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Home Publications Blogs Beat the Press Miami Herald Invents a "Consensus Among Economists" to Push Social Security Cuts

Miami Herald Invents a "Consensus Among Economists" to Push Social Security Cuts

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Friday, 09 July 2010 21:40

The Miami Herald took first place in the contest to have the most inaccurate article on Social Security when it printed without challenge an assertion that: "For awhile, there's been a consensus among economists that raising the retirement age makes a lot of sense." This is obviously not true, since there is no shortage of economists who do not agree with this view and it is quite possible that a majority of economists do not agree with this position. Any reporter who had researched this topic at all would know that the assertion is not true and would not present it to readers as being true. 

Instead the article presented almost exclusively the views of people calling for cuts in Social Security. Remarkably, the article included no discussion at all of the likely financial situation of the retirees who would see their benefits cuts as a result of an increase in the retirement age. These workers have seen most of their savings wiped out by the collapse of the housing bubble and the plunge in the stock market. No "adult discussion" [a term used in the article] of Social Security can occur with assessing the situation of the people who would be affected by proposed benefit cuts. 

The article also never once mentions the possibility of addressing the projected long-term shortfalls in Social Security by raising the cap on income subject to the Social Security tax or by raising the tax rate. Polls consistently show that these positions are far more popular than the raising the retirement age.

In fact, the people attending a set of public meetings last week held by America Speaks, an organization funded by Peter Peterson, a long-time foe of Social Security, overwhelmingly preferred raising the cap on the Social Security tax to increasing the retirement age. This was even after being presented with a heavily biased budget book prepared by America Speaks. There is no way to write a balanced story on Social Security without mentioning revenue options.

The article also makes a point of discussing the increases in life expectancy without noting that tax rate has been increased substantially over the last 70 years, precisely to cover the cost of a longer retirement. Again, it is impossible to write a balanced article without pointing out that current workers have paid higher tax rates in order to finance a longer retirement.

The article also implies that it would be reasonable to cut Social Security benefits to finance other parts of the government. This would mean describing the payroll tax as a "Social Security" tax even though the money was being used to finance the war in Afghanistan or other expenditures. It is unlikely that this would be a popular position. If people realized that their representatives in Congress wanted to use taxes designated for Social Security for other purposes -- in effect defaulting on the government bonds held by the Social Security trust fund -- it is likely that many would be voted out of office.

Impartial reporters should be pointing out to readers what members of Congress are trying to do with their Social Security tax dollars. There would be few items that would qualify as a greater political scandal.

Comments (34)Add Comment
...
written by Richard, July 09, 2010 11:47
Here is the full paragragh:
"For awhile, there's been a consensus among economists that raising the retirement age makes a lot of sense," said Richard Johnson, a senior fellow and the director of the Retirement Policy Program at the Urban Institute, a Washington research group. ( Now there's a good job if you can get it )

The article goes on to quote several so called experts on the subject, even one dissenting opinion for raising the age. It seems the article is more about raising the age, than cutting benefits, albeit the same thing I suppose. It also mentions raising the cap, which isn't a bad idea.

The better solution of course is to stop the wasteful spending on so called defense, then there might even be money to lower the retirement age to 55.
'Would'?
written by JHM, July 10, 2010 5:32
Since it is always possible that I misunderstand something economic totally, I'll deposit my two cents' worth over here to make clear who was to blame.

Happy days.

...
written by Brooks, July 10, 2010 6:09
Dean,

You write:

The article also implies that it would be reasonable to cut Social Security benefits to finance other parts of the government. This would mean describing the payroll tax as a "Social Security" tax even though the money was being used to finance the war in Afghanistan or other expenditures. It is unlikely that this would be a popular position. If people realized that their representatives in Congress wanted to use taxes designated for Social Security for other purposes -- in effect defaulting on the government bonds held by the Social Security trust fund -- it is likely that many would be voted out of office.

Where is that implication in the article? If we chose to raise the retirement age so we can spend less than projected on Social Security, why would that require "defaulting on the government bonds held by the Social Security trust fund"?
...
written by izzatzo, July 10, 2010 7:41
In a study of the two wars in Iraq and Afghanistan, economists came to a consensus on the claimed shortfalls in available financial resources to continue these wars.

To pay for the wars, several alternatives were considered, including lowering the retirement age for each war, raising the income cap for tax contributions to each war, and defaulting on bonds that finance each war.

However, the consensus was that a shortfall for war spending was not possible, since each war has continued under Obama as initiated under the Bush doctrine of "whatever it takes".

The consensus also concluded that war spending as a ponzi scheme by private contractors who own the Pentagon and members of Congress outright was a popular myth, advanced by those who don't understand that war spending is self funding and solvent until 2044, set up under the New Deal by FDR when spending for WWII was initiated to insure that a Great Depression will never again throw millions into homeless poverty.
...
written by Shell Goddamnit, July 10, 2010 9:14
If we chose to raise the retirement age so we can spend less than projected on Social Security, why would that require "defaulting on the government bonds held by the Social Security trust fund"?


Because the money for social security is in a DIFFERENT KITTY than the general funds, which different kitty is represented by the BONDS. If we spend less on Social Security, we can't actually spend the resulting $$ on something else without DEFAULTING ON THE BONDS. So we might as well spend it on the Social Security, eh?
No bond default
written by AndrewDover, July 10, 2010 9:34

The government would default on a bond only if they don't meet a scheduled payment.

If there was another flu epidemic, and 10% of retirees dies, social security's costs would drop. No bond default.

If the SS retirement age increases more than life expectancy increases, social security's costs would drop. No bond default.

If high rates of inflation occurs, the social security taxes and benefits increase, but the nominal value of the bonds in the trust fund drop. No bond default, but a disgusting outcome.


p.s. An interesting stimulus proposal:
http://www.nytimes.com/2010/07/10/opinion/10susswein.html?_r=1&src=mv





http://www.nytimes.com/2010/07/10/opinion/10susswein.html?_r=1&src=mv
Costs would go down, but money stays right there
written by Shell Goddamnit, July 10, 2010 9:57
If the "costs" of Social Security drop, then the kitty would increase in size. That money still ain't available for anything but Social Security.

IF IT EVER IS, everyone earning a paycheck since 1983 have been DEFRAUDED, because a highly regressive tax was levied for a particular purpose, and the money was not spent for that purpose. A surcharge on everyone making less than $100K a year can't reasonably end up in the general fund - EVER.
No bond default II
written by AndrewDover, July 10, 2010 12:05
I assume Shell G knows that the general fund already borrowed every dime of the social security trust fund.

You can see the composition of the trust fund at
http://www.socialsecurity.gov/OACT/ProgData/investheld.html

There will be no default unless one of those bonds is not paid at maturity, or stops paying the interest. It won't happen.

The trust fund is projected to go to zero somewhere before 2040, thus all that money will be spent on social security.
Petered out
written by diesel, July 10, 2010 1:11
Applying the Peter Principle to Pete Peterson's pet project of undermining the pecuniary prospects of the public fund poses this question: are his pundits possessed of the proper qualifications to assay the plausibility of whether the pension fund's principal is petering out and if not, whether it is fair to pilfer from the trust fund and in effect, rob Peter to pay Paul?

Yep
written by Shell Goddamnit, July 10, 2010 1:21
Yep, I do know that. I think I know, but I am not absolutely 100% certain, that the money was borrowed (and the bonds issued) to reduce the deficit in the Clinton era, and, instead of paying back the borrowed money, 2) give tax breaks to the wealthiest Americans in the Bush era, claiming the money as budget "surplus."

I wish I had yr confidence that there will be no default on the bonds, but boy oh boy, the current jacking about Social Security, reduction in benefits, increase in retirement age, panic about "entitlements" etc., on both sides of the aisle and throughout the sinecure-ridden punditocracy, sure don't inspire confidence.

We *should* be talking about raising the income cap, which would insure current levels of benefit for quite some time, as I understand it. And if there's some danged panic about the $$ to pay the bonds, let's get rid of the Bush-era tax cuts, which were a straight-up fraud anyway, as there really was no surplus to distribute.


SS policy options.
written by AndrewDover, July 10, 2010 2:06
I'm with Shell on letting the Bush tax cuts expire, and raising the income cap.

Seeing as the primary problem is unemployment, I would reject options that increase taxes on the majority of employed workers.

The following choices would remove 1.37% of the 2% of payroll long-range actuarial gap.

0.60 Raise the cap of taxable earnings per E2.10
0.49 Lower COLA by 0.3% per year per A3
0.28 Tax social security benefits per H1.

http://www.ssa.gov/OACT/solvency/provisions/index.html has the details on E2.10, A3, H1 and other policy options.

Then we can see how things are looking in 2020.
...
written by izzatzo, July 10, 2010 2:37
Pontification of the Peter Principle to prove a point not pertinent to that posed is plain platitude if not pure perjury to one's proposed prescription, past or present.

Whether Peterson is prepared to paint Paul or Peter as the perpetrator is not plausible as presented, and requires pinpoint parsing of the participants in play.

Perhaps Peter was not pilfered at all to pay Paul, just propositioned instead, with a pig in a poke, a ponzi pie with plenty of peanuts but no punch, a play with no pay, for which Peter pays the Piper instead of Paul, a perfect punt by Paul that pins the problem on the public rather than private sector.
Social Security "Integration"
written by MB, July 10, 2010 2:43
The America Speaks forum was interesting, it turned out well. Unfortunately it was not a good opportunity to learn new things. But one detail that jumped out, and commented on by others at our table, was a pie chart showing that around 80% of federal govt revenue is from individual income and FICA taxes but only 7% of revenue comes from corporate taxes. It was surprising to see that proportion when corporations have so much more influence on public policy than the rest of us, despite us providing such a greater amount of revenue. But that's another story.

This week I learned about "Social Security Integration" which allows employers to estimate employees' ss benefits (or something like that) and use it in calculations to offset their contributions to employees' pensions. This information upset me because I did not know about it and because I'm almost completely certain I'm affected by it. I need to dig through papers but I recall seeing a statement about it during orientation. And obviously that information meant nothing to me because I did not understand it. But now I do. And there's nothing we can do about it besides try to find better jobs. But I think it's more evidence about other, bigger threats to retirement security besides a publicity campaign to undermine support for Social Security. To me this says that Social Security is already being used as a tool to undercut other parts of retirement funding which are already too complex for average people to comprehend (it feels parasitic to have pension benefits reduced in relationship with SS benefits, as though SS is being used against us, while at the same time they want to make it harder to access SS benefits paid for over a lifetime of employment). I'll have to learn more. But at this moment, it seems like controversies about SS are a sideshow distracting us from the real crisis which is what the f will we do about the other 2/3 of retirement funding perched precariously on the house of cards known as 401ks and weak or nonexistent pensions. sigh.

I found this in a report: http://www.pensionrights.org/p...a/Consumer Agenda Jan 13 2009.pdf

From this group: http://www.pensionrights.org

B. Repeal Social Security integration.

Employer-provided retirement plans often account for Social Security in their benefit formulas --a practice known as integration -- thereby reducing pension benefits to account for employer contributions to Social Security. Pension benefit reductions due to integration make it more difficult for lower-income workers to attain retirement income security. The practice of Social Security integration whittles away the already precarious three-legged retirement stool by essentially melding Social Security with pension plans. The majority of the workers impacted by Social Security integration are lower-paid workers which are often women. Eliminating Social Security integration will strengthen the three-legged stool of retirement by ensuring that Social Security and employer sponsored retirement plans remain separate but important elements of an adequate retirement.

...
written by diesel, July 10, 2010 2:44
Bravo! Izzatzo
Perfectly put.
...
written by Brooks, July 10, 2010 3:05
Shell / Andrew,

You guys are both missing the point. Even if we assume that spending less than the balances of the Social Security "trust funds" would constitute default (which I'll grant for the sake of argument, although I've read a plausible argument to the contrary, involving perpetual rollover), that's beside the point. Those "trust fund" balances are less than $3 trillion, which would mean that the only thing we have to do to avoid default is to spend a cumulative total of at least roughly $3 trillion on Social Security benefits over future years. Projected spending on Social Security over the next couple of decades far exceeds that amount. Most of the "funding" for future Social Security spending will be "funded" via ongoing FICA Social Security taxes. Even if we assume just for the sake of argument that Social Security were going to be fully "solvent" forever, we could still spend a whole lot less than projected without defaulting on any such bonds. All we'd have to do is lower FICA SS taxation accordingly, and if we were doing so to reduce overall deficits, we would raise other taxes so the changes are revenue-neutral. The result would be lower overall spending, same revenues, and therefore lower deficits, with no default as long as we spent a cumulative roughly $3 trillion over time.

The whole concept of Social Security "solvency" or lack thereof is nonsensical. From a fiscal policy standpoint, looking to the future, Social Security is just part of the overall budget. Whatever we spend on it contributes to our overall deficits, just as does spending on anything else. It is simply nonsensical to consider Social Security "solvency" as a factor in choosing whether or not to change policy to reduce projected Social Security spending. As with everything else, we have to decide how much we want to spend overall and how much on what, how much we want to tax and how, and what deficit and debt-to-GDP levels we wish to achieve. Within that framework we can spend as much or as little as we want on Social Security, and finance it however we wish. The internal bookkeeping underlying the silly concept of Social Security "solvency" is meaningless.
...
written by izzatzo, July 10, 2010 4:41
That's like a carpenter who never completes a single house, due to the perfect as enemy of the good. Every time he starts to build a house, he insists that the master house plan be perfect and followed to the letter.

No matter how perfect it is, whenever he starts building, something would change to deviate from the master plan, and he would stop working and scold everyone involved for ignoring how the house plan and budget were tied directly to the rest of the world, including the GDP of every nation.

Unless the changes were adjusted accordingly in a comprehensive global context, there was no way to know exactly what to change, because the exact budget of the house relative to the rest of the world had to be determined before they could move on to complete the house.

He was known as the Zen Carpenter. Because he related everything to everything, nothing was ever produced.
...
written by diesel, July 10, 2010 4:51
The Default setting
Wars, more Wars
work till you drop
dead.
Plenty of others
to step into the traces
All those third world scabs
hoping to be players
on the Dream Team

The Elegant Solution
proposed by our betters
balances Life's equation
when they pluck the last dollar bill
from your upraised fingers
as the gravedigger heaps
the final shovelfull of dirt
over your cold body.
...
written by Shell Goddamnit, July 10, 2010 5:31
Brooks, I think I am not gettin you. It could be I am confused, though I'm still holding out hope that it's you.

We could reduce benefits - & FICA taxes - all we want - it'd be pointless for dealing with the deficit, because the spending on soc sec doesn't appear in the deficit. The ongoing funds from FICA taxes do not appear in the revenues. Stretching out the time the trust fund is paid on from general funds gains us...nothing, in the long run.

I'm willing to agree that keeping all these kitties separate - and assuming that people are using soc sec as a supplement to those non-existent company pensions - is stupid. We should just have pensions, and the taxes to pay for them. The (mainly) CORPORATE taxes to pay for them, since the buggers don't seem to want to pay out pensions any more...
Sigh
written by libhomo, July 10, 2010 9:16
It's so typical for the corporate media to propagandize in favor of the agenda of the Cat Food Commission.
...
written by brooks, July 11, 2010 11:55
Shell,

You are still missing the fundamental point. The threat and cost our economy faces are the projected long-term levels of deficits and debt-to-GDP under current policies. That means OVERALL deficits. Social Security spending is indeed part of those deficits. The fact that it has a dedicated tax associated with it is irrelevant. It is completely nonsensical that some people assert or imply that, to the extent that Social Security is "solvent", it does not contribute to these deficits. A dollar of any category of tax revenue reduces these deficits, and a dollar of any type of spending increases these deficits, period (net of dynamic effects, to be precise).

Some illustrations:

http://economistmom.com/2010/04/finding-the-relatively-easy-in-a-world-of-hard-choices/

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2010&base_name=more_failed_airthmetic_at_the#comment-6314617
income vs. payroll taxes
written by scott, July 11, 2010 12:20
Since the rich don't pay payroll taxes (see what I did there, they love to remind us how the poor and middle class pay few income taxes while ignoring the disproportionate share they contribute to payroll taxes) they should have no say over entitlements. Entitlement spending, as they love to do when it suits their interests is different from the discretionary budget, which funds our wars, our monopoly creating farm policies. When to the elites turn their focus toward the discretionary budget.

The military budget is more than half of the discretionary budget. The military spending is not just $700B but closer to a full Trillion and likely exceeds that figure. (I support Ron Paul's call to audit the fed, but let's all call for an audit of the Pentagon, for once, for it's never been done.)

Cut discretionary spending, sure go ahead. But, it's a bit tendentious to hear the rich elites bitch about the outsized influence of the poor and powerless.
...
written by brooks, July 11, 2010 12:41
Scott,

RE: Since the rich don't pay payroll taxes (see what I did there, they love to remind us how the poor and middle class pay few income taxes while ignoring the disproportionate share they contribute to payroll taxes)

It's true of course that the rich pay a lower port of their income to payroll taxes, but I doubt the top quintile or decile or whatever pay less per person in payroll taxes than the same number of working people at the bottom. Other than the relatively tiny portion of the top 10% or 20% who earn 100% of their income from investments, people at the high income end are all paying the maximum one can pay in payroll taxes. That obviously doesn't apply at the other end.

...
written by liberal, July 11, 2010 4:21
brooks wrote, The fact that it has a dedicated tax associated with it is irrelevant.

Uh huh.

If it were irrelevant, then there'd be nothing wrong with eliminating SS yet maintaining the payroll tax?
...
written by liberal, July 11, 2010 4:26
AndrewDover wrote, There will be no default unless one of those bonds is not paid at maturity, or stops paying the interest. It won't happen.

Of course a "true" default is almost impossible. But a "soft" default isn't impossible, and is what's really at issue. For example, slow down or eliminate the schedule at which the trust fund is to be drawn down. I.e., when the bonds come due, just buy more bonds.
...
written by liberal, July 11, 2010 4:28
brooks wrote, It's true of course that the rich pay a lower port of their income to payroll taxes, but I doubt the top quintile or decile or whatever pay less per person in payroll taxes than the same number of working people at the bottom.

The truly rich probably pay almost nothing in income taxes, since most of their income is capital income not wage income.

Furthermore, the top decile isn't rich, or anywhere close to it.
...
written by liberal, July 11, 2010 4:40
The truly rich probably pay almost nothing in income taxes, since most of their income is capital income not wage income.

meant "payroll taxes" not "income taxes"
...
written by diesel, July 11, 2010 7:34
Once again, this discussion has arrived at this familiar impasse. It can't be furthered along the same lines, because the real issue lies deeper.

Brooks' underlying assumption is that our economic society rewards workers with impartial fairness. From that perspective, it makes no sense to compare percentages or proportions of taxes on individuals. The wealthy earn their higher income because they deserve it. There's no unassailable reason why they should pay more taxes, which are in reality a disincentive to effort. It's not their fault that some crummy lower class bum wasted his opportunity to excel in school and reap the bountiful harvest our society awards justly. They ask "Am I my brother's keeper?"

What this overlooks, is that it's not a question of an individual not making the grade. For every he or she that does, another will not. As a class, many will not and cannot be wealthy. The viability of the entire system depends on there being a permanent underclass of cheap, disposable labor. The people on whose behalf you speak, Brooks, could not exist were it not for the very people they ignore and despise. To claim otherwise is caused by one or more of the following: (1)ignorance of the facts, or (2)callous indifference due to an inability to feel empathy for a fellow human being's suffering, or (3)an incapacity for higher intellectual reasoning, or (4) if capable of reasoning, then intellectual dishonesty.
...
written by brooks, July 11, 2010 8:00
diesel,

You write: Brooks' underlying assumption is that our economic society rewards workers with impartial fairness.

Huh?? Please quote where I say or imply any such thing, or for that matter express any policy preference. I realize that in ideologically hyperpartisan echo chambers such as this one (on right and left) people generally don't make an analytical point unless it's part of their advocacy of policies they favor, but believe it or not it's possible for someone to do the equivalent of correcting someone's math (correcting a prevalent analytical error) without it being part of advocacy. If you think the Snickers bar you're about to eat has only 10 calories and I point out to you that actually it has 250 calories, that doesn't mean I'm telling you not to eat it, much less calling you fat.

Although I sometimes argue for particular policies, I spend most of my blogging time trying to get people on both/all "sides" to at least approach policy choices rationally, logically, and factually. That's enough of a challenge.
...
written by brooks, July 11, 2010 8:07
liberal,

As I said, I was referring to whomever one is calling rich other than those who get 100% of their income from investments. So now you are apparently narrowing the definition of "rich" to be whatever works for your point. ok, (1) what constitutes "rich" per your definition in terms of income and/or net worth (or assets), (2) what percent of the population are these "rich", and (3) what percent of the population are we left with if we are referring only to those with so little labor income that they pay less in payroll taxes than someone making, say, $40,000/year or whatever figure you wish to choose?
More Phony Social Security Arguments - We Live Much Longer Today
written by FoonTheElder, July 12, 2010 12:58
"Related to issues about retirement age are questions about life expectancy. Many people are under the mistaken impression that Americans receive retirement benefits for considerably longer than they did when the program was created. The misconception results from looking at life expectancies from birth, which have changed dramatically because of the medical success achieved in conquering childhood diseases. But those numbers reflect changes in the numbers of those who survive to retirement, not what happens thereafter. The statistics regarding children distort the overall average ....

For Social Security purposes, the correct question is not how many live to age 65, but rather how long those reaching age 65 live thereafter. Here the numbers are not as dramatic. In 1940, men who survived to age 65 had a remaining life expectancy of 12.7 years. Today, a 65 year old man can expect to live not quite three years longer than he might have in 1940, or 15.3 years beyond reaching age 65. For women, the comparable numbers are 14.7 years beyond age 65 in 1940; 19.6 years in 1990."


http://www.dailykos.com/storyonly/2010/7/10/882664/-Zombie-Social-Security-lies:-Retirement-age-must-be-raised-because-people-are-living-longer
The Rich ARE Undertaxed
written by FoonTheElder, July 12, 2010 1:02
When you look at ALL taxes (not just federal income taxes) as a percentage of ALL income, the top 1% pay less than the next 19% and not much more than the next 60%.

For example, the average top 1r; makes $1.45 million and pays at an average total tax rate of 30.9%. Someone making $66,000 pays average total taxes at 30.0%.

We are much closer to a flat tax country than the propagandists would have you believe.
www.ctj.org/pdf/taxday2009.pdf
...
written by brooks, July 12, 2010 8:44
Foon,

Does it totally escape you that someone paying taxes equal to 30% of $1.45 million is paying a hell of a lot more in taxes than is someone paying 30% of $66,000?
The Raleigh newspaper printed the same disinformation
written by wakeup, July 13, 2010 11:01
This same article was printed as a headline by the formerly liberal Raleigh newspaper, The News and Observer.
uggs outlet
written by uggs outletwef, December 10, 2010 2:44
I appreciate the time you positioned on this purpose or on this post. although u have fascinating ideas.

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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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