Brad DeLong's Semi-Daily Journal: A Weblog

That's fairly good (except the whole mess about the private accounts - surely there's a way to get people to save more without involving the SS system), but you neglected to mention that the "Social Security" we're all talking about is specifically Social Security Retirement Insurance (or Old Age Insurance - the SSA website uses both). I think its very important to mention the insurance aspect of SSRI - its insurance against poverty in old age. I would go so far as to say that we should all start using SSRI instead of just SS, especially since I don't think they are changing the SSDI component of the system.

Minor quibble - I think wage income is what you meant in the passage below, unless you really meant all income, including interest, dividends, etc.

"perhaps by applying the FICA tax to all earned income, rather than exempting income over $90,000 a year from the tax"

Since your site lumps my separate paragraphs into one unreadable mess, I put my comment on my own site instead: http://www.hakubi.us/simplyamerican/3144/

But I already have accounts very much like the ones you describe. Both by choice and through my latest employers. Some I like, and some I don't. They are all a little risky. But let me make those decisions on my own, thank you, and if I'm wrong I still want to be able to cook my own canned baked beans. I like beans.

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Automotive analogy is a good one. Re TSP: many people now use tax withholding as a forced savings vehicle so they can use the refund to pay off Christmas debt. This makes it forced long-term savings? Hmm. Can they really afford it?

Let's be honest, isn't it really likely that SS will be *the* major retirement income source for a very large proportion of the American public, especially given current income trends? Best not to blink at that, I think.

Yo B-Dawg,

Thanks bro.

And why does the bush administration focus so stridently on SS? Study of Rovian tactical patterns is needed here.

First, it's unexpected by the opposition. This preserves the initiative, always the most vital tactical precept, and is proven to be especially effective when the opposition knows there isn't really a "crisis."

Second, it's a mom-and-apple-pie thing so no one can object to what's described as a "fix"; on the contrary, the opposition will tie itself into knots trying to figure out how to respond.

Third, it's a brilliant misdirection away from the real problems of the federal fisc that has most people talking about "saving SS" rather than about deficits that imperil SS's ability to meet its obligations, not to mention the rest of the entire national structure of obligation. And who knows what could be going on where no one is paying attention because of all the noise about SS?

Fourth, it may let the general fund continue to rely on excess SS contributions for daily government operation even while running up long-term debt. Remember that in the experience of certain kinds of corporate honchos very close to the administration, debt is just something to be deferred and leveraged; debt is not a dirty word to them.

This'll do for a start.

As a tail-end baby boomer, I'm less concerned about social security than about who will buy all the stock in my 401(k) plan when I have to sell it. Has anyone calculated the impact on the financial/stock market when the baby boomers are selling off their 401(k)/IRA assets (as required)? Maybe, just maybe, this is one of the motivations behind privatization.

There are definitely things to like about these ideas, but the problem is that the Grover Norquist types would never go for this type of redistributionist plan. I could see someone like Pete Peterson, a respectable Republican who has advocated a similar approach to restore some progressivity to retirement savings (in addition to private accounts within Social Security, which he supports), but I doubt he represents mainstream Republican thought.

Josh Marshal has identified potential Benedict Arnolds among Democrats who might sell out on Social Security.

I think a matching list should identify vunerable Republicans. There's going to be a barn-burner of a mid-term election in 2006, and Social Security will be one of the central issues. Who's vunerable among Republicans, and who's going to challenge them?

Note = Gene Sperling's NY Times Op-Ed on SS yesterday: http://www.nytimes.com/2005/01/05/opinion/05sperling.html

This seems compatible with your talking points, I think. What Democratic Senators and Reps have made public statements that contradict either?

Are there any Republicans on record about making the SS trustees independent, or creating a new type of IRA targeting "the rest of us"?

I like the bit about shielding retirement savings from creditors. How are current 401(k) and Roth IRA's on that score?

Though of course pushing through a change like that suddenly could cause a credit crunch with bad consequences.

I am a retired Fed who withdrew his TSP contributions because the withdrawal schemes are centered on annuities. I wanted more flexibility and transferred the funds to the leading index fund provider. The TSP funds have very low management fees which is probably why the Bushites don't mention them. Why do we need the personal retirement accounts when we have Roths, IRAs and 401(k)s?

f our Social Security problems are neither extraordinarily urgent nor extraordinarily large, why is the Bush administration so focused on them?

* Possibly because of incompetence:
* Possibly because of ideology:
* Possibly because of capture:
* Which of these is really the most important reason? I don't know.

As Josh Marshall suggests, the leaked memo from Rove's deputy* constitutes pretty strong evidence that Bush's primary motive is ideological.

*"For the first time in six decades, the Social Security battle is one we can win -- and in doing so, we can help transform the political and philosophical landscape of the country."

Truly excellent. We should all refer to this list as we discuss this issue - albeit I'll have a copy of edits on my version (see Angrybear later).

So, I'm curious. What are numbers, say, five through eight on the list of looming fiscal problems, for context?

This will be George W. Bush's thing that will be his alone. The other stuff was just about surpassing his father: (1) No new taxes, therefore tax cut (2) Left Sadaam in power, go get him out (3) GHWB got Aristeide out of Haiti, Clinton let him back in, GWB got him back out.

GHWB didn't have anything to do with Social Security, it never would have occured to him to mess with it. So if GWB does this, it will his own thing, maybe the first time in his life.

Brad...

those aren't talking points (maybe its John Kerry's idea of talking points, but its NOT talking points.)

Here is a talking point.

If we do nothing, when the Social Security Trust Fund goes broke in 2052 and benefits have to be cut, a middle income retiree will still get $19,000 per year in current dollars. If we follow Bush's plan, that same retiree, having contributed the same amount of money toward Social Security, will get $14,400 in benefits that same year.

THAT is a talking point. The Democrats don't have to offer any alternative if "the cure is worse than the disease."

And if the GOP insists that the Democrats come up with a solution, here it is...

Restore the estate tax to what it was prior to Bush's fat cat tax cut, but dedicate the proceeds from that tax to the Social Security Trust Fund. Problem solved.

"If our Social Security problems are neither extraordinarily urgent nor extraordinarily large, why is the Bush administration so focused on them? "

Do you fix the smaller problems frist or the larger problems. By fixing the smaller ones you can free up time to fix the larger ones.

"Robbing Peter to pay Paul is in general not a good idea."

I thought social security was doing that already. It takes the worker's money and gives it to the retired person.

1. Would there be an effort to "cap" medical malpractice awards if the plaintiffs' trial bar gave to the Republicans?

2. Would there be any call for private accounts if Wall Street gave to the Democrats?

"No one on this planet can tell you why a 25-year-old person today is entitled to a 40 percent increase in Social Security benefits (in real terms) compared to what a person retiring today receives. "

As someone who is in the process of buying a house, I can say with authority that is complete BS. I'm not going to worry about the fact that my outside electrical outlet doesn't work---I AM going to take care of the blocked chimney from my furnace---because if I don't, I might wind up dead from carbon monoxide poisoning....and I won't ever have the time to get the backyard outlet fixed.

The fact is that if we solve the deficit crisis we are facing, Social Security solves itself. If we take the steps now to make sure that our budget is balanced for the next 40 years, when the trust fund runs out of assets there will be no problem supplementing Social Security revenues from the general revenue pool...

And the reason for that is simple---right now, and until 2010, we will be spending about 4.2% of GDP on social security benefits. But between 2010 and 2030, that is going to rise to about 6.2% of GDP...and pretty much stay there for the next 50 years. In other words, when the trust fund runs out of assets, we will already have been speding 6.2% of GDP on benefits for over a decade---and if we have been balancing our budget that entire time, the money that we were spending from general revenue to redeem the securities of the Trust Fund will still be collected by the government, and it will be painless to dedicate those funds to Social Security benefits.

damn...I used the wrong quote in the previous post. I was supposed to start it with a quote from Cube's 7:42 AM comment, to wit:

"Do you fix the smaller problems frist or the larger problems. By fixing the smaller ones you can free up time to fix the larger ones."

The proposal I would like to see in regard to personal savings accounts is simply to exempt from taxes all interest income up to a certain amount, say $10000. Much easier to administer and gives an incentive for saving vs. the disincentive now in the tax system.

Wow, great post Brad.

I particularly love you alternative ideas on private accounts. It is not enough to say the Bushies methods of private accounts stink, but we must say there are other ways to do it while saving the basic SS. You laid out truth that there are other options.

Thanks

Why is this not a central talking point of those opposed to the privatization issue: if there is a premium difference to be gained for ss retirement funds by investing in the stock market then let the trust fund simply do that and gain the difference for the whole fund. Why is gaining this difference tied to privatization when there is no clear reason that it must be.

"If our Social Security problems are neither extraordinarily urgent nor extraordinarily large..." why do Social Security first?

Because...

(1) Despite the denial which has become the current liberal mantra, SS's fiscal problem *is* large -- clearly the second largest after Medicare.

The increase in current-value net SS liabilities in just 2004 was $880 billion according to the Treasury (over 75 years, not the indefinite horizon). Nothing else comes close, no matter what anyone says. Try finding something that does.
http://www.fms.treas.gov/fr/04frusg/04mda.pdf (p.11)

[That's a very strange thing to say: the betting is that the next Trustees' Report (if honest) will push the Trust Fund exhaustion date out by more than a year. SocSec is in better shape now than it was a year ago.]

So fixing that provides a real, major benefit to the fisc -- and also towards securing future SS benefits, and towards making sure there'll be more funds for Medicare.

(2) We *know what to do* to fix SS, because it has been analyzed in great detail for more than a decade, since the SS Advisory Commission of 1994. The clear options are all spelled out. It's just a question of having the political will to make a choice among them -- or of not having the will, and continuing to let the program's conditions deteriorate.

We even know how to fix that problem that Democrats *still* can't bear to bring themselves to ever mention -- their total abandoment of FDR's explicit promise of intergeneration equity and fair returns on contributions. Which is causing the current young generation to become the first ever to take big *losses* from SS, which is causing political support for SS among the young to plummet. (After all, the young aren't entirely stupid.)

It's really impressive to see Democrats suddenly flat turn their back on what had been for 40 years a fundamental progressive principle of SS -- both as an illustration of their *current* principles, and of their myopia as to the practical future politics of SS as the workers losing from it grow every more in number.

Now, as to why not address the only bigger problem, Medicare, first -- fine, go ahead, do it! Anyone have any ideas???

Just a few posts ago, this very blog was proclaiming that somebody who says we should do something about a program without having a plan for doing it deserves no credit.

But now we should pass on closing the "mere" $880 billion annual growing liabiltity of SS, because that's not serious enough, to focus on closing the much larger Medicare liability -- regarding which we have *no ideas at all*.

So how much credit does that earn?

Back in the Clinton Administration the Breaux Commission had serious bi-partisan proposals to address the big problems of Medicare. But even though Medicare was bigger then as now, Clinton's people *killed* them and said, no, no, "Do Social Security first!" But then they didn't do Social Security either.

Now that there are serious proposals for Social Security, the response from thoe very same people is: no, no, that's not big enough to do first, do Medicare first -- although we have no ideas whatsoever as to what to do, so it may take us some years yet to figure it out.

Someone watching this who was just a tad cynical about politics might conclude that Democrats don't want to do *anything* first about entitlements!

Except make a solemn promise that future Congresses decades from now will unquestioningly raise taxes by as many points of GDP as it takes
for current Democratic political convenience. ;-)

If you're going to privatize social security, do it right or don't do it at all. I remember when the Argentines used to complain that the markets didn't realize that their bigger deficits were a result of a more solvent social security system... didn't help them very much.

Jim Glass wrote, "(1) Despite the denial which has become the current liberal mantra, SS's fiscal problem *is* large -- clearly the second largest after Medicare."

What about the predictable shortfall in the General Fund?

Jim Glass wrote, "Now, as to why not address the only bigger problem, Medicare, first -- fine, go ahead, do it! Anyone have any ideas???"

Yep: nationalized health insurance, plus a system of rationing health care, based on evidence-based medicine and care decisions based on statistically-based cost/benefit decisions.

Any other questions?