Brad DeLong's Semi-Daily Journal (2004)

Its looking more ans more like Greenie cut a deal to get renominated, and the rhetoric we are hearing from the Fed Chair falls somewhere between his keeping his promise to the President and some half hearted attemtp to salvage his legacy . . .

I think the solution Greenspan proposed is less important than the fact he spoke clearly about what we all know--the fiscal policy of the adminstration are unsustainable and there are unavoidable trade-offs we have to face. I think the Bushies would have been much happier if Greenspan said nothing on this issue since they are committed to neither cutting Social Security nor raising taxes. Greenspan's position is closer to that of Kerry and other Dems in my opinion because they all recognize that we cannot just do nothing.

why is this story being ignored by the press and expecially the democratic candidates.

Greenspan spells it out, you can have tax cuts for the top 1% of the population or you can have social secutity.

Why are the candidates ignoring these comments by Greenspan -- this should be the key issue in the campaign -- Bush plans to gut social security.

A vote for Bush is a vote to have your parents
have to move in with you when they reach age 70.

"Alan Greenspan spells it out, you can have tax cuts for the top 1% of the population or you can have Social Secutity."

Social Security!!!

Thanks Alan -

http://www.nytimes.com/2004/02/29/weekinreview/29john.html

Mr. Greenspan told Congress earlier that Mr. Bush's tax cuts should be kept in place. The biggest beneficiaries would be the top 400 taxpayers, whose average income in 2000 was $174 million each. They paid 22.2 cents on the dollar in federal income taxes and, under the Bush tax cuts, would have paid about 17.5 cents.

Over all that year, Americans paid 15.3 cents on the dollar of income in income taxes, but many middle-class Americans paid a larger share of their incomes to the federal government than the top 400 when both income and Social Security taxes are counted.

http://www.nytimes.com/2004/02/29/weekinreview/29john.html

The Social Security Promise Not Yet Kept
By DAVID CAY JOHNSTON

Since 1983, American workers have been paying more into Social Security than it has paid out in benefits, about $1.8 trillion more so far. This year Americans will pay about 50 percent more in Social Security taxes than the government will pay out in benefits.

This year someone making $50,000 will pay $6,200 in Social Security taxes, half deducted from their paycheck and half paid by their employer. That total is about $2,000 more than the government needs in order to pay benefits to retirees, widows, orphans and the disabled, government budget documents show....

Sorry, last time I checked, Social Security was funded out of payroll taxes, not income taxes. Did something change here? Was there a big breakthrough that restructured federal finances from this 70 year-old foundation?

If not, what do income tax cuts have to to with Social Security spending?

I am convinced that the wealthy plutocrats in the GOP have a strategy to use their wealth and influence to cement their power in American politics. To do this they are driving the gap between the haves and the have nots so they will have the power to buy elections. Part of that strategy is to talk constantly about taxes being too high and promoting tax cuts. The GOP tax cuts are always bait and switch. They promise tax cuts for everyone, but when the final bill passes, the taxes of the wealthy are substantially reduced and the poor and middle class get stuck with the same high taxes, more fees for government services and fewer services.

The GOP wants to keep taxes high on the poor and middle class so they won't view the wealthy as a source of funding public projects. They want taxes to remain high on the middle class so they can maintain overall support for lower taxes. Of course, they take the support for lower taxes and cut only for the wealthy, leaving the middle class holding the bill.

People have caught on to this gimmick and the tax cuts of Mr. Bush were never very popular. Most people would have rather seen the money go to Social Security, even back in 2001. I doubt that this has changed.

Is AG serious about cutting SS or is he putting SS on the table as a wake up call to start talking about the overall deficit? Deficit does not command the public attention. SS does.

"What do income tax cuts have to to with Social Security spending?"

The deficit that is being caused by income tax cuts is being funded in part from Social Security tax proceeds. Social Security's surplus is being used to find the deficit.

http://www.nytimes.com/2004/02/29/weekinreview/29john.html

"Since 1983, American workers have been paying more into Social Security than it has paid out in benefits, about $1.8 trillion more so far. This year Americans will pay about 50 percent more in Social Security taxes than the government will pay out in benefits.

"So what has happened to that $1.8 trillion?

"The advance payments have all been spent...."

Thanks Alan -

David Kay Johnston

"Mr. Greenspan said nothing last week about returning to a pay-as-you-go basis. Doing that would put about $40 a week in the pockets of workers making $50,000 annually."

Thanks Alan -

David Kay Johnston

"Mr. Greenspan said nothing last week about returning to a pay-as-you-go basis. Doing that would put about $40 a week in the pockets of workers making $50,000 annually."

Bakho says " Most people would have rather seen the money(their tax cut) go to Social Security".

Every time you post I'm positive you are a conservative taking liberal arguments to the absurd. What fool would rather give money away to a system where politicians tax you today so that they can buy votes with gov't largess and in return promise future politicians will tax future generations to repay your generosity.

I suppose its the same morons opposed to individual accounts. SS is an immoral system that needs fundemental change whether its expedient or not. Indeed any system that requires black men with a life expectancy of about 65 to pay into a system that will payback after they turn 65 cannot be seen any other way.

Anne says SS is 1.8 Trillion $ short. Why is that? Perhaps immoral politicians reacting to perverse incentives could be the cause. How much would taxes on only the top 1% have to be raised to make up such a shortfall?

Its time SS is split into a safety net portion and a retirement savings portion(w/ individual accounts and survivor benefits). Its the only sensible thing to do.

I think Brian needs Maalox. Greenspan, like J. Edgar Hoover, has enjoyed a much better press than he deserves. He promised in 1983 that the extra money collected from increased SS taxes would be set aside in a rainy day fund. He's heard so much talk about how giving more money to the top 5% helps the country that he believes it. Bismarck set the pension age at 65 back in 1881; it would be reasonable to raise it now to 70. It is not reasonable to curtail SS benefits so that the top 5% have more money. I have Chilean relatives. What they tell me about the Chilean pension system is very different from what the Cato Institute puts out - a lot of the money goes into expenses and 1/3 of the population isn't covered. Moving to a partially defined contribution system will be expensive. It could be done gradually if people were honest about the complexities. Instead of railing about immorality of our SS sytem, Ponzi scheme,etc. why not face the truth? Most Americans can't tell a stock from a bond, don't know that SS revenues greatly exceed current outlays, and that the average person retiring today has less non-SS money than was the case 15 years ago. The dumbing down of America is worse than it was in 1929 when the Lynds commented that the average Middletown resident didn't want to have too much to think about.

Hey Bob, your compassion is quite stunning. You're willing to tell black men to pay into a system with countless hours of hard labor with no real expectation of return. I have no hesitation in calling your judgement immoral.

The day this country cannot run its affairs better than Chile will be a sad day indeed. Vanguard a popular no-load index fund company sells the s&P 500 w/ expenses of about 25 basis points. The gov't employees have Thrift Savings as their replacement for SS and it provids about 6 choices varying in risk from securities to stock funds all returning substantially more than SS with the added benefit of individual accounts and survivor benefits.

The point is the gov't is already running a successful retirement system. As for the dumbing down of America, SS is partly to blame. People will react to incentives and if retirement is taken care of by the state then people will allocate their time elsewhere. I don't buy people are too dumb to handle their own money. That's liberal elitism at its ugliest.

Brian wrote, "Hey Bob, your compassion is quite stunning. You're willing to tell black men to pay into a system with countless hours of hard labor with no real expectation of return. I have no hesitation in calling your judgement immoral."

Maybe you'd hesitate if you'd pause to stop regurgitating Cato/Heritage agitprop.

This is what the CBO found (ref: http://www.gao.gov/new.items/d03387.pdf )

"Differences by race in the relationship between taxes paid and benefits received under Social Security are due mainly to differences in lifetime earnings, the incidence of disability, and mortality among the groups. In the aggregate, blacks and Hispanics have higher disability rates and lower lifetime earnings, and thus as a group tend to receive greater benefits relative to taxes than whites. However, whites with low lifetime earnings or high disability rates also receive greater benefits relative to taxes than their higher-income or nondisabled counterparts. Higher benefits relative to taxes paid are associated with lower lifetime earnings and higher disability incidence."

Brian wrote, "Vanguard a popular no-load index fund company sells the s&P 500 w/ expenses of about 25 basis points... As for the dumbing down of America, SS is partly to blame. People will react to incentives and if retirement is taken care of by the state then people will allocate their time elsewhere. I don't buy people are too dumb to handle their own money. That's liberal elitism at its ugliest."

(1) If people won't make dumb choices, how come *average costs* in the mutual fund industry are so much higher than Vanguard's? (Disclosure: I have almost all my assets at Vanguard.)

(2) It's far from _a priori_ obvious that SS will lead to decreased interest in retirement planning.

Liberal, thanks for the link I'll take a look, but even if its true black men unfortunate enough to have a full career only to pass at their age of life expectancy are still getting a raw deal, no. Black men as a group may consume more $ than they put in, but I still find it a horrible injustice in light of the fact there is a better way.

1) Thrift savings operates with 6 choices w/ no marketing. Let's not get distracted.

2) Its hard to think of a retirement system plagued by more fiduciary dishonesty than SS. Politicians of both parties have raided it into bankruptcy in respect to its commitments.

3) How do you feel about splitting it up?

Ummm, I think it's worth remembering that Greenspan was only the head of the Commission, which included, among others, Senator Bob Dole, Senator John Heinz, Senator Patrick Moynihan, Lane Kirkland of the AFL-CIO and Florida Rep. Claude Pepper. My understanding is that Greenspan had to work long and hard just to cobble anything together from that group - reminds me that a camel is a horse designed by a committee.

That said, I've never understood why a phased-in increase in the retirement age is considered such a lightning rod. People live longer healthier lives than ever, and the 65 years of age eligibility point has become anachronistic. Gradually raise the age of eligibility and allow for tax advantaged wages for elderly who choose to remain in the workforce and lots of the Social Security problems go away.

"Every time you post I'm positive you are a conservative taking liberal arguments to the absurd."

Posted by: Brian on March 1, 2004 03:08 PM

In psychology they have a thing called "projection" whereby one falsely attributes one's own subconscious conflicts onto someone else as a defense mechanism to avoid potentially painful psychological conflicts.

Krugman: "By using his office to promote a partisan agenda, he (Greenspan) has betrayed his institution, and the nation.  

http://www.nytimes.com/2004/03/02/opinion/02KRUG.html

Retirement age for most people is no longer 65. I suggest people start checking out the SSA website to find out when you will be entitled (as of today, anyway) to full retirement benefits. Many member of the "babyboom" generation will not be able to retire at age 65 if they wish to receive full SS retirement benefits. In addition, if you look at the SS literature, you will find that Social Security was never intended to provide completely for retirement--it was expected to be one "leg" of a three-legged "stool" of retirement--the other two being pension benefits and savings. Well, quite a few people are seeing their pensions disappear or sharply decrease in value, whether it's because of the market or fraudulent behavior. Finally, while it may be true that people in the US are projected to live longer then they were during the Great Depression (although Canadians are healthier and have greater life expectancy)--I wonder if this will actually happen--given what one reads about the effects of obesity as well as the huge number of environmental toxins babyboomers and others have been exposed to (but today's age 65 to 80s weren't exposed to as juveniles or young adults). Such toxins may be at least partly responsible for the increase in Hodgkin's disease among others (exposure to Agent Orange/TCDD has been tied to an increased rate of diabetes in Vietnam vets). Saying that people can easily work past 65 these days is not true for everyone--there are still a fair number of people out there who perform work that is physically taxing enough that by 65 they are "worn out" physically (many construction workers, laborers, etc) and it would be a real physical hardship to expect them to keep working.

As for Greenspan--I notice he didn't suggest a decrease in his government pension nor do any of these other pigs at the government trough (Bush, Cheney, Rumsfield, et al) indicate that they'd be willing to decrease their government pensions. Funny how those in power (our alleged "leaders") always seem so willing to sacrifice the money interests of everyone but themselves and their cronies (i.e., members of their class). And it's interesting that Suskind's book (O'Neil) says that Greenspan originally saw Bush's tax cuts as limited in duration but now he seems to think they should be permanent. Is he now just another shill for the Bushies?

David: "I think the solution Greenspan proposed is less important than the fact he spoke clearly about what we all know- ..."

"Clearly" for those who can read between the lines with some ease, but then I think he was pretty explicit. (Although I cannot step outside myself.)

Galveston Bob: "Bismarck set the pension age at 65 back in 1881; it would be reasonable to raise it now to 70."

Good point to mention Bismarck; that's where the whole thing started.

So what are you proposing people do between 65 and 70? The reality is that many people "retire" way before 65 because they cannot find employment at terms that look reasonable to them any more.

Only slightly off-topic: in Germany I have routinely seen job ads for engineers where "not older than 35" was listed as an explicit job requirement. Obvious age discrimination is not dealt with in the same way as in the US, i.e. by lawsuits. When I used to work there, an engineer at 38 was hired in our group, and people were _amazed_ (although there was no age requirement in _our_ job ad).

(Please no comments from anybody that they are "pampered" or too good to flip burgers, etc. That's already taken by highschool graduates.)

We are definately looking at people working past age 65. So what? SS is still solvent through 2042 because workers have been paying extra into SS for decades. The SS surplus is currently invested in a place that is the highest yielding safe place, the US government. The only thing lacking is the political will to collect enough non-SS revenue to pay the costs of running the government. Mr Bush bought campaign donations with his promises of huge tax breaks to wealthy donors. That is not affordable (duh). It is up to the voters to tell the wealthy that insane fiscal policy is not for sale.

Bakho, tell it like it is. Todays politicians borrowed the money and promised future politicians will raise taxes on future taxpayers to repay the loan.

Other posters decry the scoundrels in office yet find it abhorrent if someone wants to take SS out of there hands.