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Home Publications Blogs Beat the Press The Washington Post Always Has a Good Word for Those Who Take Money from High Living Retirees

The Washington Post Always Has a Good Word for Those Who Take Money from High Living Retirees

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Monday, 10 September 2012 07:12

Today Fred Hiatt celebrates Rhode Island's Treasurer Gina Raimondo, who cut public employee pensions while partially replacing them with 401(k) accounts that should mean millions of dollars in additional revenue for the financial industry. This is the sort of upward redistribution that the Post loves.

In the course of praising Raimondo, the Post throws in a few lines about the need to cut Social Security, trying to scare readers with talk of the program's $7 trillion deficit over its 75-year planning horizon. Are you scared, are you really scared? 

Serious newspapers would put this measure in a context that readers could understand. They presumably know that none of their readers have any clue what $7 trillion means over the next 75 years means. On the other hand, the Post could have said the projected shortfall was equal to 0.5 percent of GDP, but hey, that probably doesn't sound scary enough.

Comments (18)Add Comment
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written by Sam Bell, September 10, 2012 11:15
Thanks for mentioning Rhode Island. We've been ground zero for European-style austerity here in America, and our economy has been paying the price big time. In 2005, our unemployment rate was at the national average. But since then, we've had four big policy shifts: First, we slashed income taxes for the rich, with the top rate falling from 10% to 6%. To pay for those tax cuts, we laid off huge numbers of government workers. Then we decided to hike Rhode Island's unusually high property taxes even higher, hitting small businesses in Providence especially hard. Finally, we blamed everything on retirees and their pensions and passed an unconstitutional pension slashing bill that reneged on a slew of contracts in a gigantic middle finger to capitalism (which may well get struck down). The effect on our economy was devastating. Our unemployment rate is now the second-highest in the nation.
'ay dean
written by jerry, September 10, 2012 11:19
When I hear about drug patents, I think Dean Baker :) Anyways, it looks like India is fighting tooth-and-nail right now to keep Big Pharma away from their cheap generics. Poor guys, they don't know what they're up against!

http://www.economist.com/node/21562226
of course
written by joe, September 10, 2012 11:28
The real question of social security has nothing at all to do with money. The US govt makes its own money (like it or not) and can always give checks to seniors. The real question is if the working members of society can produce enough goods and services to support all of society. A tax can subtract from aggregate demand, leaving some economic output unpurchased and able to be allocated to seniors. It has nothing to do with affordability.

But your right, talk of 77 Trillion is just a scare tactic.
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written by liberal, September 10, 2012 1:37
Sam Bell wrote,
Then we decided to hike Rhode Island's unusually high property taxes even higher, hitting small businesses in Providence especially hard.


That's questionable. If a small business rents it's premises, then the fraction of the property tax landing on the land rather than the improvements is completely born by the owner of the land, not the renter.
social security
written by mel in oregon, September 10, 2012 3:27
social security isn't given to seniors, they earned it paying into it for 40 or 50 years. the working people aren't supporting seniors, you make it sound like joe that people on social security are a bunch of freeloaders. the malarkey peddled by both parties about the deficit is ridiculous. we could solve the deficit tommorow by seizing the trillions offshored by millionaires & billionaires to escape paying american taxes. but don't worry too much seniors, social security probably won't be hacked very much.
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written by skeptonomist, September 10, 2012 3:39
Polls indicate that most people want to maintain benefit levels for SS, and are willing to pay increased tax rates for this; but they probably don't know exactly what increases will be called for. Since the percentage of retirees in the population will increase until around 2030, such increases - or benefit cuts - are inevitable. These are the numbers that would be most useful. Two or more kinds of rate are involved. First the payroll tax increases that will be required (according to current projections) to make up the shortfall. Second, as the surplus in the Trust fund is paid out to retiring boomers between around 2020 and 2040, either income tax rates will have to be increased or the total debt will increase (the federal government fortunately is not required, like SS, to always have a positive balance). Specifying this number might help make the public aware of why many influential people are saying SS must be cut. Finally, the decreasing percentage of young people since the peak of the baby boom means that some kinds of tax, mostly at the local level, would ideally be reduced. These taxes support mostly schools and higher education, but there are also taxes to support welfare, which is mostly for children. The decrease in taxes to support children is never mentioned, which is a major distortion of the effects of demographic changes. An exact calculation is impossible, but it would be very helpful to have some model numbers to show the general magnitude of the effect.
...
written by skeptonomist, September 10, 2012 3:48
By the way, here's one number which is useful. The surplus in the SS Trust Fund is approaching about $3T and probably will not exceed that since it will begin to be paid out in less than 10 years. What would happen if this debt is just transferred to the overall gross debt, that is if it is not paid for by increased income or other taxes? SS bashers in effect predict doom if this happens, but that is nonsense; it is a significant number, but all sorts of things, such as recessions and wars, may contribute more to total debt.
Just try to come up with an argument against
written by joe, September 10, 2012 3:53
keeping the checks going to seniors, which they will then spend, which ends up as income, which will further add to aggregate demand. I hear we have an unemployment problem and bunch of under-used productive capacity... I haven't heard a single pundit worry about the goods and services and employment aspects of social security. All you hear is about the money.

Seriously Dean, you need to try to shift the debate away from matters of affordability. Are we productive enough to support our seniors or not? If so, and we decide that it's a good societal goal, then we can ALWAYS make the money aspect work out. Now that's a progressive position on social security. It's just a fact that we make and control our own currency. Policy should not be ignorant of that.
...
written by skeptonomist, September 10, 2012 4:08
Dean has addressed the question of productivity at some length, and there is no reason to think that it will not increase enough overall to support retirement benefits at least as good as at present. The problem is that little of the increase in productivity over the last 40 years has gone to the working people who may rely on SS. So working people and those who retire from the working class do not have good prospects of doing better in the future unless the growth of inequality is reversed. "Working" can be precisely defined when it comes to SS; payroll taxes apply to wage and salary income below the limit of about $100k (not capital gains, dividends or interest), and the benefits are paid proportionately to the lifetime amount earned below this limit. Unless the rules are changed, wages and salaries below the limit are the slice of pie which SS has to work with, and it has generally decreased in size over the last 40 years.
...
written by joe, September 10, 2012 4:36
Well the ssa says general revenues can be used to pay benefits. So there's not too much change there. Rules already exist for the fairly flexible use of the monetary system. So govt can always write the check to seniors. You just have to do away with the formula, so they're free to make the check the appropriate amount to enable the seniors to allocate enough of production to allow them to survive with a minimum standard of living. That's the whole point of social security. Focusing on money and pretending that it's the constraint is just incorrect. There's real resource productivity constraints and political constraints.
liberal
written by Ethan, September 10, 2012 8:22
I think you are unfair to Sam Bell. Most commercial leases -- particularly those of multiple year duration -- are triple net. That is, the lessee, not the landlord, pays the real estate tax (along with insurance and maintenance). Even if the lease does not provide for the lessee to pay the RE tax, with increased expense (i.e. higher RE tax) the landlord will raise the rent as soon as the lease contract allows.
...
written by liberal, September 10, 2012 9:27
Ethan wrote,
That is, the lessee, not the landlord, pays the real estate tax (along with insurance and maintenance).


No. Notice I used the word "born," not "remitted." Who actually bears (what fraction of) a tax is independent of who remits the tax.

Even if the lease does not provide for the lessee to pay the RE tax, with increased expense (i.e. higher RE tax) the landlord will raise the rent as soon as the lease contract allows.


Nope. As far as the portion of tax falling on the (unimproved value) of land is concerned, it's been understood since Ricardo (and even hinted at in Smith!) that the actual incidence of the tax falls completely on the landlord. This is because land is in fixed supply.

...
written by Sam Bell, September 10, 2012 9:38
liberal wrote:

Sam Bell wrote,
Then we decided to hike Rhode Island's unusually high property taxes even higher, hitting small businesses in Providence especially hard.

That's questionable. If a small business rents it's premises, then the fraction of the property tax landing on the land rather than the improvements is completely born by the owner of the land, not the renter.

Actually, in Rhode Island, we levy property taxes on business inventory and machines, so small businesses do get directly hit by the high property taxes. It's also the case that high property taxes get largely or at the very least partially passed on to renters. And property taxes in Rhode Island are assessed on assessed value, not the unimproved value of the land.
...
written by liberal, September 10, 2012 10:42
Sam Bell wrote,
And property taxes in Rhode Island are assessed on assessed value, not the unimproved value of the land.


Yes, which is why I referred to the fraction of the value residing in the land. Which is considerable in many cases. Certainly in the case of residential RE, and I would presume also in the case of commercial. "Location, location, location."
Mel, Joe is on your side
written by Calgacus, September 11, 2012 12:05
Mel in Oregon:
social security isn't given to seniors, they earned it paying into it for 40 or 50 years.

The people on SS earned their moral right to collect SS by their work, by building a productive economy. Not by paying a tax which from the first was understood as nothing but a political protection for SS, which had nothing to do with "paying for SS". The tax is just a fee to join the future SS retiree club. For the past 30 years, the fee has been ridiculously, destructively high. Raising the tax, "to pay for SS" (NOT) in current and medium-term future economic conditions will severely damage the real economy & is a very bad idea. A much better idea is to just make the bonds "in" the trust fund pay one zillion percent & say, double everyone's payout.

the working people aren't supporting seniors, you make it sound like joe that people on social security are a bunch of freeloaders. Of course "the working people" are supporting "the seniors." The seniors are retired & not working any more! Just as a generation ago, "the working people" were freeloading children, and supported by their parents, today's "the seniors". Each generation takes care of and is then taken care of by the next. That's the only way it could possibly work, and the way it has worked for many millennia. No problem for Mr & Mrs Caveman & their Cavekids to understand and do, unless there is some real world megacatastrophe.

SS haters - who destroy it by "saving it" - want to make an ever-richer economy behave in an utterly unnecessary & despicable way to elderly ex-workers. They do it by innumerate "accounting" and idiotic "economics" disguised with pseudomathematics (the nonsense taught in our "best" universities & departments). Made to sound commonsensical (or "mathematical") - but which actually is complete gibberish.

Skeptonomist: Gross overtaxation "for" SS, which effectively was "used" as welfare-for-the-rich for 30 years, has been one reason that the pie you speak of has been shrinking, inequality increasing.
...
written by Ron Alley, September 11, 2012 8:28
People often overlook the ingeniousness of the independent funding and benefit system of Social Security. If Social Security had been conceived as a social welfare program paid for by annual appropriations, it would be a political football of the first order. President Roosevelt had the wisdom to make Social Security an independently funded social insurance system independent of the whims of the Tea Party and the Grand Old Party. As a independently funded system, it is not part of the federal budget.

Unfortunately, the desperation of both wings of the Corporate Party to find justification for tax cuts produced the unified federal budget that includes Social Security revenues and expenditures. That decision has opened the door to demagogues who would destroy Social Securty.
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written by liberal, September 12, 2012 9:11
Sam Bell wrote,
Actually, in Rhode Island, we levy property taxes on business inventory and machines, so small businesses do get directly hit by the high property taxes.


I don't favor those taxes, unless it's in the context of a general wealth tax. (Tax focussed on physical, non-land capital is clearly destructive.) But when you refer to "property tax," most readers are going to reasonably assume you're referring to real property (real estate).
Nice way to put it Calgacus!
written by joe, September 12, 2012 3:38
"The tax is just a fee to join the future SS retiree club."- I like that... and I agree that the tax is too high.

Someone has to produce the real goods and services necessary to provide for our standard of living and survival, and if there's not enough real goods and services produced, then it just does not matter one little bit how much money there is or isn't in the SS 'trust fund'...

It'd sure be nice if the real economy was considered for once instead of just the numbers of a spreadsheet, we're considering making harsh cuts to our elderly for christ's sake. We shouldn't stand for it, they're not living lavishly off of SS. And my point is that Dean is not helping the discussion by focusing on money and interest and all that. Money is just numbers on a spreadsheet used to facilitate the production of goods and services. And the govt can give as much money to seniors as it wants, ultimately all net dollars come from govt.

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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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