White House Strategy on Social Security..?

[tharkûn]

And includes several recessions and the Great Depression. But as I said, if this does happen, you have bigger problems than just Social Security.

The Great Depression is historical, there were numerous depression of a similar nature throughout world history. The American position post WWI and post WWII is really quite unique in the anals of history. Over wealth the damn wealth in the world was owned by Americans; that is NEVER going to happen again. Using what appears to be a once in the history of the world event as part of your baseline to predict economic growth strikes me as a reason to be conservative.

The looming threat of nuclear war being seen and bandied about as likely is gone. I looked into the birth rates for a peice I did called Hope and Fear, Tharkun. They only remained low during the Cold War. Why could that be...

I find that hard to beleive, why do several European countries have declining populations? One thing that does bring down birthrates is the trend towards delaying motherhood and marriage. Women are increasingly having careers before children thus waiting until they are less likely to have children to begin families.

Start pushing back the age at which you're paid social security. It's one of those 'blindingly obvious things', shining like the sun. THe problem is people are living longer, healthier lives, so they don't need to retire as early.

If you can vote that through congress against AARP you deserve to run the damn country. As it stands the best you can do is to delay the payout date for children born this year, which isn't going to do squat for the program. A big part of the problem is that one cannot count on Congress to buck the senior citizens lobby.

'The mere fact a percentage poitn difference in growth..' OF THE ENTIRE ECONOMY. A percentage up or down doesn't sound like much until you apply it to a 250 million person, first world country.

I know exactly what it means. When you drive over a bridge what type of safety margin do you want egineered into it? The question is how far from off the peak of the bell curve can you push the system before it fails. 1% is not even an STD as I recall.

hey're all based on things which, if proven true, are going to lead to much bigger problems than 'Crap, can't have as much pork this year.'

The entire Social Security buzz is peanuts compared to the coming doom of medicare. However the assumptions leading to those predictions were made for a reason, because that is what was beleived to be the most likely outcome and possibly included a margin of error for cautionary purposes.

nd of course, like most of those arguing there's some huge problem, you refuse to even conceptualize changing things about it other than 'Cut it up, privatize it, throw it away!'

Solutions:
I. Keep a pay as you go system.
A. Reduce benifits, goes over like a lead balloon.
B. Increase taxes, goes over like a steel balloon and is essentially charging the new guy more.
C. Have an expanding population base.
II. Have an investment system.
A. Have private accounts. Allows individuals to dick up their own accounts.
B. Have government regulated and insured accounts.
C. Have a government investment program.
III. Abolish the program.

Did I miss anything?

Option I is not my preference, pay as you go systems have intrinsic problems, which is why most private systems are structured that way. Option II is my preference and while I can live with suboption A, I think option B or C is what has a prayer of getting passed and suboption B strikes me as the best tradeoffs.

[SirNitram]

And includes several recessions and the Great Depression. But as I said, if this does happen, you have bigger problems than just Social Security.

The Great Depression is historical, there were numerous depression of a similar nature throughout world history. The American position post WWI and post WWII is really quite unique in the anals of history. Over wealth the damn wealth in the world was owned by Americans; that is NEVER going to happen again. Using what appears to be a once in the history of the world event as part of your baseline to predict economic growth strikes me as a reason to be conservative.

And this again misses the point I have been repeatedly making.

If the current economy doesn't pick up, there's worse problems than SS.

The looming threat of nuclear war being seen and bandied about as likely is gone. I looked into the birth rates for a peice I did called Hope and Fear, Tharkun. They only remained low during the Cold War. Why could that be...

I find that hard to beleive, why do several European countries have declining populations? One thing that does bring down birthrates is the trend towards delaying motherhood and marriage. Women are increasingly having careers before children thus waiting until they are less likely to have children to begin families.

Why should I give a shit over what you beleive? The numbers sit there to be checked. And yes, several European nations have declining birthrates. Several have rising ones. What's your point? That there's more than one cause for something? Shock, amazement, awe. :rolleyes:

And again. If the population continues to trend downwards(And I never said it couldn't), there's bigger problems.

Start pushing back the age at which you're paid social security. It's one of those 'blindingly obvious things', shining like the sun. THe problem is people are living longer, healthier lives, so they don't need to retire as early.

If you can vote that through congress against AARP you deserve to run the damn country. As it stands the best you can do is to delay the payout date for children born this year, which isn't going to do squat for the program. A big part of the problem is that one cannot count on Congress to buck the senior citizens lobby.

The power of lobby's is yet another thing that is going to cause a shitload more problems than just SS if left untreated. But we should just fear Social Security instead, according to those in power.

'The mere fact a percentage poitn difference in growth..' OF THE ENTIRE ECONOMY. A percentage up or down doesn't sound like much until you apply it to a 250 million person, first world country.

I know exactly what it means. When you drive over a bridge what type of safety margin do you want egineered into it? The question is how far from off the peak of the bell curve can you push the system before it fails. 1% is not even an STD as I recall.

Standard deviation, you mean? No, it's not. However, the point I made there was that you're being deliberately misleading by calling it a single percentage point.

hey're all based on things which, if proven true, are going to lead to much bigger problems than 'Crap, can't have as much pork this year.'

The entire Social Security buzz is peanuts compared to the coming doom of medicare. However the assumptions leading to those predictions were made for a reason, because that is what was beleived to be the most likely outcome and possibly included a margin of error for cautionary purposes.

Another problem that would be massively alleviated if it wasn't for sucking furiously at lobbies, in this case, drug companies.

nd of course, like most of those arguing there's some huge problem, you refuse to even conceptualize changing things about it other than 'Cut it up, privatize it, throw it away!'

Solutions:
I. Keep a pay as you go system.
A. Reduce benifits, goes over like a lead balloon.
B. Increase taxes, goes over like a steel balloon and is essentially charging the new guy more.
C. Have an expanding population base.

You forgot D., take a hit in the general budget and keep on going. It's not like the US is gonna keel over without it's full pork quota.

II. Have an investment system.
A. Have private accounts. Allows individuals to dick up their own accounts.
B. Have government regulated and insured accounts.
C. Have a government investment program.

Completely irresponsible and mindlessly stupid when the program was never meant to be a goddamn investment system and would not be served well by such.

III. Abolish the program.

Did I miss anything?

Noted above where you missed one.

Option I is not my preference, pay as you go systems have intrinsic problems, which is why most private systems are structured that way. Option II is my preference and while I can live with suboption A, I think option B or C is what has a prayer of getting passed and suboption B strikes me as the best tradeoffs.

Investment always has an inherent level of risk; as the person comparing the current projections to a bridge's safety margin, you're fucking hypocritical to then trot out investment. With pay as you go, you can at least model what's going to be happening with the in and out and do something about it beforehand.

[Patrick Degan]

I see Tharkun's latest Wall of Ignorance is past stage one in construction.

BS. The actual source material from the CBO says otherwise, after 2055 the costs will slowly rise.

Your BS, actually. Or are you simply choosing to ignore the fact that the projections are based on outlays and revenues as they are structured in the current law?

Small tweaks? In other words leave alone for now and then when you have less time for things interest compounding, possibly a worse global economy

Implementing "small tweaks" is hardly "leaving alone for now". Nice little False Dilemma Fallacy you keep putting up: either privatise/scrap Social Security NOW or face inevitable, unavoidable disaster.

Oh yes the only problem is the baby boom

Nice little non-argument.

In other words in order to fund the benifits of people who paid in now, the future workers will have to pay in more. What Krugman implicitly grants here is that in order to maintain the same level of benifits, workers of the future will have TO BE TAXED MORE.

Sigh... what Krugman actually said:

There's nothing strange or mysterious about how Social Security works: it's just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline.

Right now the revenues from the payroll tax exceed the amount paid out in benefits. This is deliberate, the result of a payroll tax increase - recommended by none other than Alan Greenspan - two decades ago. His justification at the time for raising a tax that falls mainly on lower- and middle-income families, even though Ronald Reagan had just cut the taxes that fall mainly on the very well-off, was that the extra revenue was needed to build up a trust fund. This could be drawn on to pay benefits once the baby boomers began to retire.

The grain of truth in claims of a Social Security crisis is that this tax increase wasn't quite big enough. Projections in a recent report by the Congressional Budget Office (which are probably more realistic than the very cautious projections of the Social Security Administration) say that the trust fund will run out in 2052. The system won't become "bankrupt" at that point; even after the trust fund is gone, Social Security revenues will cover 81 percent of the promised benefits. Still, there is a long-run financing problem.

But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year.

Given these numbers, it's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come.

It's true that the federal government as a whole faces a very large financial shortfall. That shortfall, however, has much more to do with tax cuts - cuts that Mr. Bush nonetheless insists on making permanent - than it does with Social Security.

The only real "tax increase" implied in Krugman's article is reversing the irresponsible Bush tax-cuts. Others have pointed out that upping the cut-off limit on the payroll tax past the $90K level it is at now would put more progressivity into the equation. And in any case, an increase of a 1/2% share of GDP to tax revenues to avert a funding crisis doesn't amount to the intolerable burden you are implying in your hysterical ravings on this subject.

As I said before if a pay as you go system is going to give a positive return you have two options:
1. Have an expanding base of people paying in.
2. Have the new guys pay in more.

Unless you can demonstrate that the population of the United States is going into irreversible decline past 2018, argument n.1 fails. And as tax rates are periodically raised and lowered over the years as necessity dictates, argument n.2 is meaningless as an objection.

Sigh, as I noted before bonds carrying their own risks ... notably inflation. Unless social security is sitting on nothing but I-bonds (and making far less in interest) you run the risk that those bonds will lose real value to inflation. Also the problem of general default cannot be overlooked. One can talk about how the deficit is Bush's fault all you like, but the debt market has to remain stable for the next 50 years out. Assuming that past performance is an indicator of future returns, particularly given the fiscal stupidity congress spews out these days, is not my idea of a robust system.

"The problem of general default"... there are plenty of reasons why this isn't going to be coming about, chief among them being the fact that it is in the vital economic interests of our trading partners to keep propping up the dollar and avoid a chaos which would throw their own economies into depression; a situation which is not going to change even with the advent of the Euro. Another being that the safeguards put into the system in the wake of the Depression pretty much obviate against anything like another chain-collapse of the banking system.

And as for the advantages and disadvantages of the bond market:

Link

Advantages of investing in bonds:

* Bonds are predictable. You know how much interest you can expect to receive, how often you'll receive it, and when your principal (the bond's face value) will be repaid (maturity date).
 
* Bonds are more steady then stocks (which can fluctuate wildly short-term). Nervous investors usually sleep better by buying bonds instead of equity investments.
 
* People on a fixed income and/or in retirement will receive a predictable amount of regular income from bonds.
 
* The interest rates paid by bonds typically exceed those paid by banks on savings accounts, especially short-term bonds.

Disadvantages of bonds:

* Companies and municipalities can and do go bankrupt, and if they do, your bonds will lose value and possibly even become worthless.
 
* Long-term bonds will have your money tied up in low yielding bonds should interest rates go up.
 
* Unlike stocks, bonds don't offer the possibility of high long-term returns. Younger investors and those with several years to go until retirement would be better served by limiting their bond purchases and opting for equity buys instead.

The one danger from inflation is rise in interest rates reducing the return on fixed-percentage bonds, but long-term stability is why bonds make the better long-term bet. And let's not have the inevitable silly bullshit about the U.S. government going broke; that scenario is as likely as a large asteroid slamming into the U.S. midlands. The economic base of the United States is too wide and diversified for even a major financial crisis to take the whole system down as would happen in a third-world banana republic.

Notice the bloody trendlines Degan. Outlays are on a slow rise, due to greater longevity if nothing else. Krugman's solution is quite simple: ask the new guy to pay in more.

Trendlines based on projections assuming that no changes are made and nothing is done to fix the system —a scenario which has not happened in the history of the Social Security system to date. Exactly what part of this is so goddamned difficult for you to grasp? Krugman's solution extends as far as reversing the irresponsible Bush tax-cuts, or is there something to my speculation on your reading/comprehension difficulty? To reiterate:

There's nothing strange or mysterious about how Social Security works: it's just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline.

Right now the revenues from the payroll tax exceed the amount paid out in benefits. This is deliberate, the result of a payroll tax increase - recommended by none other than Alan Greenspan - two decades ago. His justification at the time for raising a tax that falls mainly on lower- and middle-income families, even though Ronald Reagan had just cut the taxes that fall mainly on the very well-off, was that the extra revenue was needed to build up a trust fund. This could be drawn on to pay benefits once the baby boomers began to retire.

The grain of truth in claims of a Social Security crisis is that this tax increase wasn't quite big enough. Projections in a recent report by the Congressional Budget Office (which are probably more realistic than the very cautious projections of the Social Security Administration) say that the trust fund will run out in 2052. The system won't become "bankrupt" at that point; even after the trust fund is gone, Social Security revenues will cover 81 percent of the promised benefits. Still, there is a long-run financing problem.

But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year.

Given these numbers, it's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come.

It's true that the federal government as a whole faces a very large financial shortfall. That shortfall, however, has much more to do with tax cuts - cuts that Mr. Bush nonetheless insists on making permanent - than it does with Social Security.

You also evidently didn't notice how Krugman is citing the CBO's own report in support of his argument —the report you keep dishonestly insisting that it projects a perpetual shortfall.

Who cares what you call the system? Private insurance companies manage to continue to pay out claims even if their customer base shrinks, they do so with, as your own article cites, with 10x higher administrative costs, and to top it all off they turn a profit. That is a robust insurance system. How do they manage to do that? By investing the money they take in as premiums until they pay it out as claims. Show me a single damn private insurer, profit/nonprofit I care not, who operates their insurance in this manner and I'll conceed that you might have a damn point here.

Private insurance companies also operate on a far smaller pool of contributors than the United States government has available to it; combined with the fact that private companies look for reasons to deny claims (and have) and have collapsed from internal malfeasance or imprudent if not irresponsible investment of assets (Australian concern HIH Insurance, to name one; the chain-collapse of Japan's seven largest life insurance companies to name another). The amount of tax revenue and treasury reserve obviates against any similar situation befalling Social Security, and no private insurer has a contributor pool numbering in the hundreds of millions. The attempt to compare the U.S. government to, say, State Farm, is ludicrous on its face; particularly as its bottom-line is, or is supposed to be, its responsibilities to the citizenry as outlined in the constitution as opposed to a group of shareholders and the quarterly profit statement. Furthermore, the Social Security trust fund is invested in U.S. Treasury bonds, which essentially is an investment in the government itself. Unless you can demonstrate that the government is going to collapse, therefore rendering Social Security's investment-base insecure, you have no argument.

Let me ask you a question. You have a pay as you go system, you have no assets, population growth is near zero and there is a precipitious surge in unemployment that last long term. THEN WHAT'S THE BACKUP PLAN? Or let's suppose you have several trillion socked away in bonds to cover an impending shortfall, but inflation triggerd by an oil shock eats away at their value. WHAT'S THE BACKUP PLAN?

Exactly where do you get this apocalyptic bullshit from? Demonstrate how the U.S. population growth rate is going to flatten out or go into a negative curve. Demonstrate the basis for this assumption of a long-term surge in unemployment, which didn't occur even in the midst of the Depression. Asking for a backup plan to patently unrealistic scenarios is like asking for a backup plan for the possible asteroid-strike in the U.S. midlands.

It doesn't matter if you have a pay as you go system or an investment system, there dangers that can screw over either. The pay as you go system shines when you have a high rate of population growth, which is why it could even manage to outperform the stock market. But with a stable population both systems have weaknesses. The difference is that an ideal stable pay as you go system breaks even, an ideal investment system accrues interest.

The only way a pay-as-you-go system can be in any real danger of failing is if the population is actually going to go into decline, which is the only way the contributor base can shrink long-term. Kindly demonstrate the basis for this scenario occuring in the U.S. please.

"Cashing in early" is BS. In an investment plan you AT LEAST HAVE THE OPTION to do so. In a pay as you go system, even if you have valid fiscal reasons to cash out early you can't do so. So please stop relabeling a strength of an investment system (that one has the option to cash out early if needed) as a weakness.

Right —because we all know that if you plan for your family to not suffer a major health crisis (such as daddy developing pancreatic cancer, for example) or a major employment crisis (daddy had the bad luck to be employed by Enron, or a falling safe at the warehouse crushed his foot and he can't work his job anymore), it somehow won't happen. No, such things never happen in real life of course, of course... The pay-as-you-go system ensures that no matter what happens, you've still got a retirement or disability backup to count on.

But what is the backup plan? Well the likely compromise I see coming out of Washington is for either government regulated and insured accounts or a government investment program (rather than individual accounts). Essentially part of the superior interest made through investment will be taxed, hopefully not in the assbackwards regressive manner of payroll taxes, and that will be used to cover those few individuals who fail to make average returns. Regulations would prohibit obvious losing strategies like all your eggs in one basket or not slowly cashing out to smooth price flucations. Insurance would be run somewhat similar to FDIC.

I hate to tell you this, stupid, but that's pretty much what Social Security already is. The one regressive aspect of the system is the payroll tax, which hasn't risen significantly in decades and operates on a fixed flat level across the earnings spectrum (up to the cutoff point). That can be fixed easily enough and without putting an onerous burden on the workforce as it is by adjusting the law. You've already conceded the necessity for some form of federal pension insurance in the event that private retirement schemes go wrong, but this is essentially what we have now. This pretty much invalidates your entire position.

[Uraniun235]

Why is that cutoff point even there? Why not remove the cutoff point?

[MKSheppard]

Your BS, actually. Or are you simply choosing to ignore the fact that the projections are based on outlays and revenues as they are structured in the current law?

Seriious question Patrick. How is the government going to fundamentally
change social security so that it's solvent either way? I'm already seeing
full page COLOR ads from the AARP in the Washington Times and/or
Washington Post, on Social Security.

So it's a damn good assumption that current law will stay the way it is,
because the AARP will raise holy hell if god forbid, they don't get their
x amount of money each month.

[tharkûn]

If the current economy doesn't pick up, there's worse problems than SS.

So of course when you have problems the best thing to do is to utterly ignore everything but the biggest one

Yes all those other problems need to be looked into, however that is not carte blanche for ignoring the above problems.

The numbers sit there to be checked.

According to the National centers for Health statistics the fertility rate is 2.07 children per woman - below the replacement level. From 1990 to 1997 US birthrates declined consistently and only since then have increased. I have yet to see convincing data that the birth rate is going to be sufficient to provide an expanding population base for social security. Perhaps you could, I don't know, cite some of your numbers?

But we should just fear Social Security instead, according to those in power.

Okay Bush sucks and is an idiot. Now that we have that out of the way can we talk about fixing the problem? I know DC is full of morons who want to lie, distort, and obfuscate. What I'm interested in is the fact that under the current law Social Security is in trouble and will bleed red for as far as the eye can see.

Standard deviation, you mean? No, it's not. However, the point I made there was that you're being deliberately misleading by calling it a single percentage point.

I'm sorry I thought anyone with half a brain could see that a single percentage point was 1/3rd of the total value being discussed. My point is we have seen protracted periods with less than 3% economic growth and during those times we didn't have to worry about global warming, peak oil, or any of a long laundry list of possible economic retardants.

The government should construct its programs so that they don't go into failure mode the moment things are less than ideal.

You forgot D., take a hit in the general budget and keep on going. It's not like the US is gonna keel over without it's full pork quota.

That is already going to happen. When you cash out the debt you need to pay for it. Either you raise taxes or float yet more debt. Assuming you don't like the idea of endless deficits, that means the general budget is going be option B.

Killing the pork sounds nice, but we are dealing with congress. Engineering the system to require them to be compotent is not a good thing. Social security needs to be idiot proofed, not reliant on a responsible future congress.

With pay as you go, you can at least model what's going to be happening with the in and out and do something about it beforehand.

Get real. Mutual fund managers model their systems quite well and manage healthy rates of return.

Or are you simply choosing to ignore the fact that the projections are based on outlays and revenues as they are structured in the current law?

And when congress changes the laws then I will use other projections. I refuse to base policy contingent upon congress changing legislation it hasn't already so done. Particularly in this case where diminishing outlays will raise bloody murder for some powerful lobbies and voting blocs.

Nice little non-argument.

Thank you for making it:

The ONLY "crisis" truly looming is the fact that the most recent two generations haven't had the same bump in growth as the Baby Boomers did.

The only real "tax increase" implied in Krugman's article is reversing the irresponsible Bush tax-cuts

Concession accepted. Krugman implicitly calls for a tax increase from the current status quo.

Others have pointed out that upping the cut-off limit on the payroll tax past the $90K level it is at now would put more progressivity into the equation.

Concession accepted, increasing the payroll tax calls for a tax increase.

an increase of a 1/2% share of GDP to tax revenues to avert a funding crisis doesn't amount to the intolerable burden you are implying in your hysterical ravings on this subject.

Tell that to a Republican dominated federal government. The ability to raise taxes does not always politically exist. Likewise in 50 years who is to say that the aggregate tax burden won't hit T* at some point increasing tax es results in lower government revenue.

Social security should be designed to function even with incompotent legislators, executives, or a falling birth rate. Putting off the problem and hoping that more responsible leadership with better options will exist in the future is not a good idea.

Unless you can demonstrate that the population of the United States is going into irreversible decline past 2018, argument n.1 fails.

Total fertility rate for the US is 2.07, population growth is a result of immigration which makes the demographic impact on social security more complex (you have to look at the demographic spread of the people coming in, the differential in life exepectancy and a host of other assumptions).

The nuts and bolts of the problem is that population growth is small or zero. Life expectancy is climbing. The ratio of workers to retirees is going to fall. The expected outlays as they stand today climb till the end time and climb faster than the expected growth in revenue. Increasing the taxes buys time, true, however unless you continually increase taxation eventually you are right back to projected deficits as far as the eye can see.

"The problem of general default"... there are plenty of reasons why this isn't going to be coming about, chief among them being the fact that it is in the vital economic interests of our trading partners to keep propping up the dollar and avoid a chaos which would throw their own economies into depression; a situation which is not going to change even with the advent of the Euro. Another being that the safeguards put into the system in the wake of the Depression pretty much obviate against anything like another chain-collapse of the banking system.

Right you can predict the course of the global economy for the next 50 years with certainty. Remember 50 years ago the world was still on a gold standard.

The one danger from inflation is rise in interest rates reducing the return on fixed-percentage bonds, but long-term stability is why bonds make the better long-term bet. And let's not have the inevitable silly bullshit about the U.S. government going broke; that scenario is as likely as a large asteroid slamming into the U.S. midlands. The economic base of the United States is too wide and diversified for even a major financial crisis to take the whole system down as would happen in a third-world banana republic.

So explain to me again why investment managers advocate a healthy mix of stocks over bonds for their clients? If bonds are superior why doesn't everyone buy them to the exclusion of stock?

Trendlines based on projections assuming that no changes are made and nothing is done to fix the system

Wonderful, when Congress changes the laws I will change my predictions. You might have faith that the Congress will act responsibly in later years, I don't.

Exactly what part of this is so goddamned difficult for you to grasp?

The part where congress enacts it into law. A practical solution is one that can make it through the political process. A good solution is one that works even when the political process is against it.

The attempt to compare the U.S. government to, say, State Farm, is ludicrous on its face; particularly as its bottom-line is, or is supposed to be, its responsibilities to the citizenry as outlined in the constitution as opposed to a group of shareholders and the quarterly profit statement

The fact of the matter is you cannot name a private entity that works on a similar pay as you go model, namely because that type of system is weaker.

Demonstrate the basis for this assumption of a long-term surge in unemployment, which didn't occur even in the midst of the Depression.

Demostrate that the market is going to go bear long enough to eat away an insurance program? Long term for the aggregate population the stock market beats pay as you go by a significant margin.

Asking for a backup plan to patently unrealistic scenarios is like asking for a backup plan for the possible asteroid-strike in the U.S. midlands.

Pot meet Kettle. Kettle, Pot.

The only way a pay-as-you-go system can be in any real danger of failing is if the population is actually going to go into decline, which is the only way the contributor base can shrink long-term. Kindly demonstrate the basis for this scenario occuring in the U.S. please.

Or if real wages fall, or if unemployment rises, or if the current taxpayers decide to kill the system.

Right —because we all know that if you plan for your family to not suffer a major health crisis (such as daddy developing pancreatic cancer, for example) or a major employment crisis (daddy had the bad luck to be employed by Enron, or a falling safe at the warehouse crushed his foot and he can't work his job anymore), it somehow won't happen. No, such things never happen in real life of course, of course... The pay-as-you-go system ensures that no matter what happens, you've still got a retirement or disability backup to count on.

Right because if you suffer a major health crisis, employment crisis, or what have you your pay as you go system does what exactly? Oh that's right nothing if you don't qualify for disability. The option to cash out is a good thing, not having the option is a bad thing. If you are better off not cashing out then, you don't cash out. If you are better off cashing out, then it is a good thing to do so.

I hate to tell you this, stupid, but that's pretty much what Social Security already is.

Social security only buys bonds and only does so for the current baby boom. In the long term the system is simply money and money out. Investment of any type allows compound interest to work for the system. That interest provides a cushion to the system so that it can handle little things: like declining populations, falling real wages, etc.

[SirNitram]

If the current economy doesn't pick up, there's worse problems than SS.

So of course when you have problems the best thing to do is to utterly ignore everything but the biggest one

Yes all those other problems need to be looked into, however that is not carte blanche for ignoring the above problems.

Strawman bullshit.. Why am I not surprised?

Let's see.. If the three big worries are going to produce apocalyptic-scale problems if allowed to come to fruitation, should we dick around with the minor problem, or perhaps do something about the sources?

Or we could do it the Tharkun method, and allow terrible things to happen because the only problem we even acknowledged was, OH NOES, we'd have to raise taxes a percent or so.

The numbers sit there to be checked.

According to the National centers for Health statistics the fertility rate is 2.07 children per woman - below the replacement level. From 1990 to 1997 US birthrates declined consistently and only since then have increased. I have yet to see convincing data that the birth rate is going to be sufficient to provide an expanding population base for social security. Perhaps you could, I don't know, cite some of your numbers?

Wow, you actually went and checked. And found that.. What? We're in the middle of a rebound by your own words? Shocker.

As I said, I never denied that population could continue to drop. What I stated(What's this? Third time I'm repeating for your braindead ass?) was that we've got much bigger problems if we ignore the causes. Of course, since you have your head crammed up your posterior, you're not wanting to try and think how to offset these by dealing with the sources.

But we should just fear Social Security instead, according to those in power.

Okay Bush sucks and is an idiot. Now that we have that out of the way can we talk about fixing the problem? I know DC is full of morons who want to lie, distort, and obfuscate. What I'm interested in is the fact that under the current law Social Security is in trouble and will bleed red for as far as the eye can see.

You want a real solution to the problem? Attack the causes, you blazing retard, not the symptoms. Is the concept that the three causes for Social Security's 'OMFG IMPENDING DOOM' of being twenty percent short are going to cause alot more problems just going over your indoctorined head?

Standard deviation, you mean? No, it's not. However, the point I made there was that you're being deliberately misleading by calling it a single percentage point.

I'm sorry I thought anyone with half a brain could see that a single percentage point was 1/3rd of the total value being discussed. My point is we have seen protracted periods with less than 3% economic growth and during those times we didn't have to worry about global warming, peak oil, or any of a long laundry list of possible economic retardants.

And have I said this isn't possible in the future? No, I haven't, you biblical idiot. I have said that for all your Chicken Little bullshit, if these things are going to happen, the problems will make falling short on the Social Security cheques a minor concern.

Of course, you immediately seized hold of the False Dileema of 'Ignore Social Security' or 'Attack Social Security', just like you have in the field of 'Leave it alone' or 'Privatize'.

The government should construct its programs so that they don't go into failure mode the moment things are less than ideal.

The three causes remaining so for extended periods would only be called 'Less than ideal' by a moron who has no idea what their effects will be..

[Patrick Degan]

Since Tharkun is piling up yet another of his Walls of Ignorance and resorting to blatant dishonesty in twisting or ignoring evidence outright, it's time to simply let the facts speak for themselves:

THIS is the summary of conclusions from the CBO report on Social Security he insists points to a situation of "perpetual shortfall":

An alternative that accounts for the imbalance between projected Social Security revenues and outlays is the ratio of trust-fund-financed benefits to payroll taxes, shown with solid lines in Figure 2-6. Because trust-fund-financed benefits decline after the trust funds are exhausted, that ratio also declines in later years.

In Social Security, as in any pay-as-you-go social insurance system, earlier generations of participants received very high benefits relative to the taxes they paid. As a result of that windfall, later generations will receive total benefits that are lower, on average, than the total taxes they paid. That low benefit-to-tax ratio is not an indication of inefficiency in the system; it merely reflects a transfer from current and future beneficiaries to earlier generations.

The benefit-to-tax ratio is higher for workers with lower lifetime earnings than for those with higher earnings. That outcome results in part from Social Security's progressive benefit formula. Low lifetime earners are also more likely to include recipients of disabled-worker, spousal, or survivor benefits--who receive benefits in excess of the payroll taxes they pay, reflecting the insurance nature of the Social Security system. (The effect of disabled-worker benefits on the benefit-to-tax ratio can be seen by examining ratios for DI and OASI workers separately. Figures showing that information are available here.)

Conclusions

Those different measures of the benefits received and taxes paid, broken down by age and income group, lead to different insights about the impact of Social Security under current law.

* High earners receive higher benefits than low earners do, and future generations will receive larger benefits than current beneficiaries do, even after adjustment for inflation and even if benefits cannot be paid as scheduled once the trust funds are exhausted.


* Conversely, low earners have a larger percentage of their earnings replaced by Social Security than high earners do, and current beneficiaries have a larger percentage of their earnings replaced than future generations will.


* Future beneficiaries will not only receive higher annual benefits than today's beneficiaries but will live longer, on average; thus, they will receive greater total benefits over their lifetime.


* The payroll tax is a constant percentage of taxable earnings, which means that because taxable earnings are projected to rise over time (even after adjustment for inflation), future generations will pay higher taxes.


* For workers with low lifetime household earnings, total Social Security benefits received over a lifetime are higher, on average, than dedicated taxes paid over a lifetime. For workers with average and above-average earnings, the reverse is true. If benefits were reduced across the board because of the projected shortfall in revenues, the general pattern of taxes paid relative to benefits received would remain similar for each income group.

And THIS is a comprehensive analysis of the CBO report which isn't saying that the system is facing eventual collapse at all:

Basic Facts on Social Security and Proposed Benefit Cuts/Privatization

Dean Baker and David Rosnick1

November 16, 2004

1) Social Security is Financially Sound

According to the Social Security trustees report, the standard basis for analyzing Social Security, the program can pay all benefits through the year 2042, with no changes whatsoever. Even after 2042 the program would always be able to pay retirees a higher benefit (in today's dollars) than what current retirees receive. The assessment of the non-partisan Congressional Budget Office is that Social Security is even stronger. It projects that Social Security can pay all benefits through the year 2052 with no changes whatsoever. By either measure, Social Security is more financially sound today than it has been throughout most of its 69-year history.


Source: SSA, CBO, and authors’ calculations.


2) President Bush's Social Security Cuts Would Be Large

The proposal that President Bush is using as the basis for his plan phases in cuts over time. A worker who is 45 today can expect to see a cut in guaranteed benefits of around 15 percent. A worker who is age 35 can expect to see a cut in the guaranteed benefit of approximately 25 percent. A 15 year old who is just entering the work force can expect a benefit cut of close to 40 percent. For a 15 year old, this cut would mean a loss of close to $160,000 in Social Security benefits over the course of their retirement.

Private accounts will allow workers to earn back only a small fraction of this amount. For example, a 15 year-old can expect to make back approximately $50,000 from the $160,000 cut with the earnings on a private account. If this worker retires when the market is in a slump, then it could make their loss even bigger.



Source: SSA and authors’ calculations.

3) Imaginary Stock Returns Don't Offset Real Benefit Cuts

Proponents of private accounts have often used highly exaggerated assumptions on stock returns to argue for the benefits of private accounts. For example, even at the height of the stock bubble in 2000, when the price to earnings ratio in the market exceeded 30 to 1, many proponents of private accounts assumed that stocks would generate 7.0 percent real returns annually. This assumption was absurd on its face - it implied that price to earnings ratios would rise to levels of more than 100 to 1. Unfortunately, even the Social Security Administration has used these unfounded assumptions in assessing privatization plans.

Given current price to earnings ratios and the Social Security trustees' profit growth projections, real stock returns will average less than 5.0 percent annually. Some proponents of private accounts are still using exaggerated stock return assumptions to advance their case.



Source: SSA and authors’ calculations.


4) Social Security is Extremely Efficient, Private Accounts Are Wasteful

On average, less than 0.6 cents of every dollar paid out in Social Security benefits goes to pay administrative costs. By comparison, systems with individual accounts, like the ones in England or Chile, waste 15 cents of every dollar paid out in benefits on administrative fees. President Bush's Social Security commission estimated that under their system of individual accounts 5 cents of every dollar would go to pay administrative costs.

In addition, under Social Security workers automatically get an annuity (a life-long monthly payment) when they retire. By contrast, financial firms typically take 10 to 20 percent of workers' savings to provide an annuity when they reach retirement.



Source: SSA and authors’ calculations.


5) Social Security Pays the Most to Those Who Need it Most

Social Security benefits are highly progressive, so that low wage workers get a much higher share of their wages in benefits than do high wage workers. A worker who earned $10,000 a year during their working lifetime can expect to see a benefit that is equal to approximately 75 percent of their average wage. A worker who earned $33,000 a year will get a benefit that is equal to approximately 45 percent of their wage, while a worker who earned $50,000 on average will get a benefit that is equal to 39 percent of their wage.

While poorer workers do not live as long as higher paid workers, the progressive benefit structure largely offsets differences in life expectancy (as do disability and survivors benefits for those who do not live to normal retirement age). Furthermore, since plans are being made for the distant future, the United States could reduce the gaps in life expectancy by income and race, as other countries have done.



Source: SSA and authors’ calculations.


6) The Projected Shortfall is No Larger Than What We Have Seen In Past Decades

It has been necessary to raise Social Security taxes in the past, primarily because people are living longer than they used to. The tax increase that would be needed to make the program fully funded over its seventy five year planning period is actually smaller than tax increases we have seen in prior decades. In other words - it would have made more sense to talk of a Social Security "crisis" in 1965 than in 2005. In fact, according to the Congressional Budget Office estimates, Social Security can be made solvent throughout its seventy five year planning period with a tax increase that is less than one quarter as large as the one in the eighties.

While tax increases are never popular, the fact is that prior tax increases did not prevent decades like the fifties or sixties from being periods of great prosperity. Of course, if the economy maintains anywhere near its recent pace of growth, any tax increases can be put off for many decades into the future, and possibly forever.



Source: SSA and authors’ calculations.


7) Young Workers Will Still See Much Higher Wages If Taxes Are Increased

If it proves necessary to raise more money for Social Security through taxes, workers will still see large increases in their after-tax wages. This is true even if they end up paying a larger share of their wages in Social Security taxes. According to the Social Security trustees' projections, the average after-Social Security tax wage for a worker in 2050, will still be more than 70 percent higher than it is today, even if taxes are raised to keep the program solvent. The CBO projections imply an even larger increase in after-tax wages.

Raising payroll taxes is not the only way to increase the revenue for Social Security. An alternative is to raise the ceiling on taxable wages. Currently, no Social Security taxes are paid on income earned above $87,900 in any given year. If the ceiling were raised to $110,000 to cover 90 percent of the country's income from wages (the level set by the Greenspan commission in 1983), it would eliminate approximately 40 percent of the projected funding shortfall. Using the CBO projections, this change alone would be almost enough to make the program solvent through the seventy-five year planning period.



Source: SSA, CBO, and authors’ calculations.


8 ) The Bush Proposal Phases Out Social Security as We Know It

President Bush's proposal gradually shrinks the traditional guaranteed Social Security so that it will eventually become irrelevant for middle income workers. For today's twenty year old average wage earners, the guaranteed benefit will be equal to just 15 percent of their annual earnings when they reach retirement age. The guaranteed benefit will be equal to just 7 percent of annual earnings for a child born ten years from now.

As the traditional Social Security benefit becomes less important for middle-income workers, Social Security will increasingly become a poor people's program. This may be a clever strategy if the purpose is to undermine political support for Social Security; it is not a good way to structure the program if we expect it to be there for our children and grandchildren.



Source: President’s Commission to Strengthen Social Security and Author’s Calculations.



Footnotes:

1. Dean Baker is the co-director of the Center for Economic and Policy research., David Rosnick, provided research assistance and or comments on earlier drafts of this paper.

And THIS analysis also disputes the ideology that Social Security is facing "perpetual shortfall" and is therefore unfixable:

THE IMPLICATIONS OF THE SOCIAL SECURITY PROJECTIONS ISSUED BY THE CONGRESSIONAL BUDGET OFFICE
by Robert Greenstein, Peter Orszag and Richard Kogan

A new Congressional Budget Office analysis released today, which has been several years in the making, projects that the long-term shortfall in Social Security financing is 47 percent smaller than the Social Security Trustees have projected.

* The Trustees project that the Social Security shortfall over the next 75 years equals 1.89 percent of taxable payroll over the 75-year period. CBO projects the shortfall to be 1.0 percent of taxable payroll, or 47 percent less than the Trustees project.

* Measured as a share of the economy, the Trustees project that the shortfall equals 0.7 percent of GDP over the next 75 years. The CBO figures reflect a shortfall of about 0.4 percent of GDP.

* Similarly, the Trustees project that the trust fund will be unable to pay full benefits starting in 2042. CBO’s estimate is 2052; after that time about 80 percent of benefits could be paid.

These differences are due primarily to differences in economic assumptions, along with methodological differences.

CBO’s report emphasizes other measures of the imbalance in Social Security. The figures reported above reflect the traditional 75-year actuarial measure, which has long been used to examine Social Security’s finances.

Implications for Social Security

Two important books written by four of the nation’s leading Social Security experts — Countdown to Reform: The Great Social Security Debate by Henry Aaron and Robert Reischauer, and Saving Social Security: A Balanced Approach by Peter Diamond and Peter Orszag — have shown, using the Trustees’ projections, that long-term Social Security solvency can be restored by modest benefit and payroll tax changes that are phased in over a number of years. These books, as well as proposals developed by other experts, have shown that radical changes in Social Security’s structure — including the replacement of part of Social Security with private accounts that carry greater risk for individual beneficiaries — are not necessary to restore long-term solvency.

The new CBO estimates strongly underscore this point. Under the CBO projections, the benefit and tax changes needed to restore long-term solvency would be still more modest.

The Size of the Bush Tax Cuts and
the Size of the Actuarial Imbalance in the Social Security Trust Fund

As a percent of GDP

Year trust fund will be unable to pay full benefits

Social Security trust fund 75-year actuarial imbalance:


March 2004 Trustees’ Report
0.7 %
2042


June 2004 CBO report
0.4 %
2052


75-year cost of 2001-2003 tax cuts, if extended as proposed by the President:


Total cost of tax cuts
2.0 %


Tax cuts for the top one percent
0.6 %


Note: Estimates of the costs of the tax cuts derived from data supplied by the Congressional Budget Office and the Joint Committee on Taxation, and assume that the tax cuts are continued the Alternative Minimum Tax is indexed for inflation. Share of the tax cuts for the top one percent based on estimates provided by the Tax Policy Center



Implications for the Federal Budget as a Whole

If CBO is ultimately proved right and the Social Security shortfall is only about three-fifths the size previously thought, the required changes to restore financial balance to Social Security will be significantly smaller. Unfortunately, this will not have large implications for the budget as a whole. The nation’s long-term budget problems will be little changed if the new CBO Social Security projection is used, because Social Security is responsible for only a modest fraction of our long-term fiscal problems. Projected increases in Medicare and Medicaid costs, due to the aging of the population and the relentless rise in health care costs throughout the U.S. health care system (including the private sector), constitute a much larger factor. So do tax cuts. As the next section of this brief analysis indicates, if the 2001 and 2003 tax cuts are made permanent, their cost will dwarf the Social Security shortfall.

Social Security’s modest impact on the nation’s long-term budget problems are confirmed by projections of the long-term “fiscal gap” — the amount by which revenues must be raised and/or spending cut in order to stabilize the federal debt as a share of the economy and prevent a debt explosion that could cause serious economic damage. Economists Alan Auerbach of the University of California at Berkeley and William Gale and Peter Orszag of Brookings have estimated the size of the fiscal gap over the next 75 years to be an alarming 7.2 percent of GDP.[1] Their estimate incorporates the Social Security Trustees’ projection of the Social Security shortfall. If the new CBO projection of the Social Security shortfall is used instead, the size of the long-term fiscal gap drops only a few tenths of a percentage point and remains close to 7 percent of GDP. Stated another way, at least 95 percent of the projected long-term fiscal gap remains.



Cost of the Tax Cuts Compared to the Size of the Social Security Shortfall

If the 2001 and 2003 tax cuts are made permanent as the Administration has proposed, their cost over the next 75 years will be more than five times the Social Security shortfall over this period, as projected by CBO. In fact, the cost over the next 75 years of the tax cuts just for the one percent of households with the highest incomes — a group with average incomes of about $1 million per year — exceeds the entire 75-year Social Security shortfall that CBO projects.[2]

This does not mean that policymakers should avoid Social Security reform and simply cancel the high end of the tax cut instead. Given the need to reduce the very large long-term deficits the nation faces and to address other costly problems, such as how to finance health care programs and deal with the growing numbers of uninsured Americans, the bulk of the savings that would be achieved from scaling back the tax cuts will be needed elsewhere. Simply filling Social Security’s financing hole with funds from the rest of the budget, and avoiding making any changes in Social Security itself, would not be responsible.

Nevertheless, this comparison showing that the cost of the tax cuts for the most affluent one percent of taxpayers exceeds the entire Social Security shortfall is useful in illustrating why the tax cuts are unaffordable, and why making them permanent does not represent sound or responsible policy. This comparison also should cause ideologically driven claims made by those who assert that the tax cuts are reasonable and prudent but that the Social Security shortfall is gargantuan and catastrophic to be viewed with skepticism.

Estate Tax Reform Can Contribute to Social Security Solvency

Although the bulk of savings from scaling back the tax cuts should not be dedicated to Social Security and other Social Security reforms are essential, it is reasonable to consider dedicating the revenue that could be secured from one specific change in the 2001 tax cut to a larger Social Security reform effort. CBO’s new projections should spark increased interest in the idea of reforming rather than repealing the estate tax, by limiting the estate tax on a permanent basis to the tiny number of very large estates that will still be subject to the tax in 2009, and dedicating the estate tax revenues that remain to the Social Security Trust Fund. Diamond and Orszag, in their recent book on Social Security reform, suggest consideration of this option. Under the new CBO estimates, adopting this approach would reduce the size of the Social Security shortfall by about 40 percent.

* In 2001, before the large tax cut enacted that year took effect, estates worth less than $675,000 for an individual and $1.35 million for a couple were exempt from the estate tax. As a result, the estates of about 98 percent of Americans who died were exempt from the tax.

* By 2009, estates worth up to $3.5 million for an individual and $7 million for a couple will be exempt from the estate tax. Data from the Urban Institute-Brookings Tax Policy Center show that the estates of 99.7 percent of Americans who die will be exempt from the tax in 2009.[3]

* This means that going beyond the estate tax parameters that will be in effect in 2009 and repealing the estate tax altogether would benefit the estates of only the wealthiest 0.3 percent (i.e., the wealthiest three of every 1,000) people who die. Those would be the only estates that otherwise would still be subject to the tax.

* If instead, the estate tax is retained for this very small group of estates and the estate tax proceeds are dedicated to Social Security, approximately 40 percent of CBO’s projected Social Security shortfall would be closed.

Tax Policy Center data show that if this step is not taken and the estate tax is repealed, more than half of the tax-cut benefits that result from repealing the tax rather than retaining it at its 2009 parameters will go to roughly the 500 biggest estates each year. These very large estates will reap a tax-cut benefit worth an average of more than $15 million per estate.

Closing about 40 percent of the Social Security shortfall that CBO projects (or about 25 percent of the shortfall that the Social Security Trustees project) seems a much sounder use of these resources than eliminating the estate tax entirely in order to provide lavish tax-cut benefits to the estates of the nation’s richest individuals. It also should be noted that under the estate-tax reform proposal described here, the small number of very large estates that would continue owing estate tax would themselves receive a hefty reduction in the estate tax that they must pay, compared with the amounts that such estates pay today, since the first $7 million of the assets in these large estates would be exempt from the tax.



Conclusion

CBO’s projections of a substantially smaller Social Security deficit over the next 75 years are an important addition to the Social Security debate. It is not possible to determine at this point whether the CBO projection or the Trustees’ projection is the better one. The sources of the differences between the two projections are the subject of active examination and debate by Social Security experts.

Even under the Trustees’ assumptions, Social Security solvency can be restored with modest program reforms. The CBO projections only underscore this point. Radical changes in the program are not necessary to restore solvency. The CBO projections also underscore the fact that Social Security is responsible for only a relatively modest share of the nation’s serious long-term fiscal gap. The recent tax cuts, if made permanent, will be a significantly larger contributor to our long-term fiscal problems. Indeed, as this analysis explains, the cost of the tax cuts just for the top one percent of households will be larger over the next 75 years than the entire 75-year Social Security shortfall under the CBO projections. Finally, as discussed above, consideration should be given to retaining the estate tax at its shrunken 2009 parameters rather than repealing it altogether, and dedicating the remaining estate tax revenues to Social Security as part of a larger reform that shores up the program for the long term.

End Notes:

[1] Alan J. Auerbach, William G. Gale, and Peter R. Orszag, “Sources of the Long-term Gap,” Tax Notes, May 24, 2004.

[2] The figures cited here for the cost of the 2001, 2002, and 2003 tax cuts represent their cost (in present value, as a percentage of GDP) through 2078 if the 2001 and 2003 tax cuts are extended and made permanent in the way that the Administration has proposed. Our estimate of the cost of the tax cuts — 2.0 percent of GDP — is based on estimates by CBO and the Joint Committee on Taxation. The estimate also assumes that the Alternative Minimum Tax is indexed for inflation, using CBO figures published in January 2004 in its baseline report. Although CBO’s estimate of the cost of indexing the AMT is not directly added to our figures, CBO’s data show that under an indexed AMT, the 2001 and 2003 tax cuts would be more expensive because the AMT would “take back” less of these tax cuts. It is this incremental cost that is included in our estimate. We assume that after 2014, the cost of the tax cuts remains a constant share of GDP, an assumption that is very likely to be conservative. The resulting estimate of the long-term cost of the tax cuts (2.0 percent of GDP) is slightly smaller than the estimate of 2.2 percent of GDP from the Auerbach, Gale, and Orszag paper, op cit. The difference mostly arises from small methodological differences in how the AMT is reflected in the figures.

[3] The Tax Policy Center data estimate the number of estates that will still be subject to the estate tax in 2009. This figure represents 0.3 percent of the number of deaths projected to occur in 2009. For the purposes of determining total deaths (estates) in each year, the TPC model uses the 1996 U.S. Annuity Basic Tables available on the website of the Society of Actuaries (http://www.soa.org) combined with age-specific population data reported by the Bureau of the Census.

There's more data which can be easily referred to should Mr. Tharkun wish to continue his contest of bullshit v. reality. And as for this:

Wonderful, when Congress changes the laws I will change my predictions. You might have faith that the Congress will act responsibly in later years, I don't.

—that's just him handwaving away the fact that methods for correcting the present projected shortfall have already been outlined and can be easily implemented. His "lack of faith" counts for exactly dick in the analysis that far more rational alternatives to privatisation are available.

[Patrick Degan]

Oh, and as for this little gem:

According to the National centers for Health statistics the fertility rate is 2.07 children per woman - below the replacement level. From 1990 to 1997 US birthrates declined consistently and only since then have increased. I have yet to see convincing data that the birth rate is going to be sufficient to provide an expanding population base for social security. Perhaps you could, I don't know, cite some of your numbers?

—this website offers a few quick-reference charts and figures indicating that U.S. population is projected to increase by 47% from its 2000 level over the next 46 years taking into account both birthrate and immigration. Without immigration, that increase would be only 16%. As this note at NPG outlines:

FAST FACTS ABOUT U.S. POPULATION GROWTH

The United States has the highest growth rates of any industrialized country in the world.

*The U.S. population is growing by about 3.2 million people each year.

*Using the Census Bureau's medium projections, U.S. population is expected to grow to 400 million by the year 2050. Eight states have population growth rates over 2.0%, which means their population will double in less than 35 years. Florida’s population has grown from 1.9 million in 1940 to 15 million today. That is over a 600% increase in just 50 years.

Oh, and if he wishes to indulge an Attacking the Messenger Fallacy against NPG on ideological grounds to try to discount the facts given, this little dynamic population pyramid graphic at the U.S. Census website should underline the facts quite effectively.

Either way, the numbers still undercut his Chicken-Little bullshit that the U.S. population is going to go into irreversible decline and that therefore Social Security will become untenable due to a shrinking base.

[tharkûn]

Degan:

If you want to copy somebody elses point verbatum, please don't include pages of articles, just rehash the points on your own. Somebody else citing the CBO is not a source of data so please do my eyes a favor and cite only facts/figures rather than entire editorial columns.

I'm not reading your post, cut the length down and I will reply.

SN:

Let's see.. If the three big worries are going to produce apocalyptic-scale problems if allowed to come to fruitation, should we dick around with the minor problem, or perhaps do something about the sources?

If the problem is a declining population what exactly do you intend to do? Force women to have more children? Try to force broader immigration through congress? Stop allowing the elderly to immigrate?

If the problem is an oil shock brought about by Venzeula having a general strike, rising Chinese oil demand, and the invitable peak in global oil production - what exactly does one do to avoid that?

The US has a choice it can either make it systems robust enough to withstand such pressures or it can seek to remove such pressures. As powerful as the US government is there are somethings which are beyond its control.

Or we could do it the Tharkun method, and allow terrible things to happen because the only problem we even acknowledged was, OH NOES, we'd have to raise taxes a percent or so.

The problem isn't raising the tax burden once, it is that the social security taxes appear to never go down. In the 80's taxes were raised to pre-pay for the baby-boomer retirement, has ANYONE ever talked about a date to rescind those tax increases? Nope. To maintain social securities present performance will require a percent of GDP increase in funding in the next 50 years and another after that. All raising the payroll tax does is push the problem off to future generations.

that we've got much bigger problems if we ignore the causes.

Again I'm not argueing that bithrates will drop, merely that structuring a system to fail IF THEY DO, is a bad idea. I don't see a federal rememdy for falling bithrates other than forcing or bribing women to have more children. Other countries' failure with the bribery approach leads me to the conclusion that if the problem occurs it will largely be outside the hands of government.

e concept that the three causes for Social Security's 'OMFG IMPENDING DOOM' of being twenty percent short are going to cause alot more problems

Do you really want a full synopsis of what the US government is doing wrong and how many other craptacular things the US is waiting in line to receive because of piss poor decisions over the years? I thought this discussion was about the problems of social security, not the broader fiscal problems of the US government.

if these things are going to happen, the problems will make falling short on the Social Security cheques a minor concern.

So in other words because it is a minor concern it is completely legitimate to ignore the problem?

The three causes remaining so for extended periods would only be called 'Less than ideal' by a moron who has no idea what their effects will be..

What are the effects of a falling population base? Let's ask Japan they've had one for quite some time now. What are the effects of protacted unemployment? Let's ask the Germans they've had that too. Protracted drops in real wages? Germany again. It isn't like dozens of examples haven't been seen in other states.

The weakness of a pay as you go system is inherent. Inspite of having higher administrative costs investment setups dominate the market. Even those organizations who offer inflation protected retirement annuities do so through investment. There are insurers in the US who have more clients than small countries, yet I can't think of a one that offers a pay as you go system because the system itself is not robust.

You can talk to your hearts content about how this number should be half again higher or that number should be slashed downward by a third; but the fact of the matter is pay as you go really only provides a good return when you have an expanding base; in a time with slight population growth, increasing longevity, and stable wages you still are talking about money in only equalling money out. When everything goes right, outside of an expanding base, you break even. That is not a robust system.

[Patrick Degan]

Degan:

If you want to copy somebody elses point verbatum, please don't include pages of articles, just rehash the points on your own. Somebody else citing the CBO is not a source of data so please do my eyes a favor and cite only facts/figures rather than entire editorial columns.

I'm not reading your post, cut the length down and I will reply.

Translation: you have no actual rebuttal to the facts presented, so you're going to keep trying to bullshit your way through this thread. Thought so.

[RedImperator]

Raise the retirement age to 75, remove the cap on taxable wages, and institute means testing (throw the millionaires out), then see where we stand. That's my solution. Any particular reason why it won't work, besides the AARP's inevitable howling?

[tharkûn]

Translation: you have no actual rebuttal to the facts presented, so you're going to keep trying to bullshit your way through this thread. Thought so.

Oh grow up. You posted pages of crap that I have no intention of even reading. If you want the points addressed make a concise list and cite primary sources when appropriate. If I wanted to read Krugman again I'd log onto the New York times. Rather than have you post Krugman, then me post Friedman, so on and so forth ... why don't you buck up and distill down the arguements to the points you wish to raise and cites to the relevent primary data?

Raise the retirement age to 75, remove the cap on taxable wages, and institute means testing (throw the millionaires out), then see where we stand. That's my solution. Any particular reason why it won't work, besides the AARP's inevitable howling?

Keeping a massive government program will piss off small government conservatives. Cutting the out the cap will piss off business conservatives to a lesser degree. Kicking out the millionaires will upset those who view this as universal coverage and will upset the proponents of less progressive taxation. Essentially between AARP and the above groups I'd be amazed if it even made it out of comittee.

Essentially though you are converting a social insurance program into a wealth transfer welfare program. Not necessarily a bad thing, but a somewhat dramatic departure from social security as we know it.

[Patrick Degan]

Translation: you have no actual rebuttal to the facts presented, so you're going to keep trying to bullshit your way through this thread. Thought so.

Oh grow up. You posted pages of crap that I have no intention of even reading.

Or as it's otherwise known, "facts, figures, and evidence".

If you want the points addressed make a concise list and cite primary sources when appropriate. If I wanted to read Krugman again I'd log onto the New York times. Rather than have you post Krugman, then me post Friedman, so on and so forth ... why don't you buck up and distill down the arguements to the points you wish to raise and cites to the relevent primary data?

Wrong, you dishonest little fuck. It's called "backing your position with evidence". I'm sorry if that doesn't suit you, but you are the one making clams and presenting nothing to back them beyond your assertions that they are so. You've just demonstrated that you are incapable of registering facts inconvenient to your ideology and that you are determined to continue bullshitting your way through this thread. I have no intention of accomodating myself to your basic laziness.

[tharkûn]

Or as it's otherwise known, "facts, figures, and evidence".

Fine, distill it down and I'll read it and respond.

It's called "backing your position with evidence".

If I wanted to read editorial columns quoted verbatum I'd go the original author.

I have no intention of accomodating myself to your basic laziness.

I have no intention of debating if you intend to repost verbatum opinion peices. The last time I read through one your own source disagreed with you and they advocated a tax increase which I already admitted is a temporary fix, one which has its own problems.

[Patrick Degan]

Or as it's otherwise known, "facts, figures, and evidence".

Fine, distill it down and I'll read it and respond.

So that you don't have to do any actual work? Sorry, but you don't get a free ride.

It's called "backing your position with evidence".

If I wanted to read editorial columns quoted verbatum I'd go the original author.

These weren't "editorial columns" but the conclusions of the fucking CBO report and analyses derived from the data in that report, you dishonest little fuck.

I have no intention of debating if you intend to repost verbatum opinion peices. The last time I read through one your own source disagreed with you and they advocated a tax increase which I already admitted is a temporary fix, one which has its own problems.

Lie. Paul Krugman merely addressed the fact that the so-called crisis-situation doesn't really exist and explains how the system is funded. Robert Kuttner discussed restoring the pre-Bush tax rates on the top 1% (which is scheduled to be implemented by the present sunset-provision in the law defining those cuts anyway even without Congressional action), as did the analyses (which also mention merely raising the payroll-tax cap to $110,000) you're hell-bent on dismissing as they challenge your basic argument that privatisation is the only way.

And since you're determined to continue your bullshit, it's time for an avalanche of fact:

THIS is the summary of conclusions from the CBO report on Social Security he insists points to a situation of "perpetual shortfall":

An alternative that accounts for the imbalance between projected Social Security revenues and outlays is the ratio of trust-fund-financed benefits to payroll taxes, shown with solid lines in Figure 2-6. Because trust-fund-financed benefits decline after the trust funds are exhausted, that ratio also declines in later years.

In Social Security, as in any pay-as-you-go social insurance system, earlier generations of participants received very high benefits relative to the taxes they paid. As a result of that windfall, later generations will receive total benefits that are lower, on average, than the total taxes they paid. That low benefit-to-tax ratio is not an indication of inefficiency in the system; it merely reflects a transfer from current and future beneficiaries to earlier generations.

The benefit-to-tax ratio is higher for workers with lower lifetime earnings than for those with higher earnings. That outcome results in part from Social Security's progressive benefit formula. Low lifetime earners are also more likely to include recipients of disabled-worker, spousal, or survivor benefits--who receive benefits in excess of the payroll taxes they pay, reflecting the insurance nature of the Social Security system. (The effect of disabled-worker benefits on the benefit-to-tax ratio can be seen by examining ratios for DI and OASI workers separately. Figures showing that information are available here.)

Conclusions

Those different measures of the benefits received and taxes paid, broken down by age and income group, lead to different insights about the impact of Social Security under current law.

* High earners receive higher benefits than low earners do, and future generations will receive larger benefits than current beneficiaries do, even after adjustment for inflation and even if benefits cannot be paid as scheduled once the trust funds are exhausted.


* Conversely, low earners have a larger percentage of their earnings replaced by Social Security than high earners do, and current beneficiaries have a larger percentage of their earnings replaced than future generations will.


* Future beneficiaries will not only receive higher annual benefits than today's beneficiaries but will live longer, on average; thus, they will receive greater total benefits over their lifetime.


* The payroll tax is a constant percentage of taxable earnings, which means that because taxable earnings are projected to rise over time (even after adjustment for inflation), future generations will pay higher taxes.


* For workers with low lifetime household earnings, total Social Security benefits received over a lifetime are higher, on average, than dedicated taxes paid over a lifetime. For workers with average and above-average earnings, the reverse is true. If benefits were reduced across the board because of the projected shortfall in revenues, the general pattern of taxes paid relative to benefits received would remain similar for each income group.

And THIS is a comprehensive analysis of the CBO report which isn't saying that the system is facing eventual collapse at all:

Basic Facts on Social Security and Proposed Benefit Cuts/Privatization

Dean Baker and David Rosnick1

November 16, 2004

1) Social Security is Financially Sound

According to the Social Security trustees report, the standard basis for analyzing Social Security, the program can pay all benefits through the year 2042, with no changes whatsoever. Even after 2042 the program would always be able to pay retirees a higher benefit (in today's dollars) than what current retirees receive. The assessment of the non-partisan Congressional Budget Office is that Social Security is even stronger. It projects that Social Security can pay all benefits through the year 2052 with no changes whatsoever. By either measure, Social Security is more financially sound today than it has been throughout most of its 69-year history.


Source: SSA, CBO, and authors’ calculations.


2) President Bush's Social Security Cuts Would Be Large

The proposal that President Bush is using as the basis for his plan phases in cuts over time. A worker who is 45 today can expect to see a cut in guaranteed benefits of around 15 percent. A worker who is age 35 can expect to see a cut in the guaranteed benefit of approximately 25 percent. A 15 year old who is just entering the work force can expect a benefit cut of close to 40 percent. For a 15 year old, this cut would mean a loss of close to $160,000 in Social Security benefits over the course of their retirement.

Private accounts will allow workers to earn back only a small fraction of this amount. For example, a 15 year-old can expect to make back approximately $50,000 from the $160,000 cut with the earnings on a private account. If this worker retires when the market is in a slump, then it could make their loss even bigger.



Source: SSA and authors’ calculations.

3) Imaginary Stock Returns Don't Offset Real Benefit Cuts

Proponents of private accounts have often used highly exaggerated assumptions on stock returns to argue for the benefits of private accounts. For example, even at the height of the stock bubble in 2000, when the price to earnings ratio in the market exceeded 30 to 1, many proponents of private accounts assumed that stocks would generate 7.0 percent real returns annually. This assumption was absurd on its face - it implied that price to earnings ratios would rise to levels of more than 100 to 1. Unfortunately, even the Social Security Administration has used these unfounded assumptions in assessing privatization plans.

Given current price to earnings ratios and the Social Security trustees' profit growth projections, real stock returns will average less than 5.0 percent annually. Some proponents of private accounts are still using exaggerated stock return assumptions to advance their case.



Source: SSA and authors’ calculations.


4) Social Security is Extremely Efficient, Private Accounts Are Wasteful

On average, less than 0.6 cents of every dollar paid out in Social Security benefits goes to pay administrative costs. By comparison, systems with individual accounts, like the ones in England or Chile, waste 15 cents of every dollar paid out in benefits on administrative fees. President Bush's Social Security commission estimated that under their system of individual accounts 5 cents of every dollar would go to pay administrative costs.

In addition, under Social Security workers automatically get an annuity (a life-long monthly payment) when they retire. By contrast, financial firms typically take 10 to 20 percent of workers' savings to provide an annuity when they reach retirement.



Source: SSA and authors’ calculations.


5) Social Security Pays the Most to Those Who Need it Most

Social Security benefits are highly progressive, so that low wage workers get a much higher share of their wages in benefits than do high wage workers. A worker who earned $10,000 a year during their working lifetime can expect to see a benefit that is equal to approximately 75 percent of their average wage. A worker who earned $33,000 a year will get a benefit that is equal to approximately 45 percent of their wage, while a worker who earned $50,000 on average will get a benefit that is equal to 39 percent of their wage.

While poorer workers do not live as long as higher paid workers, the progressive benefit structure largely offsets differences in life expectancy (as do disability and survivors benefits for those who do not live to normal retirement age). Furthermore, since plans are being made for the distant future, the United States could reduce the gaps in life expectancy by income and race, as other countries have done.



Source: SSA and authors’ calculations.


6) The Projected Shortfall is No Larger Than What We Have Seen In Past Decades

It has been necessary to raise Social Security taxes in the past, primarily because people are living longer than they used to. The tax increase that would be needed to make the program fully funded over its seventy five year planning period is actually smaller than tax increases we have seen in prior decades. In other words - it would have made more sense to talk of a Social Security "crisis" in 1965 than in 2005. In fact, according to the Congressional Budget Office estimates, Social Security can be made solvent throughout its seventy five year planning period with a tax increase that is less than one quarter as large as the one in the eighties.

While tax increases are never popular, the fact is that prior tax increases did not prevent decades like the fifties or sixties from being periods of great prosperity. Of course, if the economy maintains anywhere near its recent pace of growth, any tax increases can be put off for many decades into the future, and possibly forever.



Source: SSA and authors’ calculations.


7) Young Workers Will Still See Much Higher Wages If Taxes Are Increased

If it proves necessary to raise more money for Social Security through taxes, workers will still see large increases in their after-tax wages. This is true even if they end up paying a larger share of their wages in Social Security taxes. According to the Social Security trustees' projections, the average after-Social Security tax wage for a worker in 2050, will still be more than 70 percent higher than it is today, even if taxes are raised to keep the program solvent. The CBO projections imply an even larger increase in after-tax wages.

Raising payroll taxes is not the only way to increase the revenue for Social Security. An alternative is to raise the ceiling on taxable wages. Currently, no Social Security taxes are paid on income earned above $87,900 in any given year. If the ceiling were raised to $110,000 to cover 90 percent of the country's income from wages (the level set by the Greenspan commission in 1983), it would eliminate approximately 40 percent of the projected funding shortfall. Using the CBO projections, this change alone would be almost enough to make the program solvent through the seventy-five year planning period.



Source: SSA, CBO, and authors’ calculations.


8 ) The Bush Proposal Phases Out Social Security as We Know It

President Bush's proposal gradually shrinks the traditional guaranteed Social Security so that it will eventually become irrelevant for middle income workers. For today's twenty year old average wage earners, the guaranteed benefit will be equal to just 15 percent of their annual earnings when they reach retirement age. The guaranteed benefit will be equal to just 7 percent of annual earnings for a child born ten years from now.

As the traditional Social Security benefit becomes less important for middle-income workers, Social Security will increasingly become a poor people's program. This may be a clever strategy if the purpose is to undermine political support for Social Security; it is not a good way to structure the program if we expect it to be there for our children and grandchildren.



Source: President’s Commission to Strengthen Social Security and Author’s Calculations.



Footnotes:

1. Dean Baker is the co-director of the Center for Economic and Policy research., David Rosnick, provided research assistance and or comments on earlier drafts of this paper.

And THIS analysis also disputes the ideology that Social Security is facing "perpetual shortfall" and is therefore unfixable:

THE IMPLICATIONS OF THE SOCIAL SECURITY PROJECTIONS ISSUED BY THE CONGRESSIONAL BUDGET OFFICE
by Robert Greenstein, Peter Orszag and Richard Kogan

A new Congressional Budget Office analysis released today, which has been several years in the making, projects that the long-term shortfall in Social Security financing is 47 percent smaller than the Social Security Trustees have projected.

* The Trustees project that the Social Security shortfall over the next 75 years equals 1.89 percent of taxable payroll over the 75-year period. CBO projects the shortfall to be 1.0 percent of taxable payroll, or 47 percent less than the Trustees project.

* Measured as a share of the economy, the Trustees project that the shortfall equals 0.7 percent of GDP over the next 75 years. The CBO figures reflect a shortfall of about 0.4 percent of GDP.

* Similarly, the Trustees project that the trust fund will be unable to pay full benefits starting in 2042. CBO’s estimate is 2052; after that time about 80 percent of benefits could be paid.

These differences are due primarily to differences in economic assumptions, along with methodological differences.

CBO’s report emphasizes other measures of the imbalance in Social Security. The figures reported above reflect the traditional 75-year actuarial measure, which has long been used to examine Social Security’s finances.

Implications for Social Security

Two important books written by four of the nation’s leading Social Security experts — Countdown to Reform: The Great Social Security Debate by Henry Aaron and Robert Reischauer, and Saving Social Security: A Balanced Approach by Peter Diamond and Peter Orszag — have shown, using the Trustees’ projections, that long-term Social Security solvency can be restored by modest benefit and payroll tax changes that are phased in over a number of years. These books, as well as proposals developed by other experts, have shown that radical changes in Social Security’s structure — including the replacement of part of Social Security with private accounts that carry greater risk for individual beneficiaries — are not necessary to restore long-term solvency.

The new CBO estimates strongly underscore this point. Under the CBO projections, the benefit and tax changes needed to restore long-term solvency would be still more modest.

The Size of the Bush Tax Cuts and
the Size of the Actuarial Imbalance in the Social Security Trust Fund

As a percent of GDP

Year trust fund will be unable to pay full benefits

Social Security trust fund 75-year actuarial imbalance:


March 2004 Trustees’ Report
0.7 %
2042


June 2004 CBO report
0.4 %
2052


75-year cost of 2001-2003 tax cuts, if extended as proposed by the President:


Total cost of tax cuts
2.0 %


Tax cuts for the top one percent
0.6 %


Note: Estimates of the costs of the tax cuts derived from data supplied by the Congressional Budget Office and the Joint Committee on Taxation, and assume that the tax cuts are continued the Alternative Minimum Tax is indexed for inflation. Share of the tax cuts for the top one percent based on estimates provided by the Tax Policy Center



Implications for the Federal Budget as a Whole

If CBO is ultimately proved right and the Social Security shortfall is only about three-fifths the size previously thought, the required changes to restore financial balance to Social Security will be significantly smaller. Unfortunately, this will not have large implications for the budget as a whole. The nation’s long-term budget problems will be little changed if the new CBO Social Security projection is used, because Social Security is responsible for only a modest fraction of our long-term fiscal problems. Projected increases in Medicare and Medicaid costs, due to the aging of the population and the relentless rise in health care costs throughout the U.S. health care system (including the private sector), constitute a much larger factor. So do tax cuts. As the next section of this brief analysis indicates, if the 2001 and 2003 tax cuts are made permanent, their cost will dwarf the Social Security shortfall.

Social Security’s modest impact on the nation’s long-term budget problems are confirmed by projections of the long-term “fiscal gap” — the amount by which revenues must be raised and/or spending cut in order to stabilize the federal debt as a share of the economy and prevent a debt explosion that could cause serious economic damage. Economists Alan Auerbach of the University of California at Berkeley and William Gale and Peter Orszag of Brookings have estimated the size of the fiscal gap over the next 75 years to be an alarming 7.2 percent of GDP.[1] Their estimate incorporates the Social Security Trustees’ projection of the Social Security shortfall. If the new CBO projection of the Social Security shortfall is used instead, the size of the long-term fiscal gap drops only a few tenths of a percentage point and remains close to 7 percent of GDP. Stated another way, at least 95 percent of the projected long-term fiscal gap remains.



Cost of the Tax Cuts Compared to the Size of the Social Security Shortfall

If the 2001 and 2003 tax cuts are made permanent as the Administration has proposed, their cost over the next 75 years will be more than five times the Social Security shortfall over this period, as projected by CBO. In fact, the cost over the next 75 years of the tax cuts just for the one percent of households with the highest incomes — a group with average incomes of about $1 million per year — exceeds the entire 75-year Social Security shortfall that CBO projects.[2]

This does not mean that policymakers should avoid Social Security reform and simply cancel the high end of the tax cut instead. Given the need to reduce the very large long-term deficits the nation faces and to address other costly problems, such as how to finance health care programs and deal with the growing numbers of uninsured Americans, the bulk of the savings that would be achieved from scaling back the tax cuts will be needed elsewhere. Simply filling Social Security’s financing hole with funds from the rest of the budget, and avoiding making any changes in Social Security itself, would not be responsible.

Nevertheless, this comparison showing that the cost of the tax cuts for the most affluent one percent of taxpayers exceeds the entire Social Security shortfall is useful in illustrating why the tax cuts are unaffordable, and why making them permanent does not represent sound or responsible policy. This comparison also should cause ideologically driven claims made by those who assert that the tax cuts are reasonable and prudent but that the Social Security shortfall is gargantuan and catastrophic to be viewed with skepticism.

Estate Tax Reform Can Contribute to Social Security Solvency

Although the bulk of savings from scaling back the tax cuts should not be dedicated to Social Security and other Social Security reforms are essential, it is reasonable to consider dedicating the revenue that could be secured from one specific change in the 2001 tax cut to a larger Social Security reform effort. CBO’s new projections should spark increased interest in the idea of reforming rather than repealing the estate tax, by limiting the estate tax on a permanent basis to the tiny number of very large estates that will still be subject to the tax in 2009, and dedicating the estate tax revenues that remain to the Social Security Trust Fund. Diamond and Orszag, in their recent book on Social Security reform, suggest consideration of this option. Under the new CBO estimates, adopting this approach would reduce the size of the Social Security shortfall by about 40 percent.

* In 2001, before the large tax cut enacted that year took effect, estates worth less than $675,000 for an individual and $1.35 million for a couple were exempt from the estate tax. As a result, the estates of about 98 percent of Americans who died were exempt from the tax.

* By 2009, estates worth up to $3.5 million for an individual and $7 million for a couple will be exempt from the estate tax. Data from the Urban Institute-Brookings Tax Policy Center show that the estates of 99.7 percent of Americans who die will be exempt from the tax in 2009.[3]

* This means that going beyond the estate tax parameters that will be in effect in 2009 and repealing the estate tax altogether would benefit the estates of only the wealthiest 0.3 percent (i.e., the wealthiest three of every 1,000) people who die. Those would be the only estates that otherwise would still be subject to the tax.

* If instead, the estate tax is retained for this very small group of estates and the estate tax proceeds are dedicated to Social Security, approximately 40 percent of CBO’s projected Social Security shortfall would be closed.

Tax Policy Center data show that if this step is not taken and the estate tax is repealed, more than half of the tax-cut benefits that result from repealing the tax rather than retaining it at its 2009 parameters will go to roughly the 500 biggest estates each year. These very large estates will reap a tax-cut benefit worth an average of more than $15 million per estate.

Closing about 40 percent of the Social Security shortfall that CBO projects (or about 25 percent of the shortfall that the Social Security Trustees project) seems a much sounder use of these resources than eliminating the estate tax entirely in order to provide lavish tax-cut benefits to the estates of the nation’s richest individuals. It also should be noted that under the estate-tax reform proposal described here, the small number of very large estates that would continue owing estate tax would themselves receive a hefty reduction in the estate tax that they must pay, compared with the amounts that such estates pay today, since the first $7 million of the assets in these large estates would be exempt from the tax.



Conclusion

CBO’s projections of a substantially smaller Social Security deficit over the next 75 years are an important addition to the Social Security debate. It is not possible to determine at this point whether the CBO projection or the Trustees’ projection is the better one. The sources of the differences between the two projections are the subject of active examination and debate by Social Security experts.

Even under the Trustees’ assumptions, Social Security solvency can be restored with modest program reforms. The CBO projections only underscore this point. Radical changes in the program are not necessary to restore solvency. The CBO projections also underscore the fact that Social Security is responsible for only a relatively modest share of the nation’s serious long-term fiscal gap. The recent tax cuts, if made permanent, will be a significantly larger contributor to our long-term fiscal problems. Indeed, as this analysis explains, the cost of the tax cuts just for the top one percent of households will be larger over the next 75 years than the entire 75-year Social Security shortfall under the CBO projections. Finally, as discussed above, consideration should be given to retaining the estate tax at its shrunken 2009 parameters rather than repealing it altogether, and dedicating the remaining estate tax revenues to Social Security as part of a larger reform that shores up the program for the long term.

End Notes:

[1] Alan J. Auerbach, William G. Gale, and Peter R. Orszag, “Sources of the Long-term Gap,” Tax Notes, May 24, 2004.

[2] The figures cited here for the cost of the 2001, 2002, and 2003 tax cuts represent their cost (in present value, as a percentage of GDP) through 2078 if the 2001 and 2003 tax cuts are extended and made permanent in the way that the Administration has proposed. Our estimate of the cost of the tax cuts — 2.0 percent of GDP — is based on estimates by CBO and the Joint Committee on Taxation. The estimate also assumes that the Alternative Minimum Tax is indexed for inflation, using CBO figures published in January 2004 in its baseline report. Although CBO’s estimate of the cost of indexing the AMT is not directly added to our figures, CBO’s data show that under an indexed AMT, the 2001 and 2003 tax cuts would be more expensive because the AMT would “take back” less of these tax cuts. It is this incremental cost that is included in our estimate. We assume that after 2014, the cost of the tax cuts remains a constant share of GDP, an assumption that is very likely to be conservative. The resulting estimate of the long-term cost of the tax cuts (2.0 percent of GDP) is slightly smaller than the estimate of 2.2 percent of GDP from the Auerbach, Gale, and Orszag paper, op cit. The difference mostly arises from small methodological differences in how the AMT is reflected in the figures.

[3] The Tax Policy Center data estimate the number of estates that will still be subject to the estate tax in 2009. This figure represents 0.3 percent of the number of deaths projected to occur in 2009. For the purposes of determining total deaths (estates) in each year, the TPC model uses the 1996 U.S. Annuity Basic Tables available on the website of the Society of Actuaries (http://www.soa.org) combined with age-specific population data reported by the Bureau of the Census.

This website offers a few quick-reference charts and figures indicating that U.S. population is projected to increase by 47% from its 2000 level over the next 46 years taking into account both birthrate and immigration. Without immigration, that increase would be only 16%. As this note at NPG outlines:

FAST FACTS ABOUT U.S. POPULATION GROWTH

The United States has the highest growth rates of any industrialized country in the world.

*The U.S. population is growing by about 3.2 million people each year.

*Using the Census Bureau's medium projections, U.S. population is expected to grow to 400 million by the year 2050. Eight states have population growth rates over 2.0%, which means their population will double in less than 35 years. Florida’s population has grown from 1.9 million in 1940 to 15 million today. That is over a 600% increase in just 50 years.

Oh, and if you wish to indulge an Attacking the Messenger Fallacy against NPG on ideological grounds to try to discount the facts given, this little dynamic population pyramid graphic at the U.S. Census website should underline the facts quite effectively.

And to reinforce the point, from the tables at this page from the U.S. Census website:

United States/2005
Total, all ages 295,734,134

United States/2010
Total, all ages 309,162,581

United States/2015
Total, all ages 322,592,787

United States/2020
Total, all ages 336,031,546

United States/2025
Total, all ages 349,666,199

United States/2030
Total, all ages 363,811,435

United States/2035
Total, all ages 378,113,238

United States/2040
Total, all ages 392,172,658

United States/2045
Total, all ages 406,089,392

United States/2050
Total, all ages 420,080,587

From there, the tables break down into population by sex and age groups. Furthermore, even the application of basic mathematics shows that the retirement-age percentage of the population will comprise only about 20% of the total U.S. population by 2045, with the working age percentage hovering around 53%; sufficient base to support the Social Security system.

The numbers clearly undercut your Chicken-Little bullshit that the U.S. population is going to flatten out or go into steady decline and that therefore Social Security will become untenable due to a shrinking base.

To sum up the basic facts and figures:

• Social Security is projected to remain quite solvent through 2052, and that even if there are no changes in the structure of benefits as defined in current law, retirees will still be receiving higher proportions of benefits than the generations which proceeded them. The Congressional Budget Office report is in no way suggesting that the system is facing eventual collapse or that it is unfixable, but merely projecting possible trends as a guide to legislation, as has been done numerous times in the past.

• To fix the present projected imbalance would require little more than rescinding the more irresponsible of Bush's tax-cuts to the top 1% of earners (which threatens a general budgetary shortfall five times greater than the projected Social Security shortfall) and to raise the cap on the payroll tax to the $110,000 mark, while reforming the Estate Tax to asses only those estates valued at $7 million or above. These are, at most, minor adjustments to the present tax system which would more or less restore the pre-Bush status-quo.

• The payroll-tax increases required to support Social Security's long-term solvency at this point would amount to less than a quarter of the tax increases passed by Congress in the 1980s and signed into law by Ronald Reagan to ensure the solvency of the Social Security Trust Fund twenty years ago.

• The present condition of the Social Security system, even with the projected shortfall, is far better than what was projected back in 1965.

• Projected population trends clearly show the the U.S. population will increase by about 47% beyond the 2000 census level to a population of 408 million, factoring in both birthrate and immigration. Furthermore, the proportion of retirees to working-age members of the society of 2045 and 2050 is going to remain very clearly slanted in favour of the working age percentile. There is no demographic time-bomb ticking away which will explode the contributor base for Social Security.

In short, there is no immediate or looming crisis which requires the radical solution of privatisation, no matter how much you scream hysterically to the contrary and ignore, distort, or outright misrepresent the evidence. And if you insist on continuing to pile up your Wall of Ignorance ever higher, it will simply be necessary to keep burying you with the truth until you've had enough.

[SirNitram]

Raise the retirement age to 75, remove the cap on taxable wages, and institute means testing (throw the millionaires out), then see where we stand. That's my solution. Any particular reason why it won't work, besides the AARP's inevitable howling?

Rich people flipping out en masse at the idea of being taxed for all their income?

But raising the retirement age was inevitable anyways. Hell, there's people talking about increasing human lifespan by two, three, or even ten times it's current amount. You simply can't leave the retirement age along forever.

[Uraniun235]

Rich people flipping out en masse at the idea of being taxed for all their income?

You... you mean rich people have to pay taxes too? What the hell is this country coming to?

[MKSheppard]

rather interesting thing I found

Linka

While I don't think that Social Security is the most prominent fiscal problem facing the US, I am utterly sick and tired of the sorry, misleading rhetoric being used by critics of Social Security Reform. For example, Paul Krugman has written...

* "Everyone has noticed the use, once again, of crisis-mongering."

* "It's the standard Bush administration tactic: invent a fake crisis to bully people into doing what you want."

* "Today let's focus on one piece of those scare tactics: the claim that Social Security faces an imminent crisis. That claim is simply false."


That's the Party Line: "There is no Social Security crisis". Indeed, there's even a website--www.ThereIsNoCrisis.com--dedicated to promulgating that idea.

Krugman claims the SSA has been co-opted into the impending crisis effort by the Bush administration, but--as Luskin pointed out recently--in 1998, the Social Security Administration was saying "It is important to address the financing of both the OASI and DI programs soon..."

And they weren't the only ones warning of an impending crisis. "No Social Security crisis"? My, how times have changed.

* "Gene Sperling - Clinton Economic Advisor": "this is a chance for both parties to actually show ... that we are saving more to meet the Social Security crisis in the future. If we don't do this, then we are just putting those burdens on a future generation."


* Kenneth S. Apfel, Commissioner of Social Security: "Although there is no immediate financial crisis, the time to act is now in order to prevent a crisis from ever occurring."


* Senator Kohl - Democrat: Wisconsin [March 22, 2000]: "Comprehensive Social Security Reform is still necessary. Today's changes will do nothing to hold off the coming crisis that will begin when we start drawing down the Social Security Trust fund in 2014. Congress needs to deal with this soon, otherwise we are shirking our duty to the American people."


* WHITE HOUSE RELEASE [October 30, 1998] -- "It is normally impossible for any democracy to tackle long-term problems while the crisis is still only on the horizon. Putting the surplus off-limits until we address saving Social Security provides a strong impetus for all of us to do something to solve a fiscal challenge early so we can prevent a crisis later."


And then there's...

President Clinton

* February 2, 1998 -- "We have a great opportunity now to take action now to avert a crisis in the Social Security system."


* February 9, 1998 -- "every one of you know that the Social Security system is not sound for the long-term, so that all of these achievements ... are threatened by the looming fiscal crisis in Social Security."


* February 9, 1998 -- "This fiscal crisis in Social Security affects every generation. ... That would be unconscionable, especially since, if you move now, we can do less and have a bigger impact..."


* April 7, 1998 -- "Today the system is sound, but the demographic crisis looming is clear."


* April 7, 1998 -- "All these trends will impose heavy strains on the system. Let's look at the next chart here. You can see that in 1960, which wasn't so long ago, there were over five people working for every person drawing Social Security. In 1997, last year, there were over three people --3.3 people -- working for every person drawing. But by 2030, because of the increasing average age, if present birthrates and immigration rates and retirement rates continue, there will be only two people working for every person drawing Social Security."


* April 7, 1998 -- "If we act now, we can ensure strong retirement benefits for the baby boom generation without placing an undue burden on our children and grandchildren. And we can do it, if we act now, with changes that will be far simpler and easier than if we wait until the problem is closer at hand."


* October 24, 1998 -- "Unfortunately, some in Congress already may be backing away from this historic opportunity. Just last week, the Senate Majority Leader said he may not be willing to join me in our efforts to save Social Security. That would be a grave mistake. As with so many other long-term challenges, if we act now, it will be far, far easier to resolve the problem than if we wait until a crisis is close at hand. I believe we must save Social Security and do it next year."


* February 17, 1999 -- "the evident financial crisis which will be imposed on Social Security when the baby boomers retire"


* March 12, 1999 -- "Now, if we do what I'm suggesting, not only can we deal with the financial crisis in Social Security and Medicare..."


* August 6, 1998 -- "I don't want us to run right out and spend [the surplus] before we take care of the crisis in Social Security that is looming when the baby boomers retire."



Note how closely that rhetoric--"if we act now, it will be far, far easier to resolve the problem than if we wait until a crisis is close at hand"--mirrors that of President Bush, who said:

A lot of government, if the truth be known, is crisis-oriented management. You know, we wait and wait and wait, and then the crisis is upon us and everybody demands a solution. The problem with that when it comes to a modernization of Social Security is, is that the longer we wait, the more expensive the solution becomes.

And so one of my jobs, one of my charges is to explain to Congress as clearly as I can, the crisis is now. You may not feel it, your constituents may not be overwhelming you with letters demanding a fix now, but the crisis is now.

Because it lends itself so easily to caricature and misrepresentation, it may have been a poor choice of words, but "the crisis is now" is a mirror-image of President Clintons' position on the problem of Social Security in the 1990s.

The problem hasn't changed - only the rhetoric. Fortunately, one can remind them of what they said, back when...

A lot of government, if the truth be known, is crisis-oriented management. You know, we wait and wait and wait, and then the crisis is upon us and everybody demands a solution. The problem with that when it comes to a modernization of Social Security is, is that the longer we wait, the more expensive the solution becomes.

And so one of my jobs, one of my charges is to explain to Congress as clearly as I can, the crisis is now. You may not feel it, your constituents may not be overwhelming you with letters demanding a fix now, but the crisis is now.

Because it lends itself so easily to caricature and misrepresentation, it may have been a poor choice of words, but "the crisis is now" is a mirror-image of President Clintons' position on the problem of Social Security in the 1990s.

The problem hasn't changed - only the rhetoric. Fortunately, one can remind them of what they said, back when...

[MKSheppard]

damn it

the last part should be.


Note how closely that rhetoric--"if we act now, it will be far, far easier to resolve the problem than if we wait until a crisis is close at hand"--mirrors that of President Bush, who said:

A lot of government, if the truth be known, is crisis-oriented management. You know, we wait and wait and wait, and then the crisis is upon us and everybody demands a solution. The problem with that when it comes to a modernization of Social Security is, is that the longer we wait, the more expensive the solution becomes.

And so one of my jobs, one of my charges is to explain to Congress as clearly as I can, the crisis is now. You may not feel it, your constituents may not be overwhelming you with letters demanding a fix now, but the crisis is now.

[MKSheppard]

Just read the damn link, I mangled the last part

[Chmee]

What's the mystery? The Bush & Walker families are old-money Wall Street and Big Oil who believe in raping the government for money but most certainly not giving the government money. What better way to set up their pals than to have payroll deduction turn into a new river of cash for stockbrokers?

The more things change .....

[SirNitram]

Ahhh, the bleatings of those who think 'THE LEFT DID IT TOOOOOOOOOOO!'
is an actual response. Where would the N&P forum be without this sort of fallacious posting?

[Patrick Degan]

And of course it blithely ignores the distinct difference between "action to fix problems now will avert a future crisis" (the approach of Clinton and predecessors —including Reagan, BTW) and "the crisis is NOW, therefore we must end Social Security as we know it!!!" (the Bush approach).

[tharkûn]

And of course it blithely ignores the distinct difference between "action to fix problems now will avert a future crisis" (the approach of Clinton and predecessors —including Reagan, BTW) and "the crisis is NOW, therefore we must end Social Security as we know it!!!" (the Bush approach).

Because there aren't any differences about the definition of the problem. The only real difference is in the proposed solutions. You view privatization as evil whereas others view perpetual tax increases as evil.

The nuts and the bolts of it come down to thus:
The past stellar returns of social security rested upon an expanding income base built by unsustainible population growth and increases in real wages.

The present fiscal situation in the US will NOT be sustainable in the long term. If nothing else redeeming the social security debt is going to require massive changes in the budget (more interest on new debt floated at a higher premium, more taxation, or shifted budgetary allotments).

I am not saying that the US population will necessarily decline, nor that real wages will fall; just that the system is not robust enough to weather the storm should they do so.

Take a simple trend, the increasing prevelence of kids not to work right out of highschool. Okay what does that mean in the longterm? Well for one it will lower the percentage of the population who are workers and increase the median worker age. So one could conclude that this is a bad thing? No, because by delaying entry into the workforce individuals gain skills which have a dramatic increase in their market value. So it is a good thing? Again not necessarily so higher education seems to track along with higher life expectancy plus the education gap between the US and the rest of the world is falling - the value of being an American with an advanced degree may not remain quite so large.

The point? That predicting the impacts of every sociological change possible or even just likely to hit the social security system is hard if not impossible. The system should be designed to be robust with a large margin of safety. Indeed part of the margin should be ways to prevent stupid governments from dicking it over, Bush is not the first, nor will he be the last to try to overhaul the system.

The basic suspicion that I have of the social security system is that private firms offer the same basic services, but NONE of them use a pay as you go model. You can buy insurance to cover long term retirement costs, nobody locks out investment. You can buy inflation adjusted inuities, nobody offers that as a contract for a certain percentage of your income. Despite having customer bases larger than entire countries, only the government works with a pay as you go system. If the pay as you go system were reliable, robust, and effective someone, somewhere in the private sector would make a killing selling it - nobody does.