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EconomistMom Says You Gotta Go See This Movie!

July 26th, 2008 . by economistmom

IOUSA posterTwo thumbs up!  (I have two thumbs!) 

I have mentioned the movie I.O.U.S.A. before here on this blog, starting with my “about” page in discussing the new and improved (almost totally hip?) Concord Coalition, and then again in mid-June when the movie was shown at a DC-area film festival.  Well, mark your calendars… The movie opens in theatres in 10 major metropolitan areas–the “I.O.U.S.A. the movie” website lists New York, Los Angeles, Atlanta, Chicago, Dallas, Miami, Philadelphia, Kansas City, San Francisco, and Washington, D.C.–on Friday, August 22nd.  The evening before the theatrical release, on Thurs., August 21st, a much broader nationwide distribution of about 400 theatres will be treated to a special screening/sneak preview, to be immediately followed by a simulcast panel discussion featuring Warren Buffett, Pete Peterson, and David Walker.  (***UPDATE:  go to this “Fathom Events” webpage to find the theatre nearest you.)  If and when it will come back after the 21st for a run at your theatre, I’m not sure.  So save the evening of the 21st to see it when you can–and early.

Because I’m so privileged to work with many of the ”stars” in the movie (the movie features the Concord Coalition’s Fiscal Wake-Up Tour, great shots of our executive director (my boss) Bob Bixby in our humble Concord offices in Arlington, VA, and is very much oriented around Concord’s mission), I’ve had a chance to see the various versions of the movie as it has developed and improved and have even had the opportunity to meet and give feedback to the movie’s director, Patrick Creadon (how cool is that?).  I’ve now seen the movie four times, having just viewed the theatrical release version just yesterday, and I love it more each time I see it.  (I’m always the first one to clap at the end.)  I really think it’s so brilliant how Patrick has turned what would seem to be a dull, ”inside the Beltway” policy issue that one would normally only read about in too-technical government documents or see through C-SPAN coverage of too-tedious congressional hearings, into a sit-on-the-edge-of-your-seat (and learn), thoroughly entertaining motion picture.  Amazing.

But you might think I’m a little biased.  After all, I find the issue of fiscal responsibility so engaging that I thought I could build a blog (this blog) around it!

So don’t take this budget geek’s word for it… Check out this review by Jessica Mosby, of the Women’s International Perspective blog, who must have seen the movie at one of the film festivals or other special screenings.   Jessica is not an EconomistMom–she is, in her own words, ”a writer and critic living in San Francisco, California. In the rare moments when she’s not traveling across the United States for work, Jessica enjoys listening to public radio, buying organic food at local farmers markets, trolling junk stores, and collecting owl-themed tchotchke.”

My favorite parts of Jessica’s review:

…Creadon’s new film, which is based on the book of the same name, rebuffs the notion that “economics” and “fun” have to be mutually exclusive. For 85 minutes, I.O.U.S.A. zips through 200 years of American history to explain how the richest country in the world is currently $9.5 trillion in debt.

…If you have no idea or don’t even care that this debt exists, I.O.U.S.A. makes you want to learn. The film’s complex premise and daunting numbers are made more accessible by the use of colorful graphs and illustrations. Creadon effectively contrasts what average people think (or think they know) against experts’ analysis, which keeps the film from being too weighed down by statistics and theories.

…A significant portion of I.O.U.S.A. follows former U.S. Comptroller General David Walker and The Concord Coalition Executive Director Robert Bixby as they tour the country speaking in town hall meetings as part of their Fiscal Wake-Up Tour. Since 2005, Walker and Bixby have made it their mission to educate the public on the reality that the future of the country depends on making difficult financial decisions. Hearing two middle-aged bureaucrats talk about economics and the country’s dire future is oddly compelling and even funny (maybe it’s all the Tab soda that the good-humored Bixby is always drinking).

…Between 1980 and 1990 the national debt more than tripled. After being elected in 1992, President Bill Clinton broke his campaign promise to lower taxes, deciding instead to balance the budget and eliminate the debt by 2012. But we haven’t continued to pay down our debt; the rising budget deficit, and what that means for the country’s future, is why Walker and Bixby started their Fiscal Wake-Up Tour.

Even people who are aware of the budget deficit (and, according to the film’s hilarious interviews with random people on the street, that’s only a handful) don’t fully understand the complexity and ramifications of the deficit.

… I.O.U.S.A. is an incredibly timely documentary that is able to address a serious issue in an accessible and fun way, which is never an easy feat. Spending money and time on an educational documentary film may not appeal to everyone, but understanding the country’s economy is especially important as a recession looms and the price tag for the Iraq war escalates to $3 trillion. However, some people may be overwhelmed by the amount of information that the film presents, especially those not familiar with economics. 

…To its credit, I.O.U.S.A. does not take political sides; regardless of which party is in office – politicians on both sides of the aisle are responsible for the current situation…

…While it may be easier to simply ignore the complexities of the country’s finances, Americans actually have a chance to reevaluate their fiscal policies with the upcoming presidential elections – watching I.O.U.S.A. is a good place to start.

I will keep you readers informed about the movie’s release as I have more information to share.  For now, go to the movie’s website to check out the movie trailer and photos, and save Thursday evening, August 21st for a possible special screening coming to your neighborhood theatre (the evening before the big theatrical release to those 10 major metro areas).

And… YouTube links:

IOUSA movie trailer

interview with Patrick Creadon, with clips

67 Responses to “EconomistMom Says You Gotta Go See This Movie!”

  1. comment number 1 by: rdan

    http://angrybear.blogspot.com/2008/07/what-economics-would-you-teach-kids.html

    Diane,

    I will be helping to review the MA K-12 econ curriculum frameworks in conjunction with Verizon and Thinkfinity.org.

    If you have time, mosey on over to the link and comments, especially from Karen and Tim.. Maybe we can find a match in interests and approach…AB is adult oriented, but there is plenty of room for other orientations to be developed for learning aside from point of view (school) in econ.

  2. comment number 2 by: coberly

    Mom

    i am sorry. Peterson wrote a comic book (”Will America Grow Up…”) and Walker conducted a snake oil show full of alarmist rhetoric and no serious analysis whatsoever.

    You can fool yourself and fool the people into thinking you are talking sober economics, but you can’t fool me.

    You could convince me that the budget deficit is a serious problem, but when you blame it all on entitlements, you are simply telling the Big Lie.

    Entitlements… Social Security and Medicare… are money we pay ourselves for things that we will need whether we use the government or private markets. The government turns out to be the most efficient (cheapest) way to pay for old age insurance, and old age medical insurance.

    Walker gives himself away when he says that Defense spending has nothing to do with the future debt. Defense spending is on-budget. Social Security is not. Social Security is a net-lender TO the government, not a cause of the debt. Future costs of Social Security can be met by a very small (2%) increase in the Social Security tax… really “savings.”
    Medicare costs… if they go up as wildly as predicted… can be met — remember we are going to need to buy the medical care in any case — can be met by a 6% increase in the tax… all of this taking place while incomes are going up from50% to 200%.

    We are not talking about a crushing burden from entitlements. We are talking about possibly spending part of our new higher standard of living on living longer in retirement.

    You need to get out of the medicine show and try to clear your head.

  3. comment number 3 by: economistmom

    coberly: OK. I’ve been trying to keep my cool about your comments for weeks now, but when you accuse me of being part of a “medicine show” and of being devoid of any analytical thinking, you’ve egged me on enough… It’s my son’s 10th birthday today, so I don’t want to let this ruin my day (and I’m off to his party shortly), so let me just ask you…

    I wonder if you have been reading my blog all along or only when someone tells you to look here because I’m mentioning Social Security? Go back and read what I’ve said about the “basic budget math” and what I’ve said about revenues and taxes. And go and read some of David Walker’s testimony as Comptroller General and his powerpoint shows on the fiscal wake-up tour that show the deterioration in the outlook since 2001 as highlighting the fact that we have cut taxes too much–that keeping federal revenues a bit over 18% of GDP (the 40-year historical average) just defies the basic math. Why do we say that revenues have to come up? Is it because we are trying to feed the public the “snake oil” of some kind of reverse psychology that will lead them to conclude that NO increase in revenues is necessary–because we’re really trying to get folks to turn against entitlement spending? No, we say revenues will have to come up because we actually BELIEVE that revenues (as a share of our economy) should come up and that our entitlement programs should be preserved and indeed strengthened. We in the “medicine show” are simply looking at our longer-run commitments (yes, admittedly, we are hopeful that the war will NOT go on forever but that our entitlements programs WILL) and trying to figure out how to honor them–not how to end them.

    That’s all I wanted to say in response to your latest comment, and I’m hoping I don’t have to respond in this way again. If you cannot see anything in this blog but a “medicine show,” then I’d suggest you not waste your time continuing to hear the “snake oil” pitch.

    I have a birthday cake to pick up now, and a party to attend. Hope you have a better day.

  4. comment number 4 by: B Davis

    coberly wrote:

    i am sorry. Peterson wrote a comic book (”Will America Grow Up…”) and Walker conducted a snake oil show full of alarmist rhetoric and no serious analysis whatsoever.

    What specific numbers and/or arguments in Peterson’s book do you disagree with? Please provide the precise quotes and page numbers. By the way, Peterson’s book “Will America Grow Up Before It Grows Old” has a copyright of 1996. It might be better if you have specific criticisms of one of his later books, “Running on Empty” (2004) or “Gray Dawn” (1999).

    Walker gives himself away when he says that Defense spending has nothing to do with the future debt.

    Do you have a source for that? The reason I ask is that Walker posted an article just a week ago titled Defense and Homeland Security Need Scrutiny, Too. Following is an excerpt:

    Yet while reform of entitlement programs is one key to restoring fiscal sanity, we must also impose tough budget controls on both sides of the federal ledger, engage in comprehensive tax reform, and review, re-prioritize and constrain other forms of spending — including spending for defense and homeland security.

    As Comptroller General of the United States for almost 10 years, I had a front-row seat from which to witness wasteful government spending at the federal level. Some of the worst examples I saw came in connection with defense and homeland security.

    Defense spending is on-budget. Social Security is not. Social Security is a net-lender TO the government, not a cause of the debt.

    As I mentioned before, we have a problem with large current deficits in the general fund. Not counting the $293 billion that it borrowed from the trust funds, it was nearly a half trillion dollars in 2007! However, if you look at the graphs and numbers at http://home.att.net/~rdavis2/outgdp08.html, you’ll see that the general trend since the fifties has been less defense spending and greater Medicare and Health spending as a percentage of GDP. Social Security has pretty much stabilized since 1980. Now don’t get me wrong. It’s great that we are able to decrease defense spending and increase health spending. Also, I believe that we still spend more on defense than the rest of the world combined and I have no doubt that there is still a huge amount of waste it parts of the defense budget. However, the current trends clearly point to Medicare and Health as being the prime concern when it comes to future deficits. And when you look at projections of spending during the upcoming Boomer retirement, Social Security is an important but lesser concern.

    Should we be more concerned about a very real existing deficit in the general fund or a merely projected but much larger deficit in entitlements? I think we should be concerned about both. In any event, I think that informed people can have honest disagreements about the best way to address these issues.

    Future costs of Social Security can be met by a very small (2%) increase in the Social Security tax… really “savings.”
    Medicare costs… if they go up as wildly as predicted… can be met — remember we are going to need to buy the medical care in any case — can be met by a 6% increase in the tax… all of this taking place while incomes are going up from50% to 200%.

    In the past, you seem to have questioned my suggestion that we “strengthen” Social Security rather than just leave it alone. And yet you continue to mention that we could solve future funding problems by simply raising the payroll tax. To my knowledge, that change would need to be made immediately to meet future costs. Isn’t that changing Social Security so as to “strengthen” it? If so, why is it that you can make such suggestions and others cannot?

  5. comment number 5 by: coberly

    mom

    it’s your kitchen. but may i suggest that you try to remain analytical.

    i listened to Walker when he was in Portland. snake oil it was.

    what your actual “analysis” is I do not in fact know. But when you cite Walker and Peterson you are citing people who are showmen, and at least in public not serious analysts.

    i sincerely hope you enjoy the party and the cake.

    and i sincerely offered off blog to attempt a “rational” way to talk about this.

    one thinking point: if saving for a longer old age, or a more expensive medical care in old age, requires more money than we are used to spending, what rule of God requires that we spend only the traditional percent of income on retirement and medical care?

    or put another way, what rational, honest, reason requires treating Social Security as “just another governmetn expense”? I’d be glad to read something from you, Peterson, or Walker that says clearly and specifically that you understand the need to pay for entitlements, not end them.

    if you hear someone shouting fire in a crowded theater… before you shoot them, sniff for smoke.

  6. comment number 6 by: coberly

    i took out my copy of “Will America Grow Up…” and tried to read it with mom’s kinder and gentler understanding. I got past the “more young people believe they will see a flying saucer than their Social Security benefits” because, after all, Peterson might just be commenting on the ignorance of youth, and have had nothing to do with Bush’s using that quote to imply that in fact Social Security won’t be there for them.

    But I had to skip over a lot ofwhat certainly looked like emotionally hyperventillated appeals to my ignorance or fear of large numbers…

    unitl I came to Peterson’s claim that “The…cost of Social Security and Medicare, expressed as a share of worker’ taxable payroll, is oficially projected to rise from the already burdensome 17 percent in 1995 to between 35 and 55 percent in 2040.” (p9)

    Well, the official projection in the 2007 Trustees Report says that it will actually rise to between 18.56% and 34.96%, most likely near 24.87%. (p167).

    and the Trustees point out that by 2040 the workers pay will have increased by at lest 40%.

    So what this means is that worker income will go from 700 dollars per week to about 1000 dollars per week. And his payroll tax deduction (half of the above figures) will go from about 60 dollars a week to about 125 dollars per week. Looks scary enough that way, but notice that after paying his payroll tax our poor worker has gone from an after payroll tax income of 640 a week to 875 a week… in other words he has gotten richer, AND he has his longer retirement paid for, and his more expensive medical care paid for.

    Maybe not such a looming catastrophe after all. I can’t tell you what to think about a pay raise and greater retirement and health care security. but I can point out that Peterson missed the projection window entirely, on the high side by more than 100%, and failed to offer any context in which to understand the projection.

    But he has lots of nice three-color graphics. And while they are not intended to aid in sober analysis, they certainly raise the hair on the back of my neck.

  7. comment number 7 by: economistmom

    Well, I have to admit I don’t have a copy of the earlier Peterson book, which as B Davis points out, was published in the mid 1990s, without the benefit of the 2007 (or 2008) Trustees Report and the stronger economy of the late 1990s–as well as other factors that caused the projections to move in the generally more optimistic direction since then (as summarized nicely in this year’s Trustees report here: http://www.ssa.gov/OACT/TR/TR08/VI_LRact_bal.html). I don’t think we can criticize Pete Peterson for not being clairvoyant about those projections, and I trust that the figures he cited in his book were based on the long-range projections available at that time. (But correct me if I’m wrong.)

    Those long-run projections for Social Security and Medicare do tend to move around quite a bit–quantitatively if not qualitatively–with small changes in economic and demographic assumptions from year to year, and so the best we can do if we want to plan for the future is to deal with the best projections we have at the moment (and the different types of projections available that may be helpful to different aspects of our policy prescriptions), and determine what might be prudent policy given the wide range of assumptions and projections. To me that means while we can hope that the more optimistic scenarios play out, we cannot plan our policy around that wishful thinking–we have to plan for at least the mid-range assumptions. Current projections for Social Security certainly do not predict catastrophe or even much of a “problem” that is not easily managed with “a very small (2%) increase in the Social Security tax… really “savings”" (as someone who knows better than I puts it). But rising health costs represent a much larger challenge–at least based on current projections–and given that provision of adequate health care for all Americans is a necessity, it’s a large enough priority that it seems we ought to start figuring out how we’ll pay for it. We (”medicine show” folks) worry about this now rather than saying we can wait until later (when we’re closer to the “crisis”), because prudence also means avoiding drastic action where it isn’t justified–where the overall costs of financing our priorities may be much reduced if we can take action sooner rather than later. If I thought or were persuaded that the overall costs to our society of maintaining Social Security and Medicare would somehow be LOWER if we took a “wait and see” attitude, then I wouldn’t be arguing for (hoping for) policy action now. And yes, I consider “overall costs” to include not just costs to me in higher taxes or lower benefits, but costs to my children in higher taxes or lower benefits.

    I was looking more carefully at some of the words in this year’s Trustees report, and it strikes me that we “medicine show” folks are on the same page as the Trustees, when they say in the conclusion to their “highlights”(http://www.ssa.gov/OACT/TR/TR08/II_highlights.html#76460):

    “The projected trust fund deficits should be addressed in a timely way to allow for a gradual phasing in of the necessary changes and to provide advance notice to workers. Making adjustments sooner will allow them to be spread over more generations. Social Security plays a critical role in the lives of 50 million beneficiaries and 164 million covered workers and their fami­lies in 2008. With informed discussion, creative thinking, and timely legisla­tive action, present and future Congresses and Presidents can ensure that Social Security continues to protect future generations.”

    With what parts of this “snake oil” do you disagree? If it’s the “spread over more generations” part, then that’s not subject to compromise on my part. I’m not going to let someone’s insults bully me into saying I don’t have to worry about my kids.

  8. comment number 8 by: coberly

    mom

    in the first place i did not accuse you of running the medicine show. i was warning you against being taken in by it.

    B Davis

    I heard Walker with my very own ears say that “defense was not the problem.” He may have learned better. I have a medical emergency at the moment. But I will get back to you and try to answer as carefully as I can both your’s and mom’s questions. Meanwhile… mom… try to think carefully about what “funding” future health care, or retirement costs, means.

    all i have said so far is that the Trustees (the real Trustees, not the political gloss) intermediate prediction of a total Social Security plus Medicare cost of 30% of payroll in 2085 is not as scary as it looks when you know that they also predict a 232% increase in wages by then. once you do the percents and start talking in absolute dollars you will see that what the problem resolves into is a much higher take home pay plus paying for a much longer retirement plus paying for much higher health care costs.

    i will be more than glad to try to go over all of this carefully and weed out the rhetoric (including mine) to arrive at a sober, rational, understanding of exactly what we are talking about.

    meanwhile, nothing in Petersons “old” book leads me to believe for a second that he is offering a careful analysis. he is just trying to scare people… for what reason I can’t honestly say i know at the moment, but i have my suspicions.

  9. comment number 9 by: coberly

    mom

    again, please look hard at what you mean by spread over generations. i’m on your kids side too.

  10. comment number 10 by: Tax Lawyer

    Now I am getting ticked off about the payroll tax increase. The average middle-class American has suffered income declines (inflation adjusted) since 1970. And the regressive payroll tax has increased already since then. Meanwhile, the upper 1% have received all of the income growth over the past 10 years, and their tax rate has been cut all the way down to 20%, with no payroll taxes, while my working class tax rate is near 50% when payroll taxes at 15%, federal income taxes, sales taxes, and state income taxes!

    Enough of this supply-side economic crap. We have had two jobless recessions already. We need to tax the wealthy at a much higher rate, and eliminate the capital gains preference. Then we need to end the estate tax giveaway to the superwealthy and moderately wealthy. And then eliminate the mortgage interest deduction, because it benefits the owners of property over rentals.

    Increasing payroll taxes will just make the current mess worse.

  11. comment number 11 by: coberly

    Tax Lawyer

    you need to stop and think. the payroll tax is not a tax. nor is it regressive. you get your money back. and you get more back the poorer you are. this has nothing to do with supply side, and is almost exactly the opposite of supply side in philosophy.

    the rich don’t pay the payroll tax because they do not collect Social Security benefits.

    meanwhile the taxes you do pay have something to do with the fact that your life is better, and richer, than, say, that in Zimbabwe, or even Alabama.

  12. comment number 12 by: coberly

    waiting for the Doctor

    let me put it in good news - bad news terms.

    The good news is that you are going to be living a lot longer. And there is going to be all kinds of new medical technology to make your longer life healthier.

    The bad news is that it costs more money to live longer. And all that medical technology is expensive.

    The good news is that you are going to be making a lot more money while you are working and can easily afford to prepay you retirement and health care in retirement.

    These are the “facts” as projected by the Social Security Trustees: (citations if you really need them)

    Social Security is currently in surplus and has a “savings account” (the Trust Fund) with enough money in it to pay for all scheduled retirement benefits, with no increase in payroll taxes, until 2040 or so.

    After that time, if we are living longer, it may be necessary to raise the payroll tax about 2% for each the employee and the employer. This will turn out to be about 20 dollars per week on a pay that will have increased by then from 700 dollars per week (average today) to about 1000 dollars per week (today’s dollars) then.

    The Trustees project that by 2085 the cost of Social Security will have gone up to about 9% of payroll for each the employee and the employer, and the cost of Medicare will have gone up to about 6% of payroll for each the employee and the employer. Meanwhile the pay will have gone up to 232% of what it is today. This means that out of a pay of 1624 per week, you will pay about 146 for your retirement savings and about and about $97 for health insurance. Leaving you about 1380 per week for the rest of your spending, including other taxes..compared to about $650/wk today after payroll taxes.

    It’s up to you to choose whether these numbers look like a crushing burden for “entitlements” or like a reasonable amount to pay for a longer, richer, healthier retirement AND a lot more money in your pocket after you have paid for your own “entitlements.”

    I think I can leave it there for now. It is the factual basis as I understand it. I’ll be glad to see any factual critique, or any clearly laid out plan to provide for a secure retirement and pay for the higher medical costs, that is better.

    But try to keep it factual. And don’t be offended if I ask you to explain clearly the real world connections between your facts.

    it may take me a while to get back.

  13. comment number 13 by: coberly

    still here

    i’d like to add that even if wages don’t go up… at all… that longer life and that medical care are still going to cost money.
    you might have to choose between a new car and putting away more money for the longer retirement, or between a trip to Las Vegas and prepaying your health care in retirement.

    i don’t think that raising the retirement age is a humane solution. I don’t think that killing Medicare or cutting benefits is an honest solution. And I don’t see the magic of compound interest as an intellectually well considered solution. and i hope you can tell the difference in these cases between rational argument and wishful thinking.

  14. comment number 14 by: B Davis

    coberly wrote:

    I heard Walker with my very own ears say that “defense was not the problem.” He may have learned better. I have a medical emergency at the moment. But I will get back to you and try to answer as carefully as I can both your’s and mom’s questions. Meanwhile… mom… try to think carefully about what “funding” future health care, or retirement costs, means.

    This is the reason that I always like to get a verifiable source. In your prior post that I replied to, you said:

    Walker gives himself away when he says that Defense spending has nothing to do with the future debt.

    Having “nothing to do with future debt” is very much different than “defense was not the problem”. The latter statement could have been intended to mean that defense is not the only or the main problem as far as the large projected future deficits go. Hence, I would want to see a verifiable source of exactly what he said and the context in which he said it. If you can find a record of that or any other speech that he made on the matter, I’ll be more than happy to listen to it. In addition, I have a copy of Peterson’s book “Will America Grow Up Before It Grows Old” and his newest book “Running On Empty” so I’m willing to discuss any specific part of them. Meanwhile, I also have other matter to attend to. Good luck with your medical emergency.

  15. comment number 15 by: Jim Glass

    Walker gives himself away when he says that Defense spending has nothing to do with the future debt … defense was not the problem.

    Well, to the extent that defense spending is paid for currently it in fact has nothing to do with the future debt, obviously. Only deficit spending and unfunded accrued liabilities increase the future debt.

    Let’s see, from the 2007 Financial Report of the United States Government

    Defense spending was 20.1% of total govt spending in 2007, and the deficit was $162 billion, so the portion of the deficit proportionately attributable to defense spending was $33 billion.

    Meanwhile, also per the Financial Report, the 2007 one-year increase in the unfunded accrued laibility just for Medicare and Social Security was $2,094 billion, present value.

    If you think $33 billion is comparable to $2,094 billion … you might be Coberly!

    As another recent CBO head, Douglas Holtz-Eakin, said about his time on the job….

    “The thing that I found most amazing is everybody thought the war in Iraq was a much bigger expenditure than the Medicare drug benefit. How could you possibly believe that?”

    Again as per the Financial Statement, the drug benefit’s unfunded accrued liability for 2007 was $447 billion (between 2x and 3x the expenditure on the Iraq war) bringing the total accrued laibility for it to $8,361 billion present value.

    So the Iraq war would have to run something like 45 years to run up a cost equal to where the Part D benefit is today. And Part D is still running.

  16. comment number 16 by: coberly

    B Davis

    Walkers mark re defense spending was in reply to an audience question following a lecture about future deficits. in context it meant exactly what i said it meant: that defense spending is not the problem. as of right now, there is NO debt due to “entitlements”. there is a large debt due to whatever it is congress spends money on. Butthe Reagan Arms Buildup and the Bush War on Terror and in Iraq seem to stand out to the naked eye.

    Jim Glass

    I am trying to skip the insults, but your reasoning reminds me of some compulsive liars i know.

    you discount the defense spending contribution to the deficit as the same as its share of the budget. well, that could be fair, but it could also be true that the rest of the budget is “reasonable” and the excess Defense spending is responsible for the entire deficit.

    But then you go on and count “future” deficits as though they were actual debts.

    To make a long story short… there will be NO entitlement deficits one “Americans Grow Up…” enough to understand that if they are going to collect the benefits they need to pay for them.

    The cost of paying for them is addressed in my earlier post. I would be glad to hear your plan for paying for retirement insurance and retirement health care insurance without spending exactly the same amount of money, and collecting it from the people who are going to spend it.

    and yes, i am still waiting to see the doctor. but don’t worry about me. i only mentioned it to explain the fact that i may not be back right away.

  17. comment number 17 by: Brooks

    Coberly,

    If you haven’t already done so, I suggest you post your basic argument in clearly and thoroughly on Angry Bear or somewhere else so that all your premises and your logic can be seen holistically and conveniently, and provide a link here to that post.

    That way everyone who wishes to spend time revealing your premises and logic as invalid can do so more efficiently. I probably won’t bother wasting my time with it — knocking down all your invalid arguments could be time-consuming, particularly given that responses from you would require further refutation — but others may be willing to do so.

    Anyway, if you are confident in your argument (and not worried about laying it all out and exposing it to targeted challenges), I would expect you to accept my suggestion. If you lack such confidence in your argument, just keep on taking pot shots at others.

  18. comment number 18 by: coberly

    Brooks

    in case you missed it, i offered the basic argument just above. still waiting for rational replies.

  19. comment number 19 by: coberly

    just a note to say i came back and looked. and didn’t see any effort to engage what i called the facts.

    i am not very interested in whether or not Walker and Peterson are being honest. I have read their book and listened to their talk and I don’t believe they are… not even close. But that is not the important point here.

    The important point is whether or not we need to do something (drastic) about entitlements, and if so, what?

    i have begun a case above for why i don’t think we need to do anything but expect to pay a very small increase in the payroll tax if we live to be a lot older, and a somewhat larger increase in the Medicare tax if the medical expenses of old age turn out to be as large as currently projected. these larger payments will be more than made up for by our bigger future incomes. And if they are not, we will STILL need to pay for our retirements, and our medical care in retirement.

    And I have heard no coherent alternative.

    I am sorry if it hurts people’s feelings, but I spent a part of my career teaching people how not to be fooled by numbers…and Walker and Peterson are examples of what I taught people to not be fooled by. At about the same time I studied something called human cognition, and if i had not learned it by myself, the science would have alerted me to the fact that people rarely think in anything that looks remotely like a “rational” manner. That takes some discipline. And even then it is a difficult process. So far I don’t see anything here that resembles it.

    This is not as arrogant as it sounds.

  20. comment number 20 by: coberly

    Brooks,

    if Walker and Peterson are snake oil salesmen, you are the snake.

    I personally think you are insane, but there is no denying you have learned to cast your “argument” in a form that imitates the language of people who may have a claim to rationality but have given up on their present audience. I suspect you have heard that language more than a few times in your going to and fro upon the earth.

    If you fool anyone that doesn’t want to be fooled, there isn’t much i can do about it. Except to keep saying to anyone who hears, “be careful; count your change.”

  21. comment number 21 by: Brooks

    Coberly,

    Get help. Seriously. Someone who does good work with paranoia and general irrationality.

  22. comment number 22 by: B Davis

    coberly wrote:

    The Trustees project that by 2085 the cost of Social Security will have gone up to about 9% of payroll for each the employee and the employer, and the cost of Medicare will have gone up to about 6% of payroll for each the employee and the employer. Meanwhile the pay will have gone up to 232% of what it is today. This means that out of a pay of 1624 per week, you will pay about 146 for your retirement savings and about and about $97 for health insurance. Leaving you about 1380 per week for the rest of your spending, including other taxes..compared to about $650/wk today after payroll taxes.

    It’s up to you to choose whether these numbers look like a crushing burden for “entitlements” or like a reasonable amount to pay for a longer, richer, healthier retirement AND a lot more money in your pocket after you have paid for your own “entitlements.”

    I assume that the 9% and 6% figures came from halving the 18.5% and 11.71% cost rates in Table VI.F2 on page 167 of the 2007 Trustees Report. In the future, please just give your sources so that others don’t have to search for them. As I’m not sure where your other numbers came from, I just have to put them in the same box where I put all unsourced data. Still, I do have enough information that I can address your proposal.

    First of all, any increase in real wages by 2085 will be an increase in average wages. As you can see in the third graph and numbers at this link, the average pretax income has increased by 42 percent in the 26 years from 1979 to 2005. However, the pretax income of the lowest quintile of wage-earners has barely budged, going up just 1.3 percent during that period. There’s no way to know how long and to what degree this trend will continue. But your proposal will demand that the bottom quintile pay about double the current FICA tax even if their real income doesn’t change.

    At the same time, initial benefits for all Social Security recipients will increase by the same wage index. However, unlike workers, the benefits of all retirees will increase by this same percentage. Hence, retirees are protected from an unfavorable distribution of income growth but workers are not.

    In addition, workers will be on the hook for a number of other entitlement expenses. Your cost rate numbers only include Social Security and Hospital Insurance (Medicare Part A). As the graph at this link shows, Medicare Part A is only about one third of the total projected cost of Medicare. Parts B and D comprise Supplementary Medical Insurance (SMI) and, according to the Summary of the latest report for the Social Security and Medicare programs, “general revenues pay for roughly 75 percent of all SMI costs under current law”.

    In addition to these SMI costs, taxpayers will be on the hook to redeem all of the treasury bonds in the Social Security and Medicare Part A trust funds. And, while the Social Security trust fund is projected to last until 2041 as you say, the HI trust fund is projected to last just until 2019.

    Because of this tremendous stress that the taxpayer is likely to be under, it seems that retirees should shoulder at least a part of the burden by a modification to the wage-indexing of initial benefits in Social Security. In addition, since “new medical technology to make your longer life healthier”, as you say, I see no reason why we can’t work for a bit of that longer, healthier life. Of course, it may be difficult for certain physical laborers to work longer and there may be some age-discrimination in certain industries. For that reason, it seems that we should continue to allow earlier retirement at a lower benefit level and provide a safety-net for those who cannot live on those lower benefits.

    The point is, I see no reason why all of the burden should be shouldered by future workers and none of it by future retirees who will benefit from the same hopefully-increasing wage index. In fact, it seems that we should only be mandating some minimal level of retirement benefits and medical care that we agree to be necessary. Beyond that, we should leave it up to the workers to decide whether they want to spend more of their discretionary money during their working years or during their retirement.

  23. comment number 23 by: economistmom

    B Davis said:
    First of all, any increase in real wages by 2085 will be an increase in average wages. As you can see in the third graph and numbers at this link, the average pretax income has increased by 42 percent in the 26 years from 1979 to 2005. However, the pretax income of the lowest quintile of wage-earners has barely budged, going up just 1.3 percent during that period. There’s no way to know how long and to what degree this trend will continue. But your proposal will demand that the bottom quintile pay about double the current FICA tax even if their real income doesn’t change.

    Yes! This issue of the distribution of wages relative to the distribution of costs (benefits) and income (taxes) is crucial, especially if one is trying to argue that the tax should not be made more progressive. I personally don’t agree that it shouldn’t be made more progressive, but that’s largely my own value judgment (so subject to convincing otherwise) about the overall effect of government on the distribution of income and wealth. I think it’s impossible to analyze the sustainability of the entitlement programs (and suggest the possible fixes) without considering the distirbutional implications–both generation to generation, AND across the income distribution. (That’s one reason why I don’t find the Actuaries numbers especially helpful and am looking forward to some new numbers that CBO is expecting to release very soon, which should provide a much richer distributional picture.)

  24. comment number 24 by: coberly

    i will get back a little later.

  25. comment number 25 by: coberly

    B Davis said

    “I assume that the 9% and 6% figures came from halving the 18.5% and 11.71% cost rates in Table VI.F2 on page 167 of the 2007 Trustees Report. In the future, please just give your sources so that others don’t have to search for them. As I’m not sure where your other numbers came from, I just have to put them in the same box where I put all unsourced data. Still, I do have enough information that I can address your proposal.”

    Davis,

    just who do you think you are talking to? this is a blog, not a research publication, and I have other things to do than gratify your ego by doing busywork.
    IF the argument turns critically on a point, I will supply the citiations. And in this case it turns out I did provide the necessary references. Because they were not right where you expected them, and you could not remember having seen them, or formulate why the argument depended on them, is not my problem.

    Now can we try to get back to the substance of the matter?

  26. comment number 26 by: coberly

    BDavis

    I need to try to take your comments one point at a time, because they do not seem to me to add up to a coherent argument, much less an actual plan to solve the “problem.”

    You seem to be saying that because lower income workers will not be experiencing the wage gains the “average” worker is projected to get, that there remains a problem to be solved. Well, you need to lay that problem out in more detail before I can umderstand just what it is. Then you really should offer a proposal, that is more than wishful thinking, that will solve the problem you see.

    In particular you mention that the bottom quintile will pay a FICA tax double what they pay at present.

    Perhaps. Let’s see what that means. Currently total FICA is about15%, it is projected to be about30% in 2085 or so.

    Is the bottom quintile about $20,000 per year? Then the tax today would be about 3,000 per year, or about 60 dollars per week. Assuming a near zero income tax, this would leave our low wage worker with about 340 dollars per week after he has prepaid a retirement expected to last about 15 years, and medical costs in retirement, which i assume (for now) are expected to be about what they are.

    Assuming no raise in pay, but the projected rasie in FICA, our poor worker will have about 280 dollars per week after taxes, plus have his retirement, expected to last about 20 years, paid for, plus have much larger expected medical care costs paid for.

    Now living on 280 a week can be a strain (but I can do it easily myself). But what do you propose for an alternative.
    My first thought is that that low wage worker needs a payraise. I frankly don’t see why he can’t get one. It seems somewhat improbably to me that living in a country where the average wage is 1600 a week, we would need to pay some workers less than 400 per week. But, to repeat myself, how do you propose to pay for this workers retirement and medical care otherwise. Have him work into deep old age?

    That doesn’t really sound as charitable to me as it seems to sound to you.

  27. comment number 27 by: coberly

    Davis

    you seem to think that future workers and future retirees are different people. there are a lot of disagreements i have with the rest of what you say. but unless they come back as points in a coherent argument, i’ll let them ride for now.

  28. comment number 28 by: coberly

    mom

    you seem to be saying you don’t find the actuarial numbers useful. yet they are the “official numbers.” could you state your objection more clearly?

    as for the generational fairness that you allude to, can you explain how you can possibly guarantee “generational fairness” when you cannot guarantee the price of bread, the absence of war and the draft, the possibility of recession, or even visits by flying saucers?

    i think, without going at it hammer and tongs for the moment, that “generational fairness” is a red herring created by people who realize their argument for the current state of affairs, and the reasonable future, just doesn’t make sense.

    let me be clear about the price of bread: as a percent of income, not simply as a matter of general inflation.

  29. comment number 29 by: coberly

    perhaps the problem is me.

    i am looking for a coherent arguement. that means it is not enough to say “income disparity” or “cbo numbers” like butterflies caught in your net on a fine summer day. you need to relate these ideas to some coherent statement of the problem, and some operationally understandable proposed solution to the problem as you see it.

    even if you say “generational fairness” you need to define what you mean by that, and why a small difference in rate of return on social security is either significantly unfair… to a population living at twice our real standard… or more unfair than much larger differences in rate of return on, say, work.

    why should a less than one percent difference in the rate of return on social security (which was designed NOT to be an “investment”) bother me more than a 1% increase in my auto insurance when the insurance company tells me that accidents are getting more expensive? and why should an increase in the cost of my social security bother me more, as an equity issue, than the fact that some people’s wages are not keeping up with the rate of productivity?

  30. comment number 30 by: economistmom

    coberly said:
    “…Now living on 280 a week can be a strain (but I can do it easily myself). But what do you propose for an alternative.
    My first thought is that that low wage worker needs a payraise. I frankly don’t see why he can’t get one. It seems somewhat improbably to me that living in a country where the average wage is 1600 a week, we would need to pay some workers less than 400 per week. But, to repeat myself, how do you propose to pay for this workers retirement and medical care otherwise. Have him work into deep old age?”

    Your distorted view of my motivation is getting in the way of your seeing that we’re on the same page in terms of what policy actions are warranted.
    The strain on this younger, poorer worker you refer to, and your desire to boost this worker’s wages (not easy to do through mere fiscal policy) or otherwise find a way to pay for the worker’s retirement and health care, is exactly why those of us who evoke the “generational fairness” argument suggest that we need to find solutions that spread the costs more (over time and people). Now, admittedly, “fairness” is a value judgment and would have a different quantitative (at least implicitly quantitative) definition to different people. I could define “fairer”, for example, to mean making sure our policies spread the benefits and burdens of our intergenerational entitlement programs in a proportional way, so that the net benefits add the same percentage to the different generations’ pre-policy incomes. Or alternatively, for example, I could define “intergenerationally fair” as adding the same dollar amounts to the different generations’ incomes. I’m not prepared to come up with my quantitative definition of what would be “generationally fair” (especially without more distributional estimates as I was referring to in mentioning CBO-type numbers), but qualitatively I don’t think that putting off all the adjustments to future generations is fair. That’s still a value judgment (choosing winners and losers, or dividing up the “economic pie”) which comes from my own perhaps biased perspective as a mother and which anyone could disagree with. Much less of a value judgment, however, is the fact that boosting national saving, right away, would help increase the total size of the economy (the size of the economic pie) and hence our ability to actually make everyone, across all generations, better off. That’s why I think spreading the costs of making these programs whole over the longer run, is better than NOT spreading the costs… it’s a combination of my own (perhaps biased) sense of intergenerational equity, coupled with what I believe is an unbiased view of the economic merits of public and national saving.

  31. comment number 31 by: Jim Glass

    B Davis wrote:
    “In the future, please just give your sources so that others don’t have to search for them.”

    Coberly responds:
    just who do you think you are talking to? this is a blog, not a research publication, and I have other things to do than gratify your ego by doing busywork.

    No sources of the “facts” he keeps proclaiming for you, B Davis! That’s a convincing reply, eh? ;-)

    Coberly wrote:

    perhaps the problem is me.

    That’s occurred to some people.

    Even if you say “generational fairness” you need to define what you mean by that, and why a small difference in rate of return on social security is either significantly unfair… to a population living at twice our real standard… or more unfair than much larger differences in rate of return on, say, work.

    why should a less than one percent difference in the rate of return on social security (which was designed NOT to be an “investment”) bother me…

    Repeating info given to Coberly previously. Rates of return on SS contributions…

    [] 36% annually for the first “Ida May Fuller” retiree cohorts in the 1940s, declining to

    [] 12% for those retiring in the 1960s (when Paul Samuelson praised Social Security for being an actuarially unsound Ponzi scheme that works, with “everyone receiving 10 times what they contribute”), to

    [] 5% for the retirees of the 1980s, when Congress protected benefits for then-seniors by cutting benefits for, and increasing taxes on, the then-young, to

    [] Under 1.9% and falling (less than the projected “risk free” rate on Treasury bonds of 2.9%, and thus a real economic loss) for today’s young workers born in the 1970s and later.

    (Source: SSA.gov. I could link to exact sources there, but since Coberly feels providing sources is inappropriate here as “this is a blog, not a research publication”, I shan’t bother.)

    So now we can put Coberly’s demand “to define what you mean” back to him.

    By his words “small difference in rate of return on social security … less than one percent” does he mean the decline from 36%? or 12%? or 5%? to under 1.9% and falling.

    Actually, if his arithmetic tells him that the difference between any of those numbers and under 1.9% is “less than one percent”, then he should heed his own words, perhaps his problem is him.

    why should [it]… bother me more than a 1% increase in my auto insurance…?

    Now he strangely compares SS to a real insurance program from which an individual receives nothing in the absence of an insurable loss event, such as a car crash. Does he really think SS is that kind of program?

    That’s odd because over at SSA.gov they describe SS’s retirement benefit as “a defined benefit pension”.

    In fact, in the history section over there you can read about FDR and the other founders of SS specifically promising that it would be a pension plan from which every generation would get a consistent “fair return” on its “contributions” (not its “insurance premiums”) which they defined as the return on T-bonds. (Of course, past generations actually got far more than that, due to changes to SS that FDR vetoed, his veto being overridden … which changes also cause today’s young to get a lot less than the T-bond rate, as noted above).

    FDR himself emphatically opposed the intergenerational transfer tax on the future that Coberly lauds at every turn, and there are plenty of sources attesting to that at SSA.gov and elsewhere — but as “this isn’t a research paper” and Coberly doesn’t believe people should be bothered to give sources here, I shall not.

    Anyhow, the “benefit moneysworth” tables at SSA.gov say that the average medium-wage male worker reaching age 65 in 2020 will receive a benefit equal to only 67% of his lifetime contributions to SS — i.e., take a 33% *loss* on a lifetime basis — compared to the average medium-wage male worker reaching age 65 in 1985 receiving a benefit worth 134% of contributions.

    Perhaps Coberly can give us the definition he uses to determine that a retiree of 2020 receiving only *half* as much from SS (and being made poorer by it lifetime) compared to the retiree of 1985 receiving *twice* as much (and being made richer by it lifetime) is “fair”.

  32. comment number 32 by: coberly

    jim glass

    i’ll get back to the substance. but meanwhile what i said about pathological liars still applies. you cut off my answer to davis to make it seem that i had not answered him, nor supplied the information he requested.

    if you are not trying to build a lie, you may just have a reading attention deficit disorder.

  33. comment number 33 by: coberly

    mom

    i have not made any assumptions about your motives. i do have suspicions about Peterson’s, but i can set them aside if we can find a way to talk about substance.

  34. comment number 34 by: coberly

    what i think i am seeing so far.

    we had a sky is falling book and lecture by Peterson and Walker.

    The Trustees Report actually shows that after paying the increased payroll taxes, workers will have a lot more money than they have today.

    The argument then shifts to “but the income distribution will be unfair” and some vague concern about “generational fairness.”

    that at least is my take so far. now i will try to address more specifically the responses since my last post.

  35. comment number 35 by: coberly

    mom

    apologies for this. i am going to attempt an interlinear point for point reply to your comment.

    “those of us who evoke the “generational fairness” argument suggest that we need to find solutions that spread the costs more (over time and people). Now, admittedly, “fairness” is a value judgment and would have a different quantitative (at least implicitly quantitative) definition to different people.”

    IF WE COULD at least define the “unfairness” and try at least a first draft of a remedy” we could let the value judgements take care of themselves. Please identify the unfairness you are seeing.

    “I could define “fairer”, for example, to mean making sure our policies spread the benefits and burdens of our intergenerational entitlement programs in a proportional way, so that the net benefits add the same percentage to the different generations’ pre-policy incomes.”

    AND WHY WOULD the same percentage be fairer. If the people of the future are going to have twice the income we have, be living 50% longer in retirement, and have higher medical expenses…presumably because the medical care is better… why would we expect the “percent” they pay to be any more relevant that the percent of their income they pay for food, or the fact that your auto insurance gets raised, as a percent of your income, if the insurance companies cost of accidents rises?

    : Or alternatively, for example, I could define “intergenerationally fair” as adding the same dollar amounts to the different generations’ incomes.”

    THIS WOULD SEEM rather strange given that the value of the dollar is well understood to change over time.

    ” I’m not prepared to come up with my quantitative definition of what would be “generationally fair” (especially without more distributional estimates as I was referring to in mentioning CBO-type numbers), but qualitatively I don’t think that putting off all the adjustments to future generations is fair. ”

    YOU WOULD NEED TO SHOW first a plan for not putting off the adjustments that makes any sense at all, and then you would have to show what is “fair” about that.

    That’s still a value judgment (choosing winners and losers, or dividing up the “economic pie”) which comes from my own perhaps biased perspective as a mother and which anyone could disagree with.”

    I DO NOT QUARREL with your value judgements. Just trying to make very clear what we are even talking about.

    ” Much less of a value judgment, however, is the fact that boosting national saving, right away, would help increase the total size of the economy (the size of the economic pie) and hence our ability to actually make everyone, across all generations, better off. ”

    A LOT OF ASSUMPTIONS HERE: how are you going to boost national saving? how will you see that the savings are invested in things that improve standard ofliving? how will you see that they are distributed fairly?

    “That’s why I think spreading the costs of making these programs whole over the longer run, is better than NOT spreading the costs… it’s a combination of my own (perhaps biased) sense of intergenerational equity, coupled with what I believe is an unbiased view of the economic merits of public and national saving.”

    I AM NOT questioning your bias. I am questioning the details of what you are claiming/proposing. A vague plea for fairness is wonderful. What are we actually talking about?

  36. comment number 36 by: coberly

    Mom

    I am guessing that you have internalized the scare stories. And you are carrying around a laudible concern for your children’s future welfare.

    But you have not come to terms with the evidence from the Trustees Report that there is no huge scary crushing burden in the offing.

    You can’t just read, say, that future payroll taxes will be twice what they are today. and run around in panic fear for your children. You have to say first… how much actually is twice as much. and how much of what they will have is that. and how much will they have left. and what do they get for their doubled tax?

    In other words, build a context. Try not to be afraid of ghosts.

  37. comment number 37 by: coberly

    Glass

    it is a waste of time to talk to you, but in case anyone else is listening, here goes:

    “B Davis wrote:
    “In the future, please just give your sources so that others don’t have to search for them.”

    Coberly responds:
    just who do you think you are talking to? this is a blog, not a research publication, and I have other things to do than gratify your ego by doing busywork.

    No sources of the “facts” he keeps proclaiming for you, B Davis! That’s a convincing reply, eh?

    THIS AMOUNTS TO A LIE SINCE I DID GIVE DAVIS THE REFERENCES HE ASKED FOR. BUT I ALSO MAKE THE POINT THAT THE REFERENCES DON’T ADVANCE THE ARGUMENT. IF WE EVER GET TO THE POINT WHERE A REFERENCE IS CRITICAL TO AN HONEST UNDERSTANDING I WILL PROVIDE IT.

    Coberly wrote:

    perhaps the problem is me.

    That’s occurred to some people.

    WHY WHAT A BRILLANT REPARTEE. I’LL HAVE TO KEEP IN MIND NOT TO BOTHER TO BE COURTEOUS TO YOU IN FUTURE. YOU ARE THE KIND OF CREEEP THAT IF SOMEONE OFFERS YOU THEIR HAND, YOU SPIT IN IT.

    Even if you say “generational fairness” you need to define what you mean by that, and why a small difference in rate of return on social security is either significantly unfair… to a population living at twice our real standard… or more unfair than much larger differences in rate of return on, say, work.

    why should a less than one percent difference in the rate of return on social security (which was designed NOT to be an “investment”) bother me…

    Repeating info given to Coberly previously. Rates of return on SS contributions…

    [] 36% annually for the first “Ida May Fuller” retiree cohorts in the 1940s, declining to

    [] 12% for those retiring in the 1960s (when Paul Samuelson praised Social Security for being an actuarially unsound Ponzi scheme that works, with “everyone receiving 10 times what they contribute”), to

    [] 5% for the retirees of the 1980s, when Congress protected benefits for then-seniors by cutting benefits for, and increasing taxes on, the then-young, to

    [] Under 1.9% and falling (less than the projected “risk free” rate on Treasury bonds of 2.9%, and thus a real economic loss) for today’s young workers born in the 1970s and later.

    (Source: SSA.gov. I could link to exact sources there, but since Coberly feels providing sources is inappropriate here as “this is a blog, not a research publication”, I shan’t bother.)

    So now we can put Coberly’s demand “to define what you mean” back to him.

    By his words “small difference in rate of return on social security … less than one percent” does he mean the decline from 36%? or 12%? or 5%? to under 1.9% and falling.

    THIS IS A PRETTY GOOD ILLUSTRATION OF YOUR COMPLETE FAILURE TO UNDERSTAND WHAT IS BEING TALKED ABOUT.

    IF YOUR NEIGHBORHOOD STORE GIVES YOU A HALF-PRICE INTRODUCTORY OFFER ON SOAP, IS IT OBLIGED TO GIVE ALL FUTURE GENERATION THE SAME HALF PRICE OFFER.

    THE THING YOU NEED TO BE LOOKING AT IS DO THE PEOPLE WHO PAY FOR SOCIAL SECURITY AND MEDICARE GET THEIR MONEY’S WORTH.

    THIS IS NOT A GAME OF “MOM, MOM, JOHNNY GOT A BIGGER PIECE THAN ME!”

    ESPECIALLY SINCE THOSE PEOPLE WHO GOT THE BIGGER PIECE THAN YOU WERE PAYING THE TAXES THAT BUILT THIS COUNTRY TO A PLACE WHERE YOU CAN MAKE A LIVING WITH ONE TENTH THE WORK THEY HAD TO DO.

    IS YOUR MOTTO “WHAT HAVE YOU EVER DONE FOR ME, MOM?”

    Actually, if his arithmetic tells him that the difference between any of those numbers and under 1.9% is “less than one percent”, then he should heed his own words, perhaps his problem is him.

    WRONG NUMBERS. LOOK AGAIN. GIVEN THAT SOCIAL SECURITY IS ONLY NOW REACHING MATURITY THE RELEVANT, BUT PERHAPS NOT VERY INTERESTING, QUESTION IS JUST HOW “UNFAIR” WILL IT BE GOING FORWARD. IF YOU CAN FIND ANY SANE WAY TO MEASURE UNFAIRNESS.

    why should [it]… bother me more than a 1% increase in my auto insurance…?

    Now he strangely compares SS to a real insurance program from which an individual receives nothing in the absence of an insurable loss event, such as a car crash. Does he really think SS is that kind of program?

    WELL NO, SOC SEC IS NOT CAR INSURANCE. IT IS AN INSURANCE PROGRAM. YOU ARE INSURED AGAINST NOT HAVING ENOUGH MONEY TO LIVE IN RETIREMENT. AND WITH MEDICARE YOU ARE INSURED AGAINST NOT HAVING ENOUGH MONEY TO PAY FOR MEDICAL CARE AFTER YOU RETIRE.

    That’s odd because over at SSA.gov they describe SS’s retirement benefit as “a defined benefit pension”.

    THEY CAN CALL IT WHATEVER THEY WANT. BUT ITS FUNNY THEY CALLED IT OLD AGE SURVIVORS AND DISABILITY INSURANCE WHEN THEY WROTE THE LAW. AND FOR THOSE WHO HAVE INTELLIGENCE AND HONESTY I EARNESTLY RECOMMEND THAT YOU LOOK TO SEE WHAT THE PROGRAM DOES AND DON’T WORRY TOO MUCH ABOUT WHAT PEOPLE CALL IT.

    In fact, in the history section over there you can read about FDR and the other founders of SS specifically promising that it would be a pension plan from which every generation would get a consistent “fair return” on its “contributions” (not its “insurance premiums”) which they defined as the return on T-bonds. (Of course, past generations actually got far more than that, due to changes to SS that FDR vetoed, his veto being overridden … which changes also cause today’s young to get a lot less than the T-bond rate, as noted above).

    I THINK TODAY’S YOUNG WILL ACTUALLY GET ABOUT THE SAME AS THE T-BOND RATE. BUT MORE THAN THAT THEY WILL GET AN INSURED PENSION. T-BONDS DON’T BUY INSURANCE. BEYOND THAT, HISTORY IS OFTEN WRITTEN BY LIARS. IF YOU WANT ANOTHER HISTORY OF SOCIAL SECURITY, I RECOMMENS NANCY ALTMAN “THE BATTLE TO SAVE SOCIAL SECURITY.”

    FDR himself emphatically opposed the intergenerational transfer tax on the future that Coberly lauds at every turn, and there are plenty of sources attesting to that at SSA.gov and elsewhere — but as “this isn’t a research paper” and Coberly doesn’t believe people should be bothered to give sources here, I shall not.

    NO, FDR INSISTED THAT SOCIAL SECURITY BE SELF FINANCING. WHATEVER YOU MEAN BY AN INTERGENERATIONAL TRANSFER TAX, YOU WOULD DO WELL TO LOOK AT WHAT THE WORKERS PAY IN AND WHAT THEY GET OUT. IF YOU DON’T UNDERSTAND HOW PAY AS YOU GO WORKS, YOU DON’T EVEN UNDERSTAND YOUR OWN BANK ACCOUNT.

    Anyhow, the “benefit moneysworth” tables at SSA.gov say that the average medium-wage male worker reaching age 65 in 2020 will receive a benefit equal to only 67% of his lifetime contributions to SS — i.e., take a 33% *loss* on a lifetime basis — compared to the average medium-wage male worker reaching age 65 in 1985 receiving a benefit worth 134% of contributions.

    THIS IS A LIE. EITHER YOURS OR THEIRS.

    Perhaps Coberly can give us the definition he uses to determine that a retiree of 2020 receiving only *half* as much from SS (and being made poorer by it lifetime) compared to the retiree of 1985 receiving *twice* as much (and being made richer by it lifetime) is “fair”.

    NO. I THINK I WILL LEAVE IT TO YOU TO PRODUCE THE NUMBERS THAT JUSTIFY THIS ASSERTION.

  38. comment number 38 by: economistmom

    coberly:

    Jim Glass properly laid out the different rates of return on Social Security coming to the different generations. Those of us who label this as “unfair” refer to these declining rates of return for younger generations. This intergenerational difference in rates of return would not occur under a pay-as-you-go system were it not for the fact that current and soon-to-be retirees are a larger group than future workers and retirees (the younger cohorts). So pay-as-you-go results in a natural disparity in rates of return (the so-called “intergenerational transfer tax”) because of the uneven cohorts–the changes over time in the retiree-per-worker ratios. So that is the implicit definition of “unfairness” that I think many of us are talking about–we don’t think it “fair” that future generations have to bear a larger burden–in a lower rate of return–that has nothing to do with their labor productivity or how much they will pay into the system–but rather has only to do with the fact that there are many more of their parents’ generation than of their own. That seems like no “fault” of their own. As my kids go through their working lives, they will contribute to Social Security under the same terms that I face (they will play by the same rules), yet upon their retirement, they won’t receive benefits under the same terms–their return will be lower.

    I know you have said that you are thinking of my kids (kids in general), too, but frankly, your last post makes it sound as if you think the younger generations are spoiled little brats who don’t deserve the same government support that older generations do.

    I’m also surprised that you relate pay as you go to our own bank accounts, because I see them as completely different. Those who want Social Security to work more like bank accounts and less vulnerable to the “intergenerational transfer tax”/unfairness critique, are those who tend to advocate for private accounts. I assume you are not one of those people, so I must be confused about your point.

  39. comment number 39 by: coberly

    Mom

    do the arithmetic and see exactly how much unfairness you are talking about.

    the differences in the rates of return while the program was being phased in can hardly be called unfair.

    i don’t know why my “half off introductory offer” analogy fails to persuade you.

    but first.. the baby boomers paid for their excess numbers, and the generations after 2040 will not be increasing noticeably for the next hundred years which is as far as the Trustees go. After that one time 2% raise in the payroll tax (which goes to pay for their own longer life expectancy) there is no further significant increase in the Social Security part of the tax. The ominous “continues to increase” in the Trustees Report refers to a tax increase of 30 cents per week per year when incomes are rising 20 dollars per week per year toward the end of this century.

    The increase in the Medicare part of the tax goes to pay for the increased medical care costs of the people who will be paying the tax. If you want to bring down the share of their income these people pay into Medicare, you have to bring down medical care costs. Or discover some other way of paying for medical care. Try to find one that doesn’t involve fooling yourself about where the money will come from.

    what you have is a population gradually “aging.” that means that for a while each generation will indeed pay a little more than the previous generation. but if you will stop a minute and think this through you will see that each generation will get more than the previous generation because it is living longer and the generation behind it will be paying them more than they paid in. (sorry for the clumsy grammar, but you can work out what i mean). (well, maybe you can’t. best is to work out what each “generation” pays in and what they get back in benefits in their turn. after you have looked at three or so links in this chain the pattern ought to become clear.)

    in other words, even though with pay as you go you are immediately paying to the present generation of older people, your payment will turn out to be just about what is “fair” for your own retirement.

    please. work out the math. and find out exactly how much “unfairness” you are talking about. then decide if it is enough to care about. and what unfairness means in the context of generations who face entirely different worlds. point out again that you will leave behind a world in which it is much easier for your kids to make a living. they will in fact make twice as much as your parents did. they are not getting an unfair deal.

    and after you have done the arithmetic, and you still think the pay as you go model is unfair, then propose something that will be more fair. and also secure.

    i am sure your parents never did anything for you that would make you willing to pay a little more for “their” social scurity, than they paid for “their parents.”

    yes that is a bitter sarcasm.

    and social security is not “government support.” it is people paying in advance for their retirement, with an insurance component that protects them from a number of things that can happen to retirement savings.

    i’ll say it again: get the numbers. and if you use Concord numbers, watch out for the denominators.

  40. comment number 40 by: coberly

    Mom

    I believe you want what’s best for your children. But you have to be careful you are not being penny wise and pound foolish. In order to make their slice of the pie 2% more “fair” you are proposing throwing the pie on the ground and stepping on it.

    I don’t believe today’s kids are ingrates. I believe most of them haven’t got a clue. And there are bad old men trying to fool them into selling their birthright for a mess of pottage.

    The Book you really need to read is Jemima Puddleduck by Beatrix Potter.

    Try to think of it this way. There was a time in the not so distant past when the economy was growing. Because of this growth it was possible to pay for Social Security with a payment that was very low relative to the eventual benefits.

    As the economy plateaus that will no longer be possible. But this does not mean that the subsequent generations will be getting an unfair deal. It just means they will live in the times they live in which are not the same as the times their grandparents lived in. Their Social Security tax may be a bit higher, their medical bills may be a bit larger, but they won’t have world war two, the great depression, the universal draft, working on the farm, or even working in factories. Their lives will be what their times bring them. Their higher social security and medicare taxes will allow them to live a few years between retirement and death, and maybe keep them a little healthier during that time. You seem to want to take their longer life and better health and give it to their employers. Gotta keep them working so the rich can make more money out of them.

    If you think you can ensure “growth” by somehow cutting Social Security benefits or increasing the retirement age
    or some other magical process, you have an obligation to think very hard before you kill off the program that will at least give them a chance to retire after working for forty years.

    I don’t know what I can do to help you think this through, but I despair at the ease with which you seem to accept claims that turn out to be meaningless when you try to examine them closely.

    I will say, though I know it makes some people mad at me, I did teach, or try to teach, a closely related subject to undergraduates. I was very surprised at how hard they found it. And I did discover how angry they were about that. I tried very hard to help them. It didn’t help. Now I am old and tired and I do not enjoy this. I am doing it for the same reason you say you are: to keep the bad guys from hurting the kids. But I do not know how to teach you to think. And I am sorry but there is a real difference between thinking and just free associating words you have heard.

  41. comment number 41 by: B Davis

    coberly wrote:

    I need to try to take your comments one point at a time, because they do not seem to me to add up to a coherent argument, much less an actual plan to solve the “problem.”

    I was simply addressing your post point for point. But I do not know how to teach you to think.

    Now living on 280 a week can be a strain (but I can do it easily myself). But what do you propose for an alternative.
    My first thought is that that low wage worker needs a payraise. I frankly don’t see why he can’t get one. It seems somewhat improbably to me that living in a country where the average wage is 1600 a week, we would need to pay some workers less than 400 per week. But, to repeat myself, how do you propose to pay for this workers retirement and medical care otherwise. Have him work into deep old age?

    Regarding workers retirement, one of the best plans that I’ve heard for putting Social Security back into balance is one proposed by Pete Peterson in his last book “Running on Empty”. The first of the three steps is the most important, I think, and was implemented in Great Britain under Thatcher with much success. In any case, following are the three steps:

    Index New Benefits to Prices, Instead of Wages.

    Under this reform, the average new benefit calculated each year for people reaching age sixty-two would be adjusted upward by the increase in the consumer price index rather than by an index of average wages. As a result, all future retirees - by birth year or by generation - would receive the same average benefit, adjusted for inflation, that new retirees receive today. Under current law, higher real-benefit levels will account for about 30 percent of total Social Security benefit outlays by the year 2050. By saving that extra 30 percent, we would just about bring the system back into balance by then. Social Security’s cash deficits, while still rising in the 2020s, would start declining again by the 2030s and would eventually disappear. President Bush’s own Commission to Strengthen Social Security projected that indexing new benefits to prices would more than eliminate Social Security’s long-term deficit. And this would be true even if we “grandfathered” under the old rule everyone currently over age fifty-five.

    Source: Running on Empty by Peter G. Peterson, page 200

    Mandate Saving in Personal Retirement Accounts.

    Since wages usually rise faster than prices, price-indexing will eventually lead to a sizable decline in the share of preretirement wages that Social Security replaces. Most workers will want to avoid a large drop, but to do so they will have to save more.

    Source: Running on Empty by Peter G. Peterson, page 201

    Peterson goes on to explain the problems with allowing people to redirect a portion of their payroll taxes into personal accounts or simply creating more tax incentives for savers. He then continues:

    So what does make sense is simply to mandate that all working adults put aside a minimum share of their wages (say, 2 to 3 percent) toward retirement savings, using retirement accounts that are personally owned but highly regulated. Individuals will gain enough in returns to fully make up for the decline in Social Security benefits as a share of preretirement wages, the economy will gain a powerful boost to its household savings rate, and nonsavers will at last start protecting themselves and their families. Most importantly, Congress wouldn’t have any chance to spend this money.

    Source: Running on Empty by Peter G. Peterson, page 202

    Fortify Social Security’s Safety Net.

    If Social Security benefits become a smaller share of total senior income - and if personal savings becomes a larger share - our overall retirement system would grow less progressive. The rich would grow a bit richer, the poor a bit poorer. To counteract this, I propose having the federal government contribute into personal accounts on behalf of low-income workers. These workers would have a choice: either the government could pay the worker’s mandated contribution, or it would add its contribution on top of what the worker pays.

    Source: Running on Empty by Peter G. Peterson, page 204

    Although I know you’re not a fan of Pete Peterson, you seemed willing to discuss his books in comment 6 above. This is from his most recent book AND it involves a plan for Social Security from someone associated with the Concord Coalition. Hence, I assume that you are willing to discuss it. The above quotes are just excerpts so you would do well to read the entire section if you can get access to the book. In any case, there’s an outline of the entire book at http://www.centrists.org/pages/2004/07/6_guest_budget.html.

  42. comment number 42 by: economistmom

    coberly:
    Hard to have any conversation with you when your central premise (with me) is this:
    In order to make their slice of the pie 2% more “fair” you are proposing throwing the pie on the ground and stepping on it.

    but I just want to add that in your earlier response to me, you asked how our nation could boost national saving. Well, one way is to increase the (public) savings we do through the Social Security program, by increasing taxes and/or reducing benefits. But yes, increasing savings in the program means saving more for future generations. (I hope you realize that you should be opposed to increasing national saving in general for the same reasons you are opposing increasing saving in Social Security.)

    You seem to think of yourself as an advocate for Social Security–someone who wants to “save” Social Security just like it is right now. But everything you say suggests you only want to save it in its current form for your generation, and you don’t really care how it withers away in the future.

  43. comment number 43 by: coberly

    Mom

    I keep saying… get the numbers. Otherwise we are only arm waving at each other.

    for what it’s worth every dollar in taxes you save per month will result in a four dollar reduction in benefits per month…when we have reached the 2 workers per beneficiary ratio, absent relatively minor complications re growth rate of the economy.

    you need to show…at least sketch… what you mean by “savings in the program” and how that means “saving more for future generations.”

    i do not realize that i “should be opposed to increasing national savings in general.” please explain.

    please explain what “increasing saving in Social Security”
    means.

    i have tried to make very clear why Social Security is not on a path to wither away in the future. perhaps you can explain in detail why you think i don’t care. Social Security for my generation is in absolutely no danger. It is your kids who are going to be robbed. And if you don’t learn to think more precisely you are going to aid and abet that robbery.

  44. comment number 44 by: coberly

    Davis

    Petersons plan to index benefits to the CPI just amounts to a sneaky way to cut benefits. Why would people want to cut their benefits by 30% when they can keep them at their present (barely subsistence) level by just raising their payroll tax by 2%.

    The key here is that we are talking about 2% of a monthly wage of about 4500 dollars (in 2040 or so), or about a 90 dollar per month tax increase. Which matched by the boss, and paid two months of work for each month of retirement turns out to be 360 dollars per month, which is 30% of a 1200 dollar a month pension. Eliminate the tax increase, and you cut the pension to 840 a month. It is a lot harder to live on 840 a month in retirement than it is to get by on 4410 a month while working… even if you have to pay other taxes out of the 4410. I am fairly sure that if you described the trade off to any “financial manager” without saying the words tax or social security, he’d tell you you’d be a fool to give up the retirement benefit in order to save the “tax”.

    Then you say, well, the workers can save outside of Social Security to make up for the benefit cut. Of course they can, but without the Security. Meanwhile they could pay the 2% tax increase and still have plenty of money to invest in stocks if that is what they want to do.

    You are advocating a very foolish way to manage your money.
    The Social Security provides a hedge in case everything else goes wrong. And we are far and away rich enough to afford this hedge. And if we were less rich, we would need the hedge even more.

  45. comment number 45 by: coberly

    Davis

    i’d be glad to see the government “mandate” a private savings plan. it could be paid for by dedicating say half of the next five years routine cost of living raises. that would cost employers nothing, the employees would get their cost of living raise in the form of an appreciating asset, and the privatizers would get their private accounts. but you would have to leave social security strictly alone. maybe by 2040 we would know if we could skip the otherwise needed 2% increase in the payroll tax because the private accounts were filling the gap.

    but for some reason Peterson is not advocating this. He wants a cut in Social Security benefits before there is anything to replace them. Why?

  46. comment number 46 by: coberly

    Davis

    as for having the government “fortify” social security benefits.

    this is a welfare scheme. you would have to tax “the rich” to pay for the poor. currently the poor pay for their own social security.
    yes there is an insurance effect whereby the poor get a little higher rate of return than those who have done better. but it’s insurance. those who have done better did not know they would do better until they actually did. that’s what insurance is for. and there is no means test. you get what the record shows you paid for.

    means tests are expensive to administer and very ugly to be the subject of.

    this is just another gimmick to cripple social security. after you cut the benefits, and turned it into a means-tested welfare scheme, the politics would then start grinding to eliminate “welfare” or at last reduce the benefits to poor-house levels.

    Social Security works fine now. It is projected to keep on working fine for the next 75 years with a modest tax increase to pay for our living longer.

    What Peterson tries to do is take that 2% increase, multiply it by 200 million people times 75 years (or longer, if he thinks you are a real fool) and claim a “44 Trillion Dollar Unfunded Deficit!”…by adding in medical cost projections which may or may not be realisitc, but which the people will have to pay for in any case, whether they use Medicare or private insurance.

    Even without likely reductions in the future cost of medical care, the bill turns out to be very affordable, leaving the taxpayer with an after tax income twice what he gets today, plus having a fairly comfortable retirement assured (insured) and prepaying his old age medical costs.

    and it is only “unfunded” because we haven’t raised the tax yet. and we havent’ raised the tax, because it is not needed yet.

    you are trying to ’save’ the taxpayer an unnoticeable amount of money, and the high end taxpayer a very small difference in rate of return on what he “might” get on the stock market versus what he will get from Social Security…ignoring the insurance value of his premiums (”tax.”)

    No, there is no financial reason for anybody to even consider this change. There are political reasons. And that is why we need to understand the real numbers.

  47. comment number 47 by: coberly

    Davis

    it would be hard for me to discuss the entire book. i will try to reply to specific arguments. more than that i will try very hard to adjust my arguments so that they are more “scientific” than the arm waving it is so easy to fall into. but i need your help with that. you can’t just take Peterson’s arguments at face value. you need to construct something that looks like a cause and effect linked analysis of the actual money, how much, where it comes from, and what it means to the people who pay it.

  48. comment number 48 by: coberly

    mom

    you don’t like my pie smashing analogy. why not? i am not accusing you of deliberately stepping on your children’s pie in order to teach them something about “economics.” I am saying that by worrying about what amounts to a 2% difference in the size of slices you are very likely to inadvertantly end up smashing the pie and leaving them with nothing.

    If you don’t care for the rhetoric, then let us move on to actual numbers. And please try to use numbers that can be connected in causal links to something we can agree about, and not just numbers plucked out of the air because some highly paid think tank non partisan expert has come up with a new clever way to make Social Security look bad to people who can’t step back and say, “yes, but…”

  49. comment number 49 by: coberly

    as for the causally linked arguments.

    i immodestly think i have done that. or at least made a beginning. but i do not get actual replies that we could build on. i see changes of subject. and by the time i have answered the change in subject i see that the fallacies i thought i refuted in the last post have snuck back in under the radar.

    what i think i have showed is that there is no looming crisis. that social security can be paid for with a very modest increase in the tax that is entirely caused by a need to pay for the longer lives of the people paying the tax. and that Medicare can be paid for with a significant, but not all that large, increase in the tax…again to pay for the “expected” medical costs of the people paying the tax.

    The fact that under pay as you go, the people paying the first increases (introduced at about one tenth of one percent per year) will be directly paying for the increased costs of their elders… does not change the fact that their payments ultimately pay for their own costs. the analogy with the bank account is simply that when you put your money in the bank, the money goes directly to someone else’s spending. when you take “your” money out of the bank, it is coming directly from someone else’s deposits… deposits made larger on average by the growth in the economy between the time you made your deposit and the time you take your withdrawal… exactly as what happens under pay as you go.

    no one has replied to this. instead we took a detour through the “it’s not fair!” land. but we have heard no measurable idea about why it’s not fair, how much it is not fair, what not fair means across generations, or why we should sulk because our share of the pie is not as big as someone else’s and throw the pie into the road.

    we have heard the Peterson plan for cutting benefits and replacing Social SEcurity with a system of private accounts and public welfare. We have not heard any reason for doing this that amounts to a measurable benefit for the people who pay the Social Security tax. I suspect that most people readint Peterson forget that the people who pay the tax are the same people who will get the benefits. They are confused by the pay as you go feature. They need to draw themselves a picture so they can see themselves putting money in the box, being taken out by their mom, and then coming back to the box themselves taking money out that is just being put in by their now-adult child. this is in fact the way humans have managed “retirement” for the last million years. Social Security is just the best way to manage it in a “family” of 300 million subject to economic forces that no family can control.

  50. comment number 50 by: Jim Glass

    …does not change the fact that their [SS] payments ultimately pay for their own costs. the analogy with the bank account is simply that when you put your money in the bank, the money goes directly to someone else’s spending. when you take “your” money out of the bank, it is coming directly from someone else’s deposits…

    Coberly, when you take out all the money you deposited into the bank, you get to take out all the money you deposited.

    Once more, the SSA actuaries say a medium-wage male worker reaching age 65 in 2020 will get benefits from SS equal to only 67% of the amount he “deposited” in — a solid one-third loss.

    This after the same workers reaching age 65 in 1985 received 134% — a one-third gain.

    So your “bank account” analogy works this way: Your deposits go to fund withdrawals of the prior generation’s depositors, which let them withdraw 34% more than they deposited.

    Because there are going to be fewer depositors in the future, your withdrawals are limited to 67% of what you deposited, and you take a one-third loss.

    Is this how banks really work in your experience?

    deposits made larger on average by the growth in the economy between the time you made your deposit and the time you take your withdrawal… exactly as what happens under pay as you go.

    So you imagine that when your total withdrawals are reduced to one-third less than you deposited, they have been “made larger” by the growth in the economy, eh?

    no one has replied to this

    People have replied to you on this at least 10 times, here and elsewhere. Consider this at least #11. You display a remarkable immunity to facts.

    instead we took a detour through the “it’s not fair!” land. but we have heard no measurable idea about why it’s not fair, how much it is not fair, what not fair means across generations

    You go to your bank and the banker tells you: “Mr Coberly, we’ve cut the balance in your account to one-third below the amount you deposited, so we could pay to people who showed up to make withdrawals before you 34% more than they deposited. OK? ”

    You reply: “That’s not fair!”

    The banker replies: “Oh, but how does one define ‘fair’? Is your receiving 33% less than you deposited so others could receive 34% more even ‘measurable’? They may have received exactly double what you did on their deposits, due to the transfer from you to them, but ‘how much’ is that unfair? And think of what ‘fair’ means across generations!”

    You ponder on that for a while and say, “You’re right. The average person today is so much richer than 35 years ago, in 1973, that it was really greedy of me to think I should get all my deposits back. I’ll be happy to take a 33% loss (due to all the growth in the economy over the last 35 years!)”

    And all the other bank depositors across America who take a 33% loss on their deposits happily say just the same! ;-)

  51. comment number 51 by: coberly

    Glass
    you may remember i called your one third loss a lie.

    if you can substantiate your claim, i will apologize. this may be a case where a citation to your source is necessary. I’d rather see a careful derivation of the claim, but if I read the source i may be able to demonstrate the lie with my own deconstruction.

  52. comment number 52 by: economistmom

    I thought Jim Glass’ brilliant bank account story would end this thread. Now I just want to see this thread “wither away”….

    Signed, Jemima Puddleduck

  53. comment number 53 by: coberly

    mom

    hard to tell if you are being serious. if glass’ bank account story is your idea of brilliant there is no hope.

    did they talk about cause and effect where you studied economics or did they just pull numbers out of a hat and all the students said “wow!” and “gee!”

    please offer some kind of rationale for glass’s numbers or provide a citation and i’ll see if i can figure out where they went wrong. but on the face of it it is ridiculous. you can’t go from a 12.4% contribution rate, to a targeted 40% replacement rate and end up with a 30% loss… when the dollars are held constand by wage indexing.

    even those who earn at the cap all their lives get a replacement rate…wage adjusted…of 26%, which, if you count on your fingers you will see returns 100% of their contribution plus an effective inerest rate of about 5%) to them if they live about twenty years. which in that bracket they are likely to.

    but i am open to a more careful analysis. got one?

  54. comment number 54 by: coberly

    and then we can look at the effectove rate of return for the first and second quintiles.

    and then discuss what “fair” means when we are evaluating insurance policies.

  55. comment number 55 by: economistmom

    Sure, there are analyses out there that back up the notion that Jim Glass was relaying in his bank account story. Not just the Actuaries data that I believe Jim was referring to, but even better, CBO calculations of lifetime SS benefits relative to lifetime SS taxes for folks at different lifetime income levels and different birth cohorts. With such calculations you can see the range of estimates that account for the uncertainty in the economic variables, and you can look at the important difference between “scheduled benefits” (based on the benefit formula) and “payable benefits” (based on trust funds available)–which illustrate the fact that younger cohorts will bear the larger “cost” of a “no action” scenario. CBO is soon to come out with revised calculations such as these, so I will start a new thread then.

    At that time I can also address further the distinction between measures of rates of return or “replacement rates” (relating benefits paid to what was paid in taxes) and measures of real benefit levels (in real dollars, without comparison to what was paid in taxes). It seems to me that such measures (”analytics”) are the matters of “substance” that we might agree on, that underlie what we disagree on: our different value judgments about two possible ways of considering “what’s fair” regarding the intergenerational distribution of the net benefits of the Social Security program.

    But let’s take up that disagreement in that new thread when the new CBO data come out, and let’s stop calling each other names until then (or even after then). Fifty five comments to a simple movie plug is enough!

  56. comment number 56 by: coberly

    mom

    i am not sure what i just read, but i’ll take it to mean that we will see some numbers that are connected in ways we can all agree make sense. then, yes, we could agree or not about what’s “fair.”

    for what it’s worth, i am not advocating a “no action” scenario, which would indeed result in a 30% cut in benefits on a monthly basis, but i think not on a lifetime basis.

    the trust fund is not a factor… except to set the date when the one tenth of one percent per year raise in the payroll tax needs to start.

  57. comment number 57 by: economistmom

    OK– just one more reply on this thread, and then let’s wait.

    Note that if we fix the shortfall later with the required increase in taxes on future generations (only), that effectively leaves those future generations in the exact same place as the “no action” scenario, because you’re asking the younger generations to pay for their own additional scheduled benefits. In the ratio of lifetime benefits to lifetime taxes, you’d be bringing the numerator up, but you’d also be bringing the denominator up. In the real benefits calculation, you only look as if you’re making the promises “whole” to young people because you’d be ignoring what the higher taxes are doing to their NET real benefits (and their real household incomes).

  58. comment number 58 by: economistmom

    and conceptually, by the way, Jim Glass’ bank account story does get it just right and is very understandable, and so, yes, I do think it quite brilliant. It’s easy to speak the language of one’s own preoccupied, obsessive world in a way that keeps others out of the conversation. It takes much more thought to talk about the issues in a way that can draw a much broader set of people to the conversation.

  59. comment number 59 by: coberly

    mom

    this is nonsense. glass has not supported his claim with either analysis or citation. “brilliant” does not mean “agrees with me.”

    and “one’s own preoccupied, obsessive world” is not a respectable argument.

    your style of argument is “i get to insult you , but if you answer me in kind, you are just an old meanie.”

    i have tried to address the issue in verifiable mathematical terms, but that does not seem to fit your definition of “economic rigor.”

    re comment # 57: show your work. arm waving is not a numerical argument.

  60. comment number 60 by: economistmom

    coberly: well, now you are imagining things, because I never said “you” are preoccupied and obsessive. I was complimenting Jim Glass for thinking outside the inside-analytics box when it’s a lot easier (for anyone, me included) to stay “inside the box.” I’ve never called anyone names here, nor insulted anyone in any other way (well, maybe other than calling McCain “old”), which is a lot more than I can say about you. And this is my blog, and I’ve said this before, that I don’t like to have to get angry here, and I really don’t want to have to start censoring people here, so I REALLY want to end this thread with this “comment number 60.”

  61. comment number 61 by: coberly

    mom

    i hate it that i am beginning to sound like Brooks.

    i REALLY think you are missing the point here. But i understand the devil is a very polite, well dressed gentelman.

  62. comment number 62 by: M Gilleland

    Perhaps a contribution that coberly is making to the “debate” is a need to provide scenarios of the social security program in terms of an individual’s or family’s budget over time — a daunting task for sure.

    However, I can see a lot of value in such an analysis and representation, especially in making the “issue” more accessible to your average person.

    This would help folks connect the last dot more clearly regarding “what does the current plan if left unchanged mean to me” and “what would any given proposed change mean to me” — obviously a rather complex model with a lot of variables and assumptions.

    On the other hand, the stakes are pretty high so investing in a model like this would likely be worth it.

  63. comment number 63 by: coberly

    Gilleland

    maybe not so complex as you think. but, yes, well worth it. i will be glad to read whatever you have to offer, accepting that it, as mine, may be only a beginning subject to further work.

    mom seems pretty tired of me. but if you care to post anything at angry bear, maybe we could find a way to keep the posts and the comments short enough (each time) to further understanding and overwhelm the air waves.

    i propose as a beginning… read the Trustees Report (not the summary), and either confirm or deny my assertion that a 2% raise in the Social Security tax would pay for the intermediate projection increase in benefits required by longer life expectancies. you can calculate what this 2% would mean for the budget of any given income level… keeping in mind the projected increase in wages… and, since the projected shortfall assumes present benefit schedules, you can calculate the benefits that that person should expect, given his income, contributions, and life expectancy.
    i am not sure myself where the new “break points” will be, but i assume they will be proportional to present levels, adjusted for average increase in income.

    unless i have skipped a step here, that should give you a picutre of the effect of “fixing” the “problem” with a modest tax increase.

    then you can decide if it’s “worth it” to you, but i suggest you will also need to carefully evaluate the real risks of any alternate proposal, my own take is that the cost is so small, and the “security” so essential, no one…certainly not the average worker… would be wise to propose any other change.

    i would consider a PERS-like add-on, started immediately, using money dedicated from routine cost of living raises, to create a “rival” to Social Security, and possibly eliminate the need for that future tax increase. but the basic structure of Social Security is sound, does NOT threaten any bankruptcy or “huge burden”.

    anyway… i am getting ahead of myself. there must be a way to talk about these things carefully and meaningfully.

  64. comment number 64 by: coberly

    gilleland

    the complex model… variable and assumptions… are in the Trustees Report. I assume they are the professionals, and have done the work…though they obscure the conclusions…

    i would be very reluctant to start down some rabbit trail to embrace all the other variable and assumptions that everyone and his cousin can come up with.

    but of course if you see something looming that they have overlooked, we would at least need to take a look at it.

  65. comment number 65 by: coberly

    i set aside Medicare for the time being. I think the same principles can apply, but we ought to take one thing at a time.

  66. comment number 66 by: M Gilleland

    coberly,

    When the social security trustees say that just a 2% payroll tax increase (starting now) is all that is needed to bring the program into balance over the next 75 years does that include the revenue that will be needed when the trust fund assets need to be redeemed?

    From their trustees’ view, it doesn’t appear to me that they are looking at the tax revenue that will be needed in total in the relatively near future.

    When the trust fund special issue bonds are redeemed that money will need to come from general tax revenues — putting even more pressure on tax payers in addition to the 2% payroll tax increase already needed to maintain promised benefits.

    Are there any estimates as to how big or small this additional demand on general tax revenues will be once the program is paying out more each year than it is bringing in the same year?

    In your prior posts, I don’t see you addressing this additional tax increase (effectively, if you assume no cuts in other spending and no additional borrowing) beyond the 2% payroll tax increase offered by the trustees to maintain promised benefits.

  67. comment number 67 by: AlexM

    Your blog is interesting!

    Keep up the good work!