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Home Publications Blogs Beat the Press Marketplace Pushes Tripe on Social Security

Marketplace Pushes Tripe on Social Security

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Saturday, 12 June 2010 14:53

I often think it's too bad that Social Security isn't a private company. If it were, it could sue Marketplace Radio for libel for this sort of reporting. Does Marketplace's host have any idea what she is talking about when she says: "Social Security is in such a sorry state"? According to the Congressional Budget Office the program can pay all benefits for the next 34 years with no changes whatsoever and even after that can pay more than 75 percent of benefits indefinitely. The program is in much better shape in this respect that it was in the 40s, 50s, 60s, or 70s. So what on earth is this person talking about? Can Marketplace Radio pay all its expenses for the next 34 years?

Marketplace's expert then tells us that Social Security will probably be means-tested. This idea is extremely unpopular among both the public and policy experts, so it would be interesting to know the basis for this assessment. She also recommends raising the retirement age, apparently unaware of the fact that the retirement age has already been raised to 67. She also is apparently unaware of the fact that the vast majority of the huge baby boom cohort has almost nothing saved for retirement and therefore will be almost entirely dependent on Social Security.

Comments (33)Add Comment
Social Security = Ponzi Scheme, Low-rated comment [Show]
Consistent?
written by AndrewDover, June 12, 2010 6:07
Dean,
Clearly your argument for the health of Social Security properly rests on the bonds in the SS trust fund. In that case, why did you quote a US debt to GDP ratio of 60% which excludes that debt?

When you argue the health of the US government, you should include the SS bonds in the calculation to be consistent.
Clueless
written by urban legend, June 12, 2010 7:51
Chuck Mertz is. And extremely gullible, albeit like a lot of people who have been taken by propaganda from people who want to eliminate Social Security. Those bonds are backed by the Full Faith and Credit of the United States. As a matter of law, they must be paid. They are no more "a bunch of IOUs" than the dollars in your wallet, or the Treasury bonds you buy on the market. The fact is, the system itself -- it's finding -- on solid ground into the foreseeable future.

Chuck has no idea whatsoever what a Ponzi scheme is.
...
written by izzatzo, June 12, 2010 10:30
Apparently Market Place Radio confused the means test with the Real 'Merican test which was put in place along with the raised retirement age of 67. Those retiring at 67 will also have to present an Arizona Passport to get SS, which should thin out the baby boom cohort bulge enough to make the fund solvent again.
..., Low-rated comment [Show]
...
written by diesel, June 13, 2010 4:46
"Almost nothing saved for retirement".

We boomers may not have thought this one through. We followed the formula dutifully. Sell the big house, buy a smaller more manageable retirement home with cash and add what's leftover to the retirement portfolio.

But to whom do we expect to sell our homes and our S&P index funds when the smaller population following us can not supply the demand? Certainly not other boomers, as they're trying to do the same thing. Oversupply and falling prices would seem inevitable. Can anyone posit a more cheerful scenario?
re: Brooks
written by deanx, June 13, 2010 8:37
While you're right that taxpayers will soon have to start paying down the balance they owe to S.S .. your forgetting that the Payroll taxes presently in the the Trust Fund were paid with 'real money' from the workers over the past 25 years.

Ergo I cite Dean's points made earlier this week, that reductions of benefits at this point are the full moral equivalent 'Defaulting on a Debt'.

Primarily wealthy people got tax relief over the past 25 years and working people subsidized government operations in their absence while workers saw payroll tax and retirement age increases. Everything from Reagan's reductions of the incremental tax rate to Bush's corporate and capital gains tax cuts were but a sham to raid the Trust Fund.

Federal revenue has not been keeping up with Federal expenditures for most of the last 25 years; funded by back door transfers from the Trust Fund. It's incredibly insincerely to uphold the federal debt owed to Wall Street and the Chinese while undermining our own workers.
...
written by Richard, June 13, 2010 12:58
It does seem to be a conumdrum how SS will pay its benefits in the future. Some adjustments will have to be made. We may have to adjust how corporations operate, i.e. perhaps they will no longer be able to have subsidiaries in Bahamas, and avoiding paying taxes. We may have to adjust how the market operates and eliminate the practice of short selling, which in my opinion only allows for hedge funds and sophisticated traders to raid the value of stocks. Borrowing them, selling them, which makes the price go down, then buying them back, and extracted the accumulated wealth from them. We may have to adjust how we tax the ultra rich, and estates. We may even have to tax ourselves more.

Yep Diesel, we may be stuck in our big houses, and beings our children can't afford them, we might have to have our children and grandchildren move in with us, and live as multi-generational families in one house again.

I have faith in the American people, we will find solutions to all the problems we face, it is an inherrent part of our nature.

I see us taking back our government from the foolish corporate sponsored lackeys in the future. I see our us starting to invest in the future by developing new and sustainable sources of energy.

It has been said that there are no apathetic people, as we all care, there are just those that don't take action. We've been lazy, and now we are cornered, and we have a choice, fight back, take control, and make positive changes that benefit all of us, or give up and die.

It wasn't so long ago, that my ancestors lived in a hole dug in the ground with a sod roof. They survived, we will too!
Living in a fantasy..., Low-rated comment [Show]
..., Low-rated comment [Show]
Earnings penalty - Social Security
written by tfitzaz, June 13, 2010 2:28
When is Congress going to do something about the earnings penalty for those seniors who get Social Security distributions.
It forces Seniors into poverty, especially those who have no pension or retirement savings.
So let's see, you escape paying into Social Security you make over $100,000.

Watch out for the Pete Peterson backed National Town Hall Forums beginning on June 26, 2010. And of course, the secretive 'Deficit Commission' from our dear leader, Obama.
...
written by yuan, June 13, 2010 2:55
I was a faithful NPR donor for decades. The neo-liberal corporatist garbage they now spew on market place, ATC, and ME ended my support.
"earnings penalty for those seniors who get Social Security distributions."
written by AndrewDover, June 13, 2010 3:46
tfitsaz:

President Clinton signed H.R. 5, the Senior Citizens Right to Work Act, on April 7, 2000. H.R. 5 eliminated the earnings test for recipients who have attained the full retirement age, effective in 2000.

Current federal taxation of SS benefits is non existent for those who only have SS income up to $50,000.
http://www.socialsecurity.gov/planners/taxes.htm

And of course, those earning over $106,000 pay SS taxes on $106,000 of earnings, which hardly escapes SS taxes.
...
written by Brooks, June 13, 2010 5:25
tfitsaz' mentioning of Pete Peterson reminded me that this morning I saw Dean Baker on CNN along with David Walker, and Dean called Walker a "voice of sanity" on perspective on current deficits in this bad economy (as opposed to the longer-term structural problem), one of the very issues on which he routinely completely misrepresents the position of the organization Walker heads (the Peterson Foundation) and on which he demonizes them on the basis of that straw man.

I guess being on TV with Walker made Dean shy away (and then some) from his false attributions and baseless demonization.
Brooks @ 2:08 a.m.
written by Ethan, June 13, 2010 6:29
How many DoD contractors have been paying into a fund from which they can later draw? How in the world is the DoD going to pay them? Oh yes, the government doesn't have any money, it's the taxpayers who have the money; so the taxpayers will have to pay the DoD contractors! And the taxpayers haven't even borrowed from them!!!
By the way, Brooks, do you live in Eastern Europe that you can post here at 2:00 in the morning? Or do you just stay up all night drinking whatever it is?
Now, go re-read deanx @ 6:37 a.m. and really think about it.
...
written by diesel, June 13, 2010 7:01
We don't need a "money tree" to fund social security, we just need to pull the plug on our rampant military spending, or rather, divert the stream to socially useful, self-rewarding programs.

The article in the NYTimes today on men's role in child care in Sweden and their 2 month paid work leave was just depressing. It just shows how much the US is living in the dark ages and how the argument is cast in completely different terms in other more enlightened States. We're not just not on the same page as our European brethren, we're reading from a different book. And as statistics show, their is little truth to the claim that their economies are either less efficient or that their debt is unsustainable. Quite the contrary, it's our endless war economy that seems outdated and unsustainable.

Americans always have money to murder other people, but none to be kind to themselves. Curious.

Also, times are posted EST, making it appear as though we westcoasters are insomniacs.
...
written by Brooks, June 13, 2010 7:35
I guess Ethan is just one of those people who wants to yell out "DoD!" in response to any comment that discusses SS spending vis a vis the problem of our long-term (overall) fiscal imbalance, even if he really doesn't have anything worthwhile to say.

Yeah, Defense spending is taxpayer funded, too. Great point.
...
written by Brooks, June 13, 2010 7:42
diesel,

The question of what our priorities should be as we choose among options for reducing projected spending and/or raising taxes has nothing to do with my comment. I was just correcting the fundamental conceptual, analytical error that many people make, in some cases (ahem, Dean Baker) intentionally to mislead people, but in most cases just because people are just not very good conceptually and analytically and are easily misled. In other words, I'm just encouraging people to assess the trade-offs correctly as they approach these choices. Which choices each person prefers -- what he/she considers higher/lower priorities (or worth spending money on at all) -- is an entirely different matter, although obviously hugely important. What I was doing is akin to correcting errors in others' math, not advocating for any policy choices (SS vs. Defense or any other)
Dean Baker & David Walker on CNN:
written by AndrewDover, June 13, 2010 7:46

http://transcripts.cnn.com/TRA...m.01.html

BAKER: Well, let me just say, I really applaud, I really appreciate David's comments because he's been an important voice of sanity arguing here that we shouldn't be concerned about the deficit at least in the short term, that we do need to spend money to get the economy going again. Now over longer term, I mean one of the issues that David's pointing out is that we are looking at a situation where we are building up a debt burden.

One of the points I made is that there is very little consequence, very little risk of inflation if the Fed were to simply at this point buy up debt and hold it. It's doing that to some extent but the intention is that it is going to sell that back to the public so that five, six, seven years out we're going to have large interest obligations on their debt. I see no risk at all buying that debt and having the Fed in essence hold it. So what that would mean is that when we're paying the interest on the debt we're accumulating today in 2010-2011 that is going to go to the Fed and the Fed will in turn rebate it to the treasury.

...

WALKER: Let me jump in here. Look, there is very little risk of inflation in the short term because we still have a weak global economy and unemployment is very high. But look, the fact of the matter is we need more market forces affecting us because we are an improved and unsustainable path. The Fed buying our debt is called self-dealing. The Federal government has a number of special purposenties; they're called GSE, Government-Sponsored Enterprises and trust funds. These are practices that are disconnected from reality.

VELSHI: You're talking about things like Fannie Mae and Freddie Mac?

WALKER: I'm talking about Fannie Mae and Freddie Mac, that the government effectively controls, that it has guaranteed over $5 trillion in debt and it is not owning up to it, I'm talking about the fact that we need to save Social Security and preserve a strong safety net but the government has raided all the trust funds, there is no money there. Let's get real people. We are the greatest country on earth and at the same time we're not exempt from the laws of prudent finance and we're fundamentally imprudent with regard to our long term course and we need to start doing something about it.
NPR and Commercials
written by libhomo, June 13, 2010 8:57
NPR went nutty rightist soon after they started depending on commercials for revenue. There is a lesson there.
...
written by anon, June 14, 2010 12:45
How can someone give Andrew a minus vote for reproducing the transcript from a talk show, for crying out loud?
SS flow
written by bakho, June 14, 2010 9:23
SS flows are SUPPOSED to go negative. Otherwise, those of us in the working class are subsidizing tax breaks for the wealthy special interests. Ronald Reagan gave HUGE tax breaks to the wealthy and levied a HUGE payroll tax increase on the Middle Class. The promise was that when the time came, the SSTF would be paid back by taxes collected in the future.

To do otherwise is Bait and Switch and likely what Mr Greenspan and the rest of the backers of the original SS plan had in mind.
...
written by Scott ffolliott, June 14, 2010 10:36
My notion of democracy is that under it the weakest shall have the same opportunities as the strongest...no country in the world today shows any but patronizing regard for the weak... Western democracy, as it functions today, is diluted fascism...true democracy cannot be worked by twenty men sitting at the center. It has to be worked from below, by the people of every village. - Mahatma Gandhi
...
written by oxfdblue, June 14, 2010 1:15
For Mr. Mertz who says we should use gold as our currency, a simple question: Where do you expect to get all that gold?

There is about $700 billion in actual paper and coined currency. There are trillions more in electronic funds.

The total US gold supply is about $150 billion give or take a bit.

There isn't enough gold and/or silver to monetize our massive economy. There never was. Even when this nation was on the gold standard in the 1800s, there was so much counterfeit money, no one knew what was real or fake- yet everyone accepted everything...because it worked.

Take the Ron/Rand Paul stupidity and stick in the trash. The two of them together don't add up to a clue.

As far as Social Security, make income above $350,000 a year subject to the payroll tax and the program will be 100% solvent for decades and decades.
...
written by kharris, June 14, 2010 1:18
This notion of cash...I'm not sure I understand it. Isn't cash just something that you can exchange for goods and services, and which pays no return? Specie. Greenbacks. So when somebody says there is no cash behind the Social Security Trust, they are complaining that an account which holds large reserves is invested in something with a coupon and that requires a transaction - redemption of bonds - in order to have cash on hand. Why, that's just like money market securities, CDs, bonds and stocks. And the Treasuries held are of the same quality as those held by banks as capital and by pension funds as their basic secure holding and by foreign central banks as reserves. The only difference is that SS has to sell them to Treasury, rather than in the open market. That IOU/cash argument is utterly empty, but just won't go away. Either the US government defaults, or it doesn't.
Brooks @ 5:35 pm
written by Ethan, June 14, 2010 3:05
Ok, for DoD substitute any other department -- Department of State, Department of Interior (Forest Service BLM, National Park Service and similar do bring in revenue from fees, but the point is the same).

You still have not addressed the issue. The government (taxpaying population) is committed to lots and lots of "unfunded" liabilities which must be met from future tax revenues. Why pick on Social Security? At least it has saved up and invested for its future liabilities so for the next 40 +/- years they are not "unfunded" AT ALL.

The only thing that would make SS "unfunded" is if the US Government defaults on its bonds. Is that what you are saying should/will happen?
...
written by Brooks, June 14, 2010 11:34
Ethan,

It's hard to know where to start with you because you are confused on so many levels.

Let me start by saying you should learn to distinguish between what someone has actually said (and not said) vs. what you are so eager to reply to that you fabricate a straw man you wish to knock down. Yes, future spending is generally "unfunded" and funded via future tax revenues. I never said or implied that this fact applied only to SS, nor even to a greater extent to SS than to any other program. Nor do I even refer to future SS spending as "unfunded" in the sense that many do -- as part of a metric of "unfunded liabilities" that is expressed as a gauge of our long-term fiscal imbalance, but which is actually grossly analytically unsound (i.e., makes little to no sense), as I've explained and illustrated numerous times on Beat the Press and elsewhere in the blogosphere. A measure of the gap between dedicated tax revenues and their associated programs (with or without including "trust fund" "balances") has no sensible place in a metric for the size of our long-term fiscal imbalance because the existence and levels of those dedicated tax revenues are arbitrary and irrelevant; they are just part of total revenues, just as spending on those programs is just part of total spending. Internal bookkeeping balances are meaningless from the perspective of the problem of our long-term fiscal imbalance. Lastly, I've given absolutely no indication of "picking on Social Security". I pointed out a very common, yet huge analytical and conceptual error people make when considering and discussing the relationship between SS spending (and SS's bookkeeping balances) and our overall fiscal imbalance. It's not only a common error but one deliberately fostered and perpetuated by people like Dean Baker who know it's B.S. but also know that confusing people (1) is conducive to support for policies the writer/speaker favors, and (2) pleases a hyperpartisan audience by giving it stuff it wants to hear.

Then, after seemingly accepting the notion that SS (like other programs) is not really "funded" at all, you pivot quite strangely to contradict yourself by asserting exactly the nonsense I was correcting: this whole notion that SS is indeed largely funded -- that it "has saved up for the next 40+/- years" and thus is "not 'unfunded' AT ALL".

And you top it all off with yet another form of confusion, stating that "the only thing that would make SS 'unfunded' is if the US Government defaulted on its bonds". Even if we accept the complete nonsense that the bookkeeping balance for SS has any relevance to our overall fiscal imbalance (which it doesn't), you are still fundamentally wrong and way, way off. The lion's share of the revenue that will "fund" future SS spending over the next couple of decades will come from ongoing FICA SS taxation, not from "repayment" of the bonds in the SS "trust funds". So even if earmark the $3 billion or so (SS "trust fund" balances) over to SS, we could still reduce projected spending on SS by almost as much as we chose to. And no, I'm not saying anything here about what we will or should do. And that's another distinction you should make: sometimes if someone corrects faulty analysis that is really all he's doing, not necessarily advocating one thing or another. I do have my preferences, but they are irrelevant to my analytical point, which is (or should be) very clear and which is obviously valid and should be seen as such on its merits, regardless of whether some right-winger or left-winger thinks accepting its validity is a threat to his/her policy preferences or suspects that I'm offering it as part of some advocacy.
OK, I'll respond to Brooks
written by Charles Peterson, June 15, 2010 2:01
Brooks,

I'm glad you're not making the various analytical errors often made in the right wing blogosphere.

However, the kind of argument you make can be made for all kinds of financial investments as well as Social Security. All financial investments assume the continuation of some kind of revenue stream in the future, just as Social Security depends on the continuation of gainful employment in the USA and the FICA tax being paid on it. For example, if I buy stock in XYZ corp to save for retirement, I am depending on the continuation of value of XYZ corp, which in turn relies on XYZ corp's ability to continue making money in the future, and the continuing ability of people to buy that stock.

One difference is that while corporations may come and go, we hope that in one way or another US citizens will continue to have gainful employment in the future in one way or another.

If there is no gainful employment in the future, not only is Social Security toast, *all* financial investments are toast.

That's why the focus should always be on building the jobs of the future, everything else depends on it.
...
written by diesel, June 15, 2010 2:57
Brooks says: "A measure of the gap between dedicated tax revenues and their associated programs (with or without including "trust fund" "balances") has no sensible place in a metric for the size of our long-term fiscal imbalance because the existence and levels of those dedicated tax revenues are arbitrary and irrelevant; they are just part of total revenues, just as spending on those programs is just part of total spending. Internal bookkeeping balances are meaningless from the perspective of the problem of our long-term fiscal imbalance."

It is your contention then that with respect to accounting, dividing our taxes into categories of income and FICA is merely an illusion. Do you also maintain that the results are illusionary. Do you deny that the effective outcome of this illusionary accounting has been to transfer a substantial portion of the tax burden from the wealthy to the middle class?

You can't have it both ways. Now that you've lumped them all together, you can't say that the FICA tax ultimately serves those who bore the brunt and is therefore rightfully their burden.

And if what you say were true, then it would have made no difference whatsoever that FICA taxes were raised in the 80's. The revenue could equally have been raised by tripling the capital gains tax and by a 70% highest-bracket income tax and by subjecting all estates to a 90% tax upon the death of any individual, without exemption or evasion through the use of foundations or trusts. There seems to be no reason for not using these taxes to fund SS.

And if one acknowledges that the SS surplus was used to offset revenue shortfalls due to individual and corporate income tax cuts over the last thirty years, and that the money was spent on military adventures, then it would seem that the obvious and simple solution to our projected deficits is to cut not SS, but our military spending.

However, by lumping revenue and expenditures all together (respectively), one seemingly evades this choice. After all, inputs and outputs are numbers. There is no "just" allocation, since source and destination are not connected by any chain of cause and effect. This is an example of what Sartre called "bad faith". In the end you will have chosen, but you deny having made a choice.
...
written by Brooks, June 15, 2010 11:22
diesel,

I don't have time tonight to get into a critique of your entire comment, so I'll just say...

Sounds like you are saying that, as we make choices among sacrifices to reduce our (currently huge and unsustainable) projected overall long-term fiscal imbalance, we should consider political promises that were made to those who were asked to sacrifice more for promised benefits. I agree. And I think a political promise was probably made (implicitly or explicitly) in the 80s that if the public accepted higher SS taxation, it would preserve the benefit structure for them down the road when they retired or at least preserve more of their eventual benefit levels than they'd receive if not for that tax increase. That is indeed one factor to consider as we review choices among sacrifices that we must, in aggregate, make on a large scale to shift us to a sustainable fiscal course and avoid predictable eventual economic and fiscal disaster.

That does not diminish the validity, usefulness or importance of my point (you apparently think it does) but I have no time tonight to sort out where you need guidance based on your comment and to provide that guidance.
...
written by Brooks, June 15, 2010 11:29
Charles Peterson,

I don't know what your point is or how it relates to what I've said. Yeah, the value of investments is NPV of cash flows. Yeah, spending on anything is (eventually) funded by taxes (or inflation via printing money, but that's another matter). If you are responding in some way to something I've said, you'll have to be a lot clearer for me to be able to respond. What is it you think I'm asserting and why do you think it's wrong or insufficient in some way? Spell it out. Connect the dots, or at least the dots you think you see.
Why I stopped donating to NPR
written by john Woodford, June 24, 2010 11:52
Since NPR has sold out to the corporate funds that produce Marketplace, I've seen no need to continue donating to it, and won't till they get rid of MArketplace or add a program that diretly contradicts and exposes it.
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written by James, July 05, 2010 2:38
I wish SS were privately run too, mostly so that I could not be forced to participate with my consent.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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