mbs: Here's the column with my witticisms interspersed . . .
" . . . Before all else, let's be clear about one thing. The challenge facing Social Security isn't the figment of some statistician's overheated imagination or a political ploy. The challenge is real and can best be summed up in a single word: demographics. . . . "
mbs: The bullshit alert siren has gone off.
" . . . In 1950, for example, there were 16 workers for every one retiree. Today, the ratio of workers to retirees is 3 to 1, and will drop to 2 to 1 by 2030. . . . "
mbs: Breathtakingly dishonest, but not an unusual statement in the debate. All you have to do is read the excerpt from Eisner that I posted a week or so ago.
"It's this relentless demographic shift that is fueling Social Security's financial woes. Starting in 2016, when today's 50-year-olds are scheduled to retire, Social Security will pay out more in benefits than it collects in payroll taxes. If no changes are made before then, the government will either have to raise taxes, cut benefits or other government spending, or add to the public debt."
mbs: An abject lie. Before the tax cut, the unified budget was in surplus till 2050, which means that NO change in taxes, spending, or borrowing was necessary to pay all benefits as promised for that entire period. Now with the tax cut, that date is less far off, but chances are there is still a projected surplus thru 2020.
"The good news is that the Social Security Trust Fund has been promised enough resources to pay full benefits through 2038. The bad news is that the Trust Fund is a financial obligation, not a financial asset. That's a big distinction."
mbs: true.
"Since 1984, Social Security has been collecting more in payroll taxes than it pays out in benefits. This money is assumed to be saved in the Trust Fund as a way of "pre-funding" the benefits of future retirees. In reality, the money is "loaned" to the Treasury, which in the past used the money to underwrite federal spending and is currently using it to retire public debt. In other words, this money has already been used. In return, the Trust Fund receives from the Treasury special bonds that can redeemed as needed."
mbs: true.
"When the Trust Fund tries to redeem its bonds starting in 2016, where will the Treasury get the money? . . . "
mbs: before the tax cut, it already had the money. probably still does, though new projections have not been released yet.
"The Clinton administration's 2000 budget summed up the problem perfectly:
mbs: there's a pinnacle of truth for you . . .
"Balances are available to finance future benefit payments and other trust fund expenditures -- but only in a bookkeeping sense. . . . They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits."
mbs: true.
"Thus, the government faces the same unpalatable choices of spending cuts, tax increases or budget deficits, whether the Trust Fund's balance is a billion, a trillion, or nothing at all.
mbs: depends on the shape of the rest of the budget, as above.
"Social Security's shortcomings go beyond budgetary issues. Chief among them is that workers don't truly own their Social Security benefits. They pay taxes into a system in exchange for a promise that, when they retire, the government will somehow find the money to pay their benefits. A future Congress, facing annual deficits of hundreds of billions of dollars, could raise taxes or cut benefits with the stroke of a pen, even for workers who had paid into the system for decades."
mbs: true in principle, but Congress has made large adjustments in the past. There is plenty of time to wait and see how the economy shapes up in 2020 or so.
"The current Social Security system also does not allow workers to build up an estate that they can leave to their beneficiaries. .. . "
mbs: it's not supposed to. It's insurance. The system is the estate.
"This is not a problem for wealthy Americans who earn enough to give their children a head start in life. But for many middle- and lower-income Americans, Social Security is their only long-term savings tool."
mbs: and whose fault is that?
"Addressing these challenges means putting aside ideology and taking an honest look at how best to preserve and enhance this vitally important program. It means rejecting inflammatory rhetoric or scare tactics in order to make a realistic, nonpartisan appraisal of what changes might restore people's faith in the system and, at the same time, give them options for increasing their wealth and passing on what they've worked a lifetime to accumulate. . .
mbs: sounds like greasing the skids for privatization. Notice the segue from solvency of the program to individual assets. Actually the two goals conflict. Oiling up individual accounts drains resources from the program and the Federal gov as a whole.
mbs: JT's comments and mine . . .
"1. Using the excess FICA to pay down the debt does not "spend" Trust Fund money as Moynihan claims, but just substitutes one debt for another, with a net of no change except for interest. Am I right?
mbs: No. Using FICA to pay down non-FICA debt doesn't make the Trust Fund balance any bigger. Arguably, less non-FICA debt makes the Feds more able to pay SocSec, but we could say the same for public investment. An extra trillion of debt makes relatively little difference to Federal Gov solvency in 2020 or 2040. Insiders to the debate will concede in enlightened company that getting rid of the debt that now stands altogether or by half makes little difference in the long run.
"2. Just how big is the Trust Fund at its max in relation to the Federal debt? What I have in mind is that the so-called tax-cut means no surplus, and thus no continued debt paydown.
mbs: There is plenty of surplus left, most of it due to excess FICA revenues, so there will be plenty of debt pay-down, even after the tax cut.
"3. If the dollar is just a Fed obligation, backed by no more than Treasuries (I've been re-reading your book, Doug), and if Moynihan is right (hah!) that making good on the Trust Fund is very difficult, then aren't our dollars near worthless? Let me be fanciful for a moment, reach in your billfolds, pull out a fistful of dollars and give them the Clint Eastwood squint, cuz they're worthless.
mbs: making good on the Trust Fund is not 'very difficult.' As for any dollars you feel are worthless, send 'em to me. I'll give them some self-esteem.
"Isn't that the logical conclusion of Moynihan's argument, if one grants that his argument *is* logical in the first place?
mbs: no. that's a tangent.
"4. Finally, does anybody have comments on Moynihan's place? I've been intrigued for some time by his liberal reputation contrasted with his longstanding (I think he was a founder) joint editorship with Irving Kristol and Daniel Bell of the Public Interest. What gives?"
mbs: I think he is an agent of Kapital.