Politics holding the US back

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October 22, 2010.

THAT'S your opinion based on your own ideas, I guess, since you didn't post a link.

http://www.aarp.org/work/social-sec...paign=G_Work&360cid=SI_155866756_6027343261_1

To me it is amazing, sort of until one considers a few things, that we are discussing SS when the massive deficit we have now is out of control. And the debt has nothing to do with SS. But I can understand why Republicans want to change the subject to SS, at least from their point of view.

Unfortunately, as you point out, no one will cut spending in a meaningful way. The problem is not the actual programs, but the interest on the debt, which is getting us in too deep.

You are right, that no one has suggested "drastic tax increases" on the rich, at least at the natinal level. The only thing I've heard is the expiration of the Bush tax cuts for anyone making 200K. I suppose some people may consider that "rich" but I certainly don't. Those are high income wage earners, but still "wage earners." The "rich" are people who don't have to work for a living, but can support themselves with their own money.

I wouldn't worry too much - often they inherit their wealth, if it's "old" money, and sometimes they just steal it.

 

CtR already touched on this but I'll add a little more. SS has been modified (specifically the percentage paid by current workers) several times over the last 70 or so years of SS's existence. The same applies to Medicare. If you look at this chart, you'll see that when we implemented SS in 1937, only 1% of your income was paid into SS, but it's now up to 6.2%. Similarly, when Medicare was made available in 1966, it was 0.35% of your income, while now it is 1.45%.

While it takes an act of Congress to modify SS, saying that it cannot be fixed in 10 years is hyperbole. This isn't something like the health care debate, in which numerous options were on the table. To "fix" SS, there's really only two things you can do: 1) Take in more money or 2) Pay out less money.

1) There's two options for getting more money. You can either have everyone pay a greater percentage of their earned income into SS, or you can remove (or raise) the cap of how much earned income will be taxable. Right now, everyone pays 6.2% of thier income up to about $107,000 (technically I think it's $106K and change). Income earned beyond that is not subject to any SS tax. (So I suppose a 3rd option is have income earned beyond $107K to be taxed at a lesser rate.)

2.) There's only two options for paying out less money as well. You can either give everyone less, or raise the age in which one can start collecting benefits. Instead of the current 62/66/70, maybe make it 67/71/75.

So it really isn't rocket science.

 

Those things seem to me like just stop-gap measures. They'll put things off, maybe even for a while, but we're still paying the previous investors with the payments of the current investors. This is why I compare SS to a pyramid scheme. The people who are looking for dividends are being payed out by the new investors, which means you keep needing to have new investors, or bigger investments, but that only increases your later liability. It doesn't help that the surplus isn't really invested (not as far as the US budget as a whole is concerned). Solvign SS, in my mind, means making it so that no change in simple circumstances could screw it up, so that you're getting back the actual money that you put in (at least that's the most obvious solution to me).

But as long as we're spending all that money on the actual programs, we can't pay down that debt any, can we. We need to cut back to the essentials, pay down the debt, suddenly feel increadibly free now that we aren't spending X00 billion every year in interest, and then carefully consider what we want to spend our newfound wealth on (50 years from now, when we've payed down the debt).

My point is that no level of tax increase is going to solve the problem. It may form a part of the solution, probably a small part, but it won't solve anything. That means that cuts are needed, whether they're wanted or not.

I have heard more and more politicians (though it's still few, and all republicans) saying that everything is on the table, including the Sacred Conservative Cow of military spending. We'll see if that leads anywhere or not.

As I pointed out to Chandos, it's also not actually solving things, just putting them off. As evidenced by the fact that they've been done before, but we're back to the same mess. SS depends on more people working now for more money than worked then for the money they made then. Possibly with some influence of inflation in the mix, but I'm not certain. As long as those are conditions to it being stable, it can become unstable if things completely unrelated to it go bad. The US is currently facing negative population growth, with only immigration keeping the population increasing. If fewer workers enter the taxable workplace (because there are fewer people, or because more are being payed under the table, or whatever), then SS will run into a problem. If people are being, on average, payed less, then SS will run into a problem. It's a balancing act.

 

No, actually it does. You just refuse to accept that because of your dislike for the SS system. As the Boomers gradually move out of the picture the situation will be much different.

We've had this argument several times already. A pyramid scheme is like Amway, or some multi-marketing schems, not SS. Again, like the last time we had this argument, SS works very much like "insurance," hence the term that is often used in describing Social Security Insurance.

http://en.wikipedia.org/wiki/Social_Security_(United_States)

 

Actually, I'd say that a high enough increase in taxes could solve the problem without cuts, but a) they are not likely to pass, and b) they may well create other problems.

I think it could be a bit of everything. Some areas of spending could be reduced without significant problems, and some increase in taxes might be justified, at least bringing them up to the Clinton levels. Also, I think that once the US gets out of its economic slump, tax revenues would increase naturally - just as they decreased when the crisis began.

 

I think we need to both reduce spending and increase taxes. But there needs to be a promise that at some point the taxes will be lowered again.

I would like to see an amendment that does not allow deficit spending. The government should only be allowed to borrow money to finance disasters and unforseeable emergencies (which would not include an ongoing war).

 

NOG, the main reason we've done this before and we're back to the same mess is because as time has gone on medical advances have been made, and people are LIVING a lot longer. The reason why 1% of your income into SS worked so well in 1937, is that at the time, people were only on SS an average of 3 years before they died. (And if you want to talk about getting your money back, that's never happened - the first people to receive SS never paid into the system at all - Because it didn't exist prior to their retirements.)

Go back and look at the chart I posted again. From the begining of the SS program in 1937, up until 1990, there was in incease in the SS tax - usually on the order of a fraction of a percent - every 3-5 years. The fact that we haven't had an increase in 20 years - several times longer that any previous period before an adjustment was made - means that if anything, an adjustment to SS is overdue.

Which has always been, and continues to be, the situation.

Newsflash: If immigration is keeping the population growing (and you're right that it is growing) - then the population growth is POSITIVE. Look at the fertility index for the US. The average US woman gives birth to 2.08 children in her lifetime - so that growth is not dependent upon immigration alone. It's positive growth. They've also looked at fertility index of immigrants and non-immigrants and have found that immigrants do not tend to have any more kids than non-immigrants. The main differences you see are based on race. White women are a little under 2, black women are a bit over 2, and hispanic women are around 2.2.

Now if what you are saying is that the rate of growth is slowing compared to what it was in the baby boom years, I'll agree with that. But that does NOT mean our population growth is a negative number. The current population growth is 0.9% annually. Chart of growth rate from 1960-2008.

Yes that would be a problem. Good thing that every year there are MORE workers entering the taxable workplace, and people are being paid, on average, MORE than they were years ago.

If only there was some means available to verify this information. If only there was some government agency that kept track of population growth over time. Someone like the US Census Bureau. I'll save you a few clicks. We'll start in 1940, right around when SS came into existence:

YEAR - POP (in millions) - % Change from 10 years ago

1940 - 132.1 - +7.31%
1950 - 152.3 - +15.29%
1960 - 180.7 - +18.64%
1970 - 205.1 - +13.50%
1980 - 227.2 - +10.77%
1990 - 249.5 - +9.82%
2000 - 275.1 - +10.26%
2010 - 309.5 (est) - +12.50%

So from about 1970-present, we've had a growth rate of about 10%-13% every decade. The chart above shows that during the height of the baby boom (represented in the 1950 and 1960 line above), the growth rate was more, but the recent growth rate has been (if anything) a bit better than average.

As for earnings, well, there's a place to go for that too. The US Dept. of Commerce. I'll save you some more clicks - but I was only able to find data from 1950, so I'll start there:

YEAR - AMT ($K) - AMT PRESENT $ ($K)

1950 - 2.6 - 17.1
1960 - 4.1 - 22.0
1970 - 6.7 - 28.1
1980 - 12.5 - 27.2
1990 - 20.3 - 28.4
2000 - 28.3 - 31.1
2010 - 32.7 (est) - 32.7 (Obviously)

So the arguement that people are being paid less now - even after one adjusts their earnings for inflation - also falls flat.

 

Good post Aldeth.

One interesting item I read about social security is the illegal immigrants are actually helping SSA remain in the black. The vast majority of illegal immigrants have jobs which pay into SSA -- they contribute as does their employer. But an illegal immigrant cannot collect SSA (unless they have real good fake ID).

The SSA is actually counting on the "free money" from illegals to fund the program.

 

What if they suddenly became "legal?"

 

So is the entire political discourse in this country basically boiling down to Keynes vs. Chicago school again? Neither of them seem to work alone, but people keep arguing as if they do. I don't want a robber baron economy or European stagnation. Compromise is necessary, but compromise necessarily incorporates both. My worry is that the people in Congress don't understand that on either side.