Matthew Yglesias: Other Reasons

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Other Reasons

Waddling Thunder says he doesn't buy "the Matthew Yglesias/other leftist line that there's nothing wrong with the [Social Security] system" before explaining that "Paying 12% of your first $80,000 to the government in addition to all your other taxes is itself the crisis. Nothing more needs to be said in favor of reform." But now of course this doesn't mean that he doesn't buy my argument at all. My argument is that, contrary to the President's contention, there is no Social Security crisis. No this is not a genuine disgreement between myself and Bush. Rather Bush, like WT, simply finds Social Security objectionable on ideological grounds. But rather than present an honest argument in favor of his ideas, he prefers to try and mislead people in order to try and gain popular support for an agenda that, were it presented honestly, would stand no chance of passing. See also the Iraq War and every major Bush legislative initiative so far.

At any rate, other people I respect also just find Social Security to be intolerable for ideological reasons and are, therefore, hoping that Bush's campaign of deception will win the day. I don't really have any inclination to get into an argument on this front, since I don't really think there's a purpose to having purely ideological arguments of this sort. Looking around me, I don't see a country in which a rather large mandatory social insurance program has created a nation of serfs. More to the point, the privatization schemes I've actually seen put forward only amount to a rather trivial injection of actual human choice into the system. The main difference between the status quo and the most popular forced savings plans is the distributional one. Social Security is progressive, mandatory tax-free savings would be regressive. Some people think government policies aimed at redistributing income are, as such, immoral. Other people think that people who think that are a bit crazy. The clever ones among the anti-redistributivists -- the president, for example -- never say that this is actually what they believe since running on a platform of "We Must Do More to Help Rich People!" wouldn't work very well.

December 24, 2004 | Permalink

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Matthew Yglesias wonders why so few of those who are opposed to Social Security on ideological grounds will denounce George W. Bush's misleading rhetoric: Matthew Yglesias: Other Reasons: Waddling Thunder says he doesn't buy "the Matthew Yglesias/other... [Read More]

Tracked on Dec 24, 2004 2:00:00 PM

» Social Security from Waddling Thunder, mach 2.0
I hadn't noticed because of Christmas, but Matthew Yglesias apparently responded to my Social Security post below, noting that my argument (that the level of social security payroll taxes is itself the problem) and his (that President Bush is using dishon [Read More]

Tracked on Dec 25, 2004 10:59:37 AM

Comments

Actually, SS is not progressive; it's regressive. Your friends at Cato should have impressed that upon you by now.

Posted by: Trent McBride | Dec 24, 2004 2:28:07 AM

The decoupling between the linear earnings tax and the indexed payout at retirement complicates the question of progressivity, does it not?

Posted by: bad Jim | Dec 24, 2004 3:35:43 AM

Paying 12% of your first $80,000 to the government in addition to all your other taxes is itself the crisis. Nothing more needs to be said in favor of reform."

The depth of dishonesty here is amazing -- it is so deep, that I bet the guy that said this doesn't even think he was being dishonest.

Excuse me, your belief that Social Security is morally wrong has absolutely nothing do to with a nonexistent "crisis" in SS. To even pretend that the statement is anything but the highest of mendacity is sickening.

I don't like Bush. Therefore, the US is in CRISIS! We must pick up the guns now, to avert the crisis! Revolution at once!

This is the sick game being played here. The problem is, people will actually suffer after the mendacious fucks get there way in this game.

Posted by: Timothy Klein | Dec 24, 2004 5:26:36 AM

Actually, it is the left that is being dishonest about Social Security. When 2018 comes and SS is paying out more than it is taking in, the crisis is already upon us.

Matt, you have not even hinted at how you would pay for that shortfall, since those treasury bonds will have to be paid for somehow from other parts of the government. You're way to smart to not be seeing this obvious point.

Posted by: Adam Herman | Dec 24, 2004 6:20:25 AM

How exactly did you convince yourself that a combination of a flat tax (which phases out at high incomes) and a indexed-to-total-amounts-paid benefit counts as anything like "progressive"? Combine those with the fact that the poor simply live less long than the rich (and thus get fewer checks), and Social Security is easily the most regressive federal program outside of agricultural subsidies.

Posted by: dave | Dec 24, 2004 7:24:34 AM

"[I]t is the left that is being dishonest about Social Security. When 2018 comes and SS is paying out more than it is taking in, the crisis is already upon us.

"Matt, you have not even hinted at how you would pay for that shortfall, since those treasury bonds will have to be paid for somehow from other parts of the government."

That's not a social security crisis--that's a crisis of the general budget. Bush took the money that was supposed to fund Social Security from 2018 to 2042, and spent it on tax cuts for his rich cronies and military adventurism in Iraq.
Explain, please, why the remedy for this is to cut Social Security.

Posted by: rea | Dec 24, 2004 8:31:00 AM

My reaction to those who oppose social security on ideological grounds is this: I was a liberal hawk who supported the war in Iraq on the grounds that overthrowing dictators and spreading democracy was a fully defensible reason for going to war. I know the administration presented different arguments in favor of war, i.e. WMD. I still thought, however, that my justification was the real one driving the White House. Whether I was right at the time I won't ever be able to know until Bush has someone ghost write his memoirs, but the public face put on the justification for war effort by the administration has done pretty much irreperable damage to the effort. The lesson: avoid doing the right thing for the wrong reason.

Posted by: Hugh Hermanos | Dec 24, 2004 8:49:35 AM

The pattern of deception by this President is appalling. Why do we continue to let him get away with it?

Posted by: Chad M Schuldt | Dec 24, 2004 9:50:47 AM

My objection with Social Security is not ideological per se, it's more utilitarian. Social Security could be structured in a wiser fashion. My view is that, given the system's substantial cost (nearly 5% of GDP and rising) we don't get much bang for the buck. That "buck" isn't just the money cost, it's the nasty spillover effects from the manner in which that money cost is met (lower wages, fewer jobs, and less growth). We could do better, and still have a guaranteed social insurance scheme for retirees. Not that it would be near enough, but simply ditching payroll taxes in favor of (higher) income or consumption taxes would be a step in the right direction.

Posted by: P.B. Almeida | Dec 24, 2004 10:42:01 AM

In about 2018 FICA taxes will be less than is paid out to Social Security recipients. But, that is not a problem. Back around 1985 or so, Greenspan and his committee intentionally set it up this way. They got the FICA tax rate increased then so that the accumulated excess would be available to pay for the higher SS payouts. That scheme worked. Now we have a bundle of Treasury Bonds in the Social Security account just waiting to be used starting in about 2018. How is that a problem?

Of course someone will have to come up with the funds to redeem those Treasury Bonds, but didn't we always know that? So, obviously our government has planned for that day and all of this flap is nonsense.

Posted by: Vaughn Hopkins | Dec 24, 2004 10:56:10 AM

Actually Bush's tax cuts have nothing to do with the cash flow problems of Social Security. In 2018, no matter what the rest of the budgetary picture, FICA won't be sufficient to pay current retirees. That means the SSA has to start using the income (and eventually, the principal) from the bonds it holds. And that, of course, means getting the money from the rest of the Federal Government. Presumably rea means that, sans Bushian tax cuts, we'll have more overall revenue with which to conduct "bond cashing" actvities starting in 2018. While no doubt true, I would remind all that Bush will be gone for nearly a decade by that time. If we need to raise taxes in 2018, we could certainly do so.

I think the real debate is not about whether we're going to continue to have guranteed social insurance. We almost certainly are, much to the dismay of my libertarian friends. The proposal being discussed still gurantees brand new workers something like two-thirds of the guranteed pension component they would get under today's status quo. Two-thirds of a loaf ain't that bad. The plan likely to be debated in Congress is actually quite timid, not at all imaginative and, sadly, (lacking creative counterproposals from the Democrats) it's likely to be the best we can do.

The real debate is between: A) do we want to take a cost-curbing approach to Social Security, and if so, by which means? Or, B) do we surrender to the demographic math and "feed the beast" with whatever resources the AARP deems necessary.

All I want for Christmas is an end to the GOP's monopoly on creative policy ideas.

Posted by: P.B. Almeida | Dec 24, 2004 11:00:27 AM

At least WT does not cloak his libertarian views in incompetent finance (aka Bush lies). Another 1st rate post Matt!

Posted by: pgl | Dec 24, 2004 11:05:57 AM

The current annual salary cap (the amount after which no more FICA is withheld) is $87,500. That means that the employees who make $500,000 and $87,500 respectively both pay exactly the same annual FICA payroll taxes.

When Bush said that he would not "raise FICA taxes," he was actually saying that he would NOT raise the cap. Translation: he would protect the wealthiest wage-earners at the expense of the lower wage earners.

It is my understanding that if that cap is raised to $150,000, there is no funding deficit projection at all for social security. If the cap is entirely removed...thus equalizing FICA to a "flat tax" status for all wage earners, social security could conceivably raise benefits substantially.

If FICA is a tax, it is a reverse-progressive tax of sorts, in that the lower wage-earners are taxed at a greater proportion that high earners. It is not even a flat tax right now....as the wealthiest workers get amazing tax breaks under the current rates.

The obvious, logical and fair solution to the "crisis" that Bush brands as urgent is to raise the cap for FICA withholdings!

That is, unless his true goal is a massive redistribution of wealth...under which the rich get even richer and the poor get even poorer!!!
And once poorer, they have no more social security to rely on.

Incredibly mean-spirited situation.....

Posted by: Deborah White | Dec 24, 2004 11:10:28 AM

"So, obviously our government has planned for that day and all of this flap is nonsense." - Vaughn Hopkins

You've nailed it. If government HAD planned for that day none of this flap would be necessary.

The current PLAN is to increase revenues in the general fund by an adequate amount to pay for SSI obligations. And to increase revenues in the general fund by an adequate amount to pay for Medicare obligations. And to increase revenues in the general fund by an adequate amount to fund everything else that government does. And to not increase government revenues in such a way that it damages the economy.

Gee, maybe Congress should sit down and do some REAL long-term planning, If that's what the SS debate is about, it will be a good thing.

If the debate is about an option of putting 1-2% of contributions into private accounts, the arguments should be about why Congress is not serious about fulfilling its responsibilities.

Posted by: pilsener | Dec 24, 2004 11:21:21 AM

"In about 2018 FICA taxes will be less than is paid out to Social Security recipients"

Says who? The level of innumeracy of this thread is simply appalling. You just don't get to accept that 2018 date without accepting the economic projections that underly it. Nor do you get to simply put it out there without giving some notion of how big the gap will be. We came up with a trillion dollars to bail out the Savings and Loans, we reached in our wallets and found $200 billion to fund an unnecessary war. Yet some people argue that finding $50 billion in 2018 is some crippling burden.

The 2018 shortfall date and the 2042 exhaustion date are drawn from a specific set of economic and demographic projections that called for 2.7% growth in 2004 and 1.8% growth in 2005. To paraphrase Nixon's Press Secretary Ron Zieglar "Those numbers are no longer operative". 2042 is so yesterday and deploying it like it was graven in stone is either thoroughly dishonest or thouroghly stupid. The economy is rolling in at 4.0% for 2004 and the official projections for 2005 are 3.5%. Plug those into the Trustees' model and both the 2018 and 2042 date get pushed back, way back.

PB, Vaughn, rea: your numbers are wrong. How wrong will be found out when the next Social Security Report is released in March, or maybe you can run your own spreadsheet. But the economic projections are profoundly sensitive to small changes. The difference in the models for 2004 growth between a fully funded Trust Fund forever and one that runs out in 2042 is 2.8% (Low Cost) vs 2.7% (Intermediate Cost). We are going to be plugging 4.0% into that model. The best case scenario that the Trustees could forecast for 2005 was 2.1% (Low Cost). Now we are faced with plugging 3.5% in. Yet you are blithly assuming that you can get away with deploying dates that derive from much lower rates of growth. And cop an attitude besides.

You are assuming what needs to be put in evidence. Give your best bet for economic numbers going forward, compute the effect that will have on the health of the Trust Fund, and then you can present your remedy. The numbers suggest that no remedy is necessary. Until you are ready to bring your own numbers you are simply not competent to comment on this topic. You literally do not know what you are talking about.

Social Security is overfunded over the long term. It is as simple as reading numbers in a table and examining a graph. Something privatizers and crisismongers simply refuse to do.

2004 Social Security Report: Economic Projections under the Three Alternatives
Trust Fund Ratios under the Three Alternatives

While some people were blustering others were patiently examining the numbers and noting how future growth was being low-balled over time by the Trustees to maintain some notion of crisis. Under any reasonable set of numbers the Social Security gap has vanished.

Here is a "creative policy idea" for you. Leave Social Security alone until you can give me numbers that show it is broke. Numbers that will stand the light of day. Because we just yanked the carpet out from under you.

Posted by: Bruce Webb | Dec 24, 2004 11:36:02 AM

When the Greenspan plan was enacted, when FICA was raised so that it far exceeded current needs, so that the excess would be available for future needs, the government needed to plan for how this would work. To some limited degree Clinton's administration did just that. They allowed a surplus to develop in the general fund, announcing that it would be used for Social Security and to pay down the debt (which redeeming the bonds in the SS trust fund was). But, the current administration preferred to transfer that surplus to the wealthy taxpayers, and force the Social Security system to run short of money sometime long after they were a dim memory in the minds of voters. So, the real crisis we face today is the inauguration of Bush next year. Let's call a spade a spade.

Posted by: Vaughn Hopkins | Dec 24, 2004 11:45:51 AM

Bruce,
I am assuming nothing. I fully realize that come 2018 the projected probable date for a shortfall in FICA will likely be sometime after 2030. My whole point is that Greenspan's plan was to over fund Social Security for the present, so as to prevent problems in the future. The excess was to be invested, as it was, and would be available when needed some time way off in the future. That plan is still working. Its unfortunate side effect was to eliminate the progressivity of federal taxes, but that's another issue.

Posted by: Vaughn Hopkins | Dec 24, 2004 11:52:32 AM

Bruce: Please show me where I said Social Security is "broke". Please show me where I indicated support for "privatization". Also, please explain why accepting the lowball estimate from the trustees is not prudent, but accepting the rosier scenarios is. Finally, I'm not "assuming" anything. I'm making conclusions based on what I regard as the best evidence. Apparently, anybody who favors something different from the status quo is supposed to "show evidence". But neither you nor anybody can show the "evidence" that's really required, because of the non-existence of crystal balls and time machines.

Posted by: P.B. Almeida | Dec 24, 2004 11:55:25 AM

The Bushies are fighting for what they regard as a sacred principle- their ability to collect money for one purpose (Social Security) and spend it for another (war, tax cuts for the rich, etc). They are no different from a broker who tells you to buy a stock, but actually uses your money to pay for a mistress.

And a special mention for P.B.Almeida who tells us that the changes, which supposedly still give you 2/3 of the benefits from the unchanged plan, "ain't that bad". Let's see now, that would be a pension of about $660 per month- of course, you will have to save $2000 of that each year for the new medi-gap insurance coverage you'll be forced to take part in- so you'll have a little over $500 each month for your rent, food, and transportation, if you can afford to go anywhere. Of course, by the time you get this, prices will be a little higher than they are today....

Posted by: serial catowner | Dec 24, 2004 12:09:32 PM

"The clever ones among the anti-redistributivists -- the president, for example -- never say that this is actually what they believe since running on a platform of "We Must Do More to Help Rich People!" wouldn't work very well."

This is an odd attack in that the corrent system:

A. Takes a greater slice of payroll from poorer workers than from wealthier workers.

B. Pays benefits to wealthier retirees for more years on average to poorer retirees.

C. Pays no retirement benifits at all to what are disproportionately the poorest workers in the most hazardous jobs.

The current system is redistributionist. But taxing the working poor so Ross Perot get a check every month is nothing to brag about. Its shameful.

Posted by: abdul abulbul amir | Dec 24, 2004 12:30:52 PM

"Apparently, anybody who favors something different from the status quo is supposed to 'show evidence'."

What's the problem with that, PB? And where did the scare quotes come from? Doesn't it make sense to ask whether changes will be better than what they replace? Isn't that actually the commonsense standard for anything more important than rearranging the living room?

"If it ain't broke, don't fix it". Who said that?

Posted by: John Emerson | Dec 24, 2004 12:42:18 PM

abdul abulbul:
This is an odd attack in that the corrent system:

A. Takes a greater slice of payroll...

Yes, it would be better to finance it from the general fund and maybe adjust the payments based on the actual need.

But if this were how the system works, it would've been killed long time ago.

In fact, the only reason they want to kill it now is exactly because it looks like it's going to have to be financed from the general fund in a couple of decades.

IOW, you're saying: the system is not perfect but it's getting better, so let's kill it now because soon it'll become terrible.

That's what I call 'an odd attack'.

Posted by: abb1 | Dec 24, 2004 12:53:43 PM

Serial catowner,
Social Security will, with no changes at all, pay more in inflation adjusted dollars, to retirees after 2042, or whatever date you use for the "crisis" date, than it pays today. But, that will be less than it would pay if it had all the money it needs. That fact has been repeated over and over again. I think it is because SS payments increase, by law, faster than the actual inflation rate, so in 40 years they will be considerably higher, in inflation adjusted dollars, than today. The shortfall, if it even happens, would reduce that increase to nearer to actual inflation increases.

Posted by: Vaughn Hopkins | Dec 24, 2004 1:16:06 PM

Aw, c'mon Serial, now you're being deliberately misleading. While it's true the average benefit is currently something like $1,000 -- nobody is talking about cutting the benefits of folks currently receiveing Social Security. And even that low number, of course, is reflective of the full range of people who today receive checks, including many folks who retired years ago, and have been only getting the CPI boost (not a wage-indexed boost) for many years now.

Workers who make at least decent money currently (say, over 35k a year) and are now paying into the system would be in line under the status quo for a montly check in the vicinity of $2,000. And yes, 2/3 of that number isn't terrible, especially it it's accompanied by, say, owning your own home (not to mention savings, some of which is going to be generated via the Prez's new plan). I personally wouldn't have any problems with a more progressive trimming of benefits (or a bumping-up of benefits for moderate income folks) paid for by reductions in benefits to the rich or a more agressive increase in the retirment age, but I've been told by liberals that such measures violate the laws of physics.

Anyway, if you want to frame the debate as status quo vs W's evil plan, feel free. I'd say you'd be much better off looking at some of the truly creative ideas for reform out there (nearly all of which are more imaginative, and substantively superior, to Bush's), but who am I to give advice to the progressive community?

Posted by: P.B. Almeida | Dec 24, 2004 2:14:07 PM

Frankly, I don't see how this will happen. A one-thousand dollar SS benefit has increased by $10 every year for as long as I've been watching. Over the next 40 years that's an increase of $400- not $1000 as PB describes above.

Considering that there appears to be no "crisis" at all I would be very happy to keep the system we have. If we're that good at coming up with creative ideas we should do it at the local level and make the retiree's dollar do more. This idea that "somebody" has a great idea that gives us more dollars sounds to me like pie-in-the-sky. And we all know when you get that.

Posted by: serial catowner | Dec 24, 2004 2:28:16 PM