Comments on: The Associated Press starts to catch up on the Social Security Crater

By: Obama Demagogues Social Security in Radio/Net Address; AP and Erica Werner Take It Further « A Moral Outrage

Sat, 14 Aug 2010 14:22:54 +0000

[…] surpluses (from 2006-2008) to cash deficits. Benefits paid and administrative costs have been have been outpacing taxes collected. The Congressional Budget Office says that there will be Social Security deficits during the […]

By: BizzyBlog

BizzyBlog — Sat, 14 Aug 2010 12:41:57 +0000

By: No Runny Eggs » Blog Archive » The New York Times catches up to NRE – admits Social Security is running a cash deficit

Thu, 25 Mar 2010 15:50:33 +0000

[…] Morrissey and I have been noting since September (with the first alarm bells rung in May), and what the Associated Press noticed ten days ago. I’ll go with Ed’s take on the catch-up: We’ve been writing about this for the last […]

By: steveegg

steveegg — Tue, 16 Mar 2010 00:41:53 +0000

In reply to Ilpalazzo. Actually, you are a racist. It's what happens when big-S Socialists get in power, be they white, black, yellow, green, purple, polka-dotted, gray, blue, or whatever color.

By: Ilpalazzo

Ilpalazzo — Tue, 16 Mar 2010 00:35:10 +0000

That’s what happens when a white woman marries a black man! Oh, I’m a racist bigot! Oooh! Actually, just a misanthrope tellin it like it is after years of observing the human race..

By: steveegg

steveegg — Tue, 16 Mar 2010 00:25:50 +0000

Point noted on what the “Trust Funds” represent. The only difference between them and publicly-held debt is ownership for a few years.

Sending the excess to individuals for investment might have worked, but somehow I doubt that’s what Al Gore had in mind for the money.

By: No Runny Eggs » Blog Archive » Would the “lockbox” have worked?

Mon, 15 Mar 2010 23:57:54 +0000

[…] Associated Press praised the AlGore “lockbox” in its story discussed earlier, and Glenn Reynolds and Andy McCarthy ask where the “lockbox” was, so I figure […]

By: Paul137

Paul137 — Mon, 15 Mar 2010 22:03:45 +0000

In reply to steveegg.

I read the Meriam and Schlotterbeck book in 1975, when I was a grad student (in astronomy and astrophysics) at the University of Chicago. The question that occurred to me back then was “Where does the money deducted from paychecks for Social Security actually go?” I figured out the answer for myself and then had it validated by finding the Meriam and Schlotterbeck book in the UofC library.

So I’ve been sitting on that knowledge and, especially, that particular quote since 1975, trotting it out (usually to little effect) when someone talks about how “Congress stole the money from the trust fund.” The global point is that Social Security has been lousy public policy since its inception.

(It was also dishonestly sold as “insurance” during the mid-1930s to get it enacted by Congress. See the late John Attarian’s 2003 book _Social Security: False Consciousness and Crisis_ or check out his ~half-dozen pertinent articles at the Lew Rockwell website.)

Perhaps the “trust fund” monies **could** have actually been invested in the private, wealth-producing economy, but the net financial flows have, until recently, been so large that you can just imagine what a political football the necessary investment choices would have been.

Of course, money is fungible, and if Congress had been devoting resources — whether nominally coming from the Social Security inflows or not — to capital investments (e.g. public infrastructure, applied research [perhaps … that can be a political football, too!], …) instead of, mostly, current consumption, the country would now be facing less of an abyss.

To call Social Security a “Ponzi scheme” is, ultimately, to recognize that its problems (and Medicare’s problems) are rooted primarily in demographics. In short, promises were made that can’t possibly be fulfilled. (I haven’t studied Paul Ryan’s “Roadmap” plan in sufficient detail yet, but I have the impression that some parts of it are escapist. However, I’m delighted by his seriousness and focus, so much a contrast to most of his colleagues — and most citizens.)

By: Keith_Indy

Keith_Indy — Mon, 15 Mar 2010 20:33:48 +0000

In reply to steveegg. As much as I know, they'll be replaced eventually. If they voted for it, I'd rather see them out sooner, rather then later.

By: steveegg

steveegg — Mon, 15 Mar 2010 20:30:32 +0000

In reply to Paul137. Very interesting. Thanks for the historical research showing it's been a Ponzi scheme further back than generally-admitted.

By: steveegg

steveegg — Mon, 15 Mar 2010 20:16:22 +0000

In reply to smitty.

Simple – the majority of Social Security’s 10-year run of not having so much as a combined monthly primary deficit happened during Bush’s terms in office.

Beyond that, the last tinkerings of the Social Security taxes were:

– The FICA/SECA tax rate went up to 12.4% (the FICA split evenly between employee and employer) in 1990 as part of the 1986 rewrite of tax law, itself an implementation of the 1983 “forever” fix.
– The rate of the taxation of benefits last went up in 1993, as part of Bill Clinton’s biggest-up-until-PlaceboCare/Cap-and-Tax tax hike.
– The split between the two halves of Social Security was last adjusted for 2000 (the DI portion went up to 1.8% of total FICA/SECA from 1.7%, again with FICA split evenly between employee and employer, and the OASI portion going down to 10.6% from 10.7%).

Other than Bush, Steve Forbes, and Paul Ryan, nobody offered any serious reform to Social Security in the last decade.

By: Laurence

Laurence — Mon, 15 Mar 2010 19:58:59 +0000

Every federal trust fund is part of the national debt, liabilities not assets, because all contain nothing other than IOUs from one part of the government to another. Any increase in FICA taxes above the annual deficits would just be used for current spending, increasing the size of the debt. I am not aware that any mechanism for how a “lock box” would behaved has been advanced. The only way this could worked is if the excess was allocated to individual accounts invested in marketable assets.

I have heard people praise Social Security and Medicare as examples of socialist programs that work. They have good benefits but, the fact that each is going bankrupt, demonstrates that they do not work. I may buy a Rolls and realize that it is a wonderful car but that would mean little after a visit from the repro-man.

By: smitty

smitty — Mon, 15 Mar 2010 19:47:21 +0000

You have omitted the Blame Bush angle. Why?

By: Paul137

Paul137 — Mon, 15 Mar 2010 19:39:57 +0000

That’s John DINGELL.

And Social Security revenues have ALWAYS been thrown into the general fund, no matter what they call the accounting method. It was always that way, by design and for lack of suitable alternatives.

From _The Cost and Financing of Social Security_, by Lewis Meriam and Karl Schlotterbeck (Brookings Institution, 1950), p. 155:

“The establishment of the Trust Fund has given an aura of soundness and solvency to the OASI [Old-Age and Survivors Insurance] system. Many believe that this reserve fund ‘earns’ income in the same sense as do private insurance reserves; that, if need be, all claims could be met by liquidation of the reserves; and that an individual, with his final payment of OASI taxes, will have paid in full for his retirement benefits.

“The operation of the OASI Trust Fund is NOT [emphasis in original] similar in character to that of a private insurance company. Private insurance reserves (…) are usually invested in projects that directly participate in or promote the production of goods and services. These investments are procreative in character and thus ‘earn’ income. Furthermore, they are assets of the insurance company reserve, but they are liabilities of OTHER [emphasis in original] enterprises. The OASI Trust Fund is invested in federal government securities. Since the money is used by the government in meeting its regular expenditure requirements, no real reserve is created. The obligations of the government (liabilities) deposited in a trust account do not represent assets; they merely record future obligations which can be fulfilled only through the levy of future taxes upon the economy in general. The Trust Fund is thus a fiction — serving only to confuse.

“The explanation of the failure to establish trust fund assets analogous to those provided by private insurance companies is presumably that the sums ultimately involved are so stupendous that available investment securities of productive enterprises would not be adequate for the purpose. The deposit of its own liabilities in a so-called reserve fund thus appeared as a happy solution to the problem.”

By: steveegg

steveegg — Mon, 15 Mar 2010 19:34:07 +0000

In reply to Hucklebuck. They'll die of old age sooner or later. I'll go with them departing Congress at the earliest opportunity.

By: Hucklebuck

Hucklebuck — Mon, 15 Mar 2010 19:26:19 +0000

Let’s have those four shot. That’ll be a good start.

By: steveegg

steveegg — Mon, 15 Mar 2010 18:47:51 +0000

In reply to Keith_Indy. That happened in the mid-1960s to pay for the Vietnam War, so the list of targets is rather short. In the Senate, only Robert Byrd and Daniel Inouye were around to vote for it. On the House side, add John Dingle and John Conyers.

By: Keith_Indy

Keith_Indy — Mon, 15 Mar 2010 18:32:42 +0000

Sounds like we need to get a list of anyone who voted for being able to move the excess SS funds into the general fund. Not even sure when that happened. But if any of those jokers are still in office, they ought to have stiff primary/general election challenges.

¡Viva la fiesta de té

By: Hot Air » Blog Archive » Social Security starts cashing in US debt

Hot Air » Blog Archive » Social Security starts cashing in US debt — Mon, 15 Mar 2010 18:10:10 +0000

[…] Update: Steve Eggleston has more background. […]