as 401Ks).

    As I understand it, a corporate defined benefit plan is required to be a funded benefit plan, not a pay-as-you-go plan, because the latter makes employees’ pensions subject to the extremely high risk associated with a single company’s solvency 20 or 30 years in the future. Social Security, by contrast, is a pay-as-you-go plan.

    Perhaps I am wrong and there are pay-as-you-go corporate pension plans, but that’s not how I understand the system to work.

23. DTM Says:
    August 14th, 2008 at 4:48 pm

    No Comment,

    Current law encourages certain funding levels, but does not guarantee all corporate pensions will in fact be fully funded (indeed, it is effectively impossible to provide such a guarantee for a defined benefit plan). So, in practice a lot of corporate defined pension plans are not in fact fully funded.

24. stevie Says:
    August 14th, 2008 at 11:38 pm

    My question is why is McCain collecting over $28k a year in SS and GH Bush collecting over $40k? These corporate socialists are already getting full pension and medical for life paid for by the taxpayers. SS should be for poor, working and middle class people and not for the already rich. They’re like welfare queens driving Cadillacs.
    The wealthy should be made to ’spend down’ their assets in order to collect SS.
    I’m tired of paying for their golf outings.

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