Whoa! Nice work, Brad.

The link to the SF Chronicle pic is at:

http://www.sfgate.com/cgi-bin/object/article?f=/chronicle/archive/2005/02/12/BUG3SB9TIE1.DTL&o=0&type=business.

You can make out the "Brad DeLong" better in the paper than the posted picture (go figure).

However, I just realized that the caption (in the paper) reads "Sen. Barbara Boxer holds up a leaked Republican document on Social Security at the San Francisco Senior Center."

Didn't know you went to the other side, Brad.

Senator Boxer is obviously a woman of taste.

I don't know, Brad. I've analyzed the image and I think I see kerning. That means it could not have been typed on an IBM Composer. Therefore ...

J'Accuse!
I accuse Bradford DeLong of having been the fiendish agent of a miscarriage of justice. I accuse the San Francisco Senior Center of having been complicit in one of the greatest iniquities of this century. I accuse Senator Boxer of having in her hands proof positive that the Bush administration is innocent. I accuse Joshua Micah Marshall of having been an accomplice of this crime, the first out of journalistic conviction, no doubt, and the second, perhaps, to get more web traffic. Finally, I accuse the Senator's speech of having violated political law by pronouncing a Wehner guilty on the basis of a document which should have remained secret. Truth is on the march and nothing can stop it!

On the other hand, maybe it came from a word processor, in which case I take everything back.

[troll]

Wasn't the 1983 solution a lockbox of sorts?

Patrick: the solution is to reduce federal debt now so that the SS trust fund treasuries can be reissued to private markets when it comes "due". That means eliminating the tax cuts and trying to get the budget closer to balance.

By issuing all of this debt now, Bush is guaranteeing that SS cannot be funded in the manner envisioned by Greenspan, et.al., in 83.

As Bush so eloquently put it "There is no trust." I couldn't agree more.

Social Security taxes have been raised over fourteenfold during its existence, and we're still short of revenue to meet promised benefits.

Originally, it was 2% on a maximum of $3,000 income, for $60 (about $787 in 2004 dollars)tops. We're now at 12.4% of $90,000, for $11,160.

And benefits were cut into the bargain. Without having solved the fundamental problem.

[Which is that elderly people who were feckless in their youth aren't poor today? What is the 'fundamental problem'?]

Benefits have expanded significantly since the inception of SS - including survivor benefits, disability. My sister actually received SS benefits when she was 16, when my father retired (don't know if that benefit still exists).

Now, the amount of benefits that should be extended is a valid political discussion - but we aren't having that.

The fundamental problem - the older segment of our population living in poverty - has been substantially solved. I agree is it an expensive proposition, but needs to be discussed honestly.

Patrick, my reading of SS history suggests that the tax changes up till 1975 were planned from the start. The program was phased in.

The Greenspan commission's work ended the practice of ad-hoc benefit changes, and introduced the idea of the 75 year actuary balance so that congress would be less tempted to twiddle with benefits.

Indeed, that seems to have worked. Minor tweaks were made in the early 1990s when the disability trust fund was projected to run out of funds, shifting something like 2-tenths of a point from the old age trust to the disability trust.

Now, the DI trust is expected to run out of funds around 2029, while the old age trust, depending on which report you read, is expected to run out of funds 13 to 23 years later.

Hmm. Wonder why there's all this fuss about old age benefits and promises not to touch the disability program, when the DI program faces a "crisis" much sooner.

I'm honestly confused. Why is it that the only American politician with balls from any party is a woman?

Steve, as far as Dems with backbone go, I think there's more. I tentatively think Rep Tim Ryan (OH) might be one, but I haven't kept a close enough eye on him to be sure. Still, he got pretty good scores by the Americans for Democratic Action's voting record report card.

"my reading of SS history suggests that the tax changes up till 1975 were planned from the start. The program was phased in."

Which is exactly what you would expect from a pay as you go system. Why would we have possibly wanted Social Security to start taxing us at a higher rate than was needed to pay current benefits? And given that they could not have predicted the Baby Boom back in 1935, the shortfall we were faced with in 1982 was not due to any structural flaw in the system, it was just a cash flow problem that needed to be addressed, by a fix that is turning out to be almost exactly what was needed.

The rhetorical notion that Social Security is somehow out of control rests on nothing but bombast. It worked, it works, it will continue to work.

Bush continues to use the word "bankrupt", which is manifestly false. Can't someone like Boxer take him on about this. And even if bankrupt were an accurate description, his implication that his private accounts will solve it is another lie.

The CEA says the definition of bankrupt is not having the assets to pay your debts. Since the dominate asset of the govt -- and ss -- is the power to tax as long as taxes are less then 100%
of gdp the govt--and ss -- can not be bankrupt.

The history of George Bush as president (and presumably as governor) is that he has exactly one political skill, although it is an exceptional one: the use of crisis rhetoric. But unlike his single most sucessful use of the crisis ploy - Iraq - where there was a tendency to give him the benefit of the doubt by many on the assumption that the president had access to classified information that told him more than he could reveal.

But there is no classified information on social security: the data is all out there. Which makes the phony crisis claim harder to sustain.

As a result, the man is getting more and more desperate, and this week he has said (at the Commerce Department) that the payroll tax is completely fungible and can be used for anything; he has said that the prescription drug benefit, which by itself pretty much equals, on a 75-year horizon, the prospective social security problem, is inviolate; and he said, only yesterday, that the system faces "bankruptcy," which makes no sense at all, both for the reason that spencer cites and for the reason that if the revenues are all completely fungible, then social security has no separate existence and can't, by itself, be anything.

Which is to say, in short, that bush has now uttered two untruths of a magnitude equal to any presidential untruths i can recall since world war ii. and honest adults still support this man?

as for patrick, once he describes to us his vision for a government that functions on 17-18% GDP and sells it to bush and congress, i'll be interested in what he has to say about social security. until then, he has nothing worth listening to on social security.

PS. Spencer, per your comments on yesterday's thread about historic PEs and suchlike, i tried to email you and request your article, but the mail i sent by clicking through on your name (s.england@comcast.net) got bounced back. Can i just please use this public forum to ask you to go ahead and send me the article to my email address? thanx.

Spencer, so you admit that Social Security is an intergrated part of the federal government, and so the trust fund is a fiction?
Brad, how does that excerpt from the memo prove a desire to destroy Social Security? Change it fundamentally? Yes. Destroy? No. I'd have no problem with eliminating the program, and it's possible that's the intent, but this in no way proves anything like that.

"the man is getting more and more desperate"

He is on deadline, his Administration by law has to produce a report on the Trust Fund for 2005. Typically it comes out the last week in March, and I suspect that April 1 is a statutory deadline. But in any event it is due in six weeks.

And his numbers just don't run. You can't jam real world 2004 growth into models that predicted 2.7% (Intermediate) or 2.8% (Low Cost) and still get anything resembling "crisis" out the back end. They may try to delay the Report, but given the firmness of Democratic opposition, the existence of Josh's 'faint-hearted faction', and a Medicare Drug program that went from $400 billion to $730 billion in a matter of months, there is exactly zero chance of selling any kind of plan without numbers on the table.

This bizarre notion that holding Town Hall meetings in front of picked audiences is going to generate a tidal wave of pressure on Democrats on this topic is, well leave it at bizarre. In many ways Bush was given a blank check on 9/11, on that day everyone enlisted in the War on al-Qaeda, although some of us expected he would cash that check where he shouldn't, but nobody outside the Cato Institute ever signed up for the War on Social Security.

At its heart Privatization is Faith-Based, and Privatizers are having their Faith challenged in the very spot they thought they were invulnerable: the Numbers in the Book. Either they thought we would never actually examine the numbers or they just were flat out ignorant of the plain reality of the tables and graphs. It has hit them like an unexpected belly punch, they are reeling and gasping for air and the bell is ringing for another round.

Please Maestro, it is not like Republicans are not on record as opposing Social Security from the outset. Everthing else has been tactical, they simply knew they could not take it head on.

And Social Security being integral to the government has no bearing on whether the Trust Fund is a fiction. The reality is that it has a dedicated revenue stream, and changing that stream requires Congressional action or Dictatorship. I commented above on the odd notion that for the purposes of this discussion privatizers simply wave away the whole concept of electoral consequences. People are living in a dream world where bonds somehow become 'worthless IOUs' and where Boomers forget where their voting places are in 2023.

No one was talking 'worthless IOUs' back in 1993, but then again depletion was set at 2026, coinciding with the peak point of Boomer retirement. Now at 2042 we will be sitting at a point when the youngest Boomer is 78. So the scare tactics shift to the Trust Fund itself.

Sorry, Hope is not a Plan. And privatizers are rapidly losing all hope of selling this one.

There are enough people who understand how much Social Security has helped them, while there are others who are sympathetic enough that I believe there will be no privatizing of Social Security. Nonetheless we must understand the wish is not to reform Social Security, but to end it. Reducing benefits and adding massively to debt for private accounts will effectively mean Social Security will lose a support base in the coming years. The wish is to end the system.

As to Dubbya's crisis-mongering, for someone who reputedly is all hat and no cattle, he sure does like to try and cause stampedes.

Bush has another reason to be feeling a little nervous right now and that is if his SS reform tanks then the rest of his second term agenda is less likely to be taken seriously. Shucks.

"my reading of SS history suggests that the tax changes up till 1975 were planned from the start. The program was phased in."

From a rate of 2% to 9.9%!

Fact is, all real evidence points away from Bush's plan, but until that thing is dead and buried, I'll remain very worried...and talking up against it to as many people as I can.

"Have we ever faced a similar Social Security challenge before? Yes. During the Reagan presidency in 1983. Working together, Democrats and Republicans, we resolved the challenge then just as we can do now. "

The smartest, truest thing on this subject ever posted here.

Now let's remember, in 1983 the SS funding shortfall was cut 50% by **cutting benefits**.

And yes, on that precedent we can all bet that's what will happen *again* with the next shortfall -- which will require a 35% increase in income taxes from today's level by 2030 just to cover the operations of the trust funds, say the SS actuaries.

Those trust fund bonds aren't going to pay off themselves, you know!

Yup, Senator Boxer at least knows politics.

It was the 1983 deal that preserved benefits for the old while increasing taxes and reducing benefits for the young that destroyed intergenerational equity and drove return on contributions for the young *negative* for the first time ever -- making today's young the first generation ever that is not fond of SS, and for very good reason. They got the shaft in 1983.

The next deal, which will indeed be like the last one as the same forces will apply, will do much more of the same as there will be a much bigger gap to close, cause SS to make the young even poorer on a lifetime basis, and poltiically bury SS as we have known it within a generation.

She's right! Good work!

"Patrick, my reading of SS history suggests that the tax changes up till 1975 were planned from the start."

The plan at the start -- as FDR had enacted in 1935 -- was a 6% payroll tax for a funded system that was in FDR's words "actuarially sound and out of the Treasury forever". It was to pay every generation basically the 3% real return on federal bonds, with no burden thrust on the future -- FDR *hated* that idea -- and intergenerational equity as each generation got the same return -- an FDR promise.

That lasted all the way until 1939, when the "ad hoc" changes started -- over FDR's veto -- with Congress cutting the payroll tax to 3% and upping benefits repeatedly to boost returns on contributions to current voters *way* above the bond rate. What voter wouldn't vote for that? That made SS the success we all know it to be!

Even if it did turn SS, over FDR's dead body (literally), into an unfunded paygo scheme.

By the 1960s SS was paying *10% real annually* to current retirees on their contributions, and Paul Samuelson was singing the glories of SS as a free lunch Ponzi scheme...

"The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in -- exceed his payments by more than ten times (or five times counting employer payments)!

"How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see ... A growing nation is the greatest Ponzi game ever contrived."

http://www.scrivener.net/2005/02/beauty-of-social-security-by-paul.html

But by 1980 Congress had pushed up benefits *too high* and found that it finally couldn't pull taxes up enough to pay for them, so SS was broke.

Then came the "stick it to the young" solution, to save those high returns for then-voters while driving returns *negative* for future workers.

Which you all propose to do *again* because it was such a good idea last time!

Because now that we need to stick it to the young again to save *the form* of our so-valued program, why the heck should we pay any attention to what either FDR or Paul Samuelson said was important about SS as to its *substance* (and politics)?

Hey, keep "saving SS" by changing it to stick it ever more to the young as much as you want! Then just wait and see what they do to it when they grow up.

Jim, despite years of calculated effort and bullshit, the fact is, there is as yet still no sign of young people rebelling against social security (as distinct from fearing that it may not exist), and Patrick, there is as yet still no sign of a tax rebellion against the payroll tax. Meanwhile, if either of you can find anything in bush's plan that has anything to do with what you claim to be concerned about, you'll be the first two to do so.

As for the necessary tax hikes, the dishonesty here is breathtaking. We have a here and now general fund crisis of much greater proportions than any possible social security problem, we have a truly looming medicare crisis exacerbated by the untouchable bush drug prescription travesty, and we are supposed to ignore all that and only worry about social security? people who refuse to deal with the general fund crisis first and foremost do not even deserve to be attended to on social security, so we can safely ignore whatever patrick and jim have to say until they solve the general fund crisis.

C'mon guys, your party controls all the levers of power: give us a budget that works at 18% GDP. Fight for the spending cuts it will require. Get the American public to buy in with you.

Then we can talk about social security, but until then, stop wasting the prof's servers on bu(sh)it hypocrisy of the rankest order....

Bruce, like I said, it's possible that's the intent. It may even be probable. Hell, it might have been explicitly said in public somewhere that I missed. But that particular memo does not say it. I wish it did, but it doesn't.

What adjustments do we need to make in SocSec to make it work?

(1) Raise FICA taxes on the wealthy.

(2) Start cutting SS benefits from the top down. (Both ideas, by the way, supported by 70-80% of the public in the last three polls.)

(3) Have the government start investing FICA receipts in index funds (as DeLong keeps saying).

(4) MAYBE -- in addition -- modestly raise the retirement age for everyone.

Now, then, Patrick and Jim. Exactly what do Bush's proposals have to do with any of these? His brilliant idea is to chop up FICA receipts (whose extraction from workers will still be compulsory) into individual accounts -- thereby:

(1) Requiring, for the sudden creation of such accounts, either suddenly cutting benefits to current retirees, or suddenly raising taxes (both of which, so far, he refuses to do) or suddenly and massively raising the deficit -- which could very easily set off a panic among investors.

(2) Allowing private investment firms to bleed off 25-35% of the returns from workers' privately invested FICA funds into their own profits -- which is what has already led both the British and Chilean pension privatization schemes to disaster even without a huge deficit to begin with.

(3) Reducing total SS payments to the poorest workers, and ONLY to them, because their payments will now come less from the collective SS fund and more from their own small individual contributions.

In short, to steal Dr. Johnson's famous line: what's good in Bush's plan is not unique to it, and what's unique to it is not good. Still, it was interesting to see Jim Glass admit that FDR was far more fiscally responsible than Reagan or Bush Jr.