
New commission, old cats, older tricks. (photo: NCFRR/White House)
Grumpy Alan Simpson, the National Commission on Fiscal Responsibility and Reform, and the President who appointed both, plan to protect the lesser people by cutting their benefits and raising their taxes. After reading some of the commentary, including that of our own Scarecrow, it finally dawns on me why this is so infuriating. Uncle Grumpy doesn’t just think we are lesser people, he thinks we’re so stupid we’ll fall for the Greenspan shell game again.
In 1983, Alan Greenspan, the previous incarnation of the fiscal scold who speaks up only when Democrats are in power, chaired a commission to look into the long-run funding of Social Security. Unlike Simpson, Greenspan foresaw the impact of the retirement of the baby boomers, and the related reduction in the ratio of workers paying Social Security taxes to retirees. The Greenspan Commission recommended a switch from a totally pay- as-you-go system to a partially pre-funded system. Social Security taxes were increased, and the excess funds went into the Trust Fund in the form of special Treasury Bonds, so we would have the money on hand when benefits exceeded revenues.
All that money, $2.5 trillion, was spent.
Now the time has come to pay off those bonds. It is earlier than anticipated, because rich people, their financial experts on Wall Street and their pet economists combined to wreck the economy by preaching deregulation. Millions of people lost their jobs. Only workers pay, so annual Social Security revenues have dropped. There’s now a small excess of benefits over revenues. It’s a minor problem; something similar happened four times between 1959 and 1974 without causing a panic.
The big problem is that Simpson and the other deficit hawks on the commission, and by extension, the President who appointed them, don’t want to repay those bonds issued by the U.S. government. Their plan, created by Peter Orszag, the soon-to-depart Director of the Office of Management and Budget, is to raise the current maximum cap on income that’s taxed for Social Security, and cut benefits for the people who have already pre-funded those benefits. Then we’ll put the excess money in the Trust Fund, and pay it out when we need it.
Do they really think we’re that stupid?
There are alternatives. Dean Baker points out that we don’t ask where the money comes from when we repay other Treasury Bonds owned by the Chinese government or Goldman Sachs or Pete Peterson. That is one solution. If and when the Trust Fund runs out of money, that will be soon enough to fix it. See slide 19 of this presentation to the Commission.
Since the deficit hawks are screaming that we have to do something right now, doggone it or we’re all doomed, I have proposed a tax on the richest Americans, the top one percent who benefited from the tax cuts so beloved by Republicans. The deficits that those tax cuts created hid behind all that money from Social Security in the unified budget. The new taxes would be dedicated to paying off the bonds in the Trust Fund as needed, and the excess can be held in the Trust Fund until we need it.
This committee is a sham. Send the charlatans home in disgrace.



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What are we going to do about it?
Unfortunately, yes they do think this.
As do apparently most of the crooks inside the beltway, to go along with so much of their inherent cluelessness on most all issues.
Or willfully obtuse about issues until they get their talking points down.
They believe that they can get away with it, which is more to the point. As MaryM sez: what’re we gonna do about it?? nyah nyah nyah
It’s not that they think we are stupid, it’s that they believe — with some reason — that Americans can’t think for themselves, that we are so lazy that we depend on the media, from center-right outlets like CNN and MSNBC to just to the right of Attila the Hun, Fox News, to twist, contort, and when all else fails, lie, to the public in order that the corporations’ will be done, and that the public will numbly submit to being robbed yet again by the rich and our political elites.
Hey, they haven’t been wrong yet.
Agreed.
They don’t think we’re that stupid, they think we’re that helpless to stop them.
It’s not unfortunate that these greater people think we lesser people are stupid. What’s unfortunate is this: The lesser sort will find it difficult to muster the political resources needed to impose their will on these John Galts/Gottis.
Now, where’s the “people’s party” when it is needed….
Yes and unfortunately, many are.
massacio — one question is how you see your proposed tax kicking in.
Suppose that the best estimates predict the Trust Fund is used up in the year 2037, so that starting in 2038, SS could only hapy aboudt 75% of scheduled benefits.
A. Would you just let the Trust Fund dwindle down until close to 2037-38, and then implement the tax on wealthy to keep the benefit payments at 100%?
B. Or would you implement that tax well in advance and start rebuilding the Trust Fund, instead of letting it gradually get used up, so that there’s plenty in the Fund by 2037-38 to ensure 100% payments for additional decades?
Doing this earlier, rather than later, will build up the Fund.
If you advocate strategy B, build up the Fund, a la Greenspan, what would you then do with that surplus? Because it would seem logical to loan that surplus out to the Government at some nominal interest rate (rather than let is just sit there) — that is, have the Govt issue, and the Trust Fund hold, special government bonds that pay interest into the Fund and that can be cashed out when/as needed to fund benefits.
I think that’s more or less what they do now, so the question is whether you want to extend that policy with additional revenues/taxes now, or end that policy and go back closer to a pay as go approach and adjust it more often to keep close to target?
I can see arguments either way, but of course one obvious feature of the current/Greenspan “pre-pay” approach is that it taxes workers now to provide funding, via the bonds, for government spending, without having the govt issue debt to others — I’m not sure it matters — why is that a problem?– but that seems to be a concern of yours, because it creates some confusion about the total US debt — but does this matter?
We’re not wholly helpless. But they don’t fear us.
Simpson isn’t just grumpy. He’s rude, a bully and feels that he is one of the entitled. Obama was crazy to appoint someone who had such poor “people” skills.
Its not about being stupid. It’s about being powerless. Yes, we are that powerless.
AND THE KILLIN’ GOEZ ON AND ON AND…
Citizen masaccio and the Firepup Freedom Fighters:
“Do they really think we’re that stupid?”
Short answer: YES!
The Greenspan fascist tactic here is to provide corporate Democrats with a straw dragon to slay while putting a “bi-partisan” compromise together a la Reagan and Tip O’Neill to save the entire baby boom generation from a secure retirement. And it ain’t us out here on the street who the fascists think are stupid, it’s the elected Democrats who think we are and that we will vote for ‘em if they give away the last priciple of social democracy that defines the word Democrat.
We all know that cuttin Social Security is the thrid rail in American politics and that even a full blown fascist with majorities in both houses of Congress couldn’t get it done so what “Democrats” are stupid enough to commit suicide on themselves and their entire party by supporting any cuts?
I been sayin for months now that the Peterson Commission was a diversion and a useful excercise for ObamaRahma to distract folks from pushin too hard for a real jobs program,healthcare, bankin reform and an end to the wars. But events, all those issues and the stupidity and hubris of the corporatists have all finally caught up with the “Dark Man” and he’s bein’ forced ta deal with ‘em all in the next 5 months or end up makin’ an emergency vacation to Elba in 2012.
KEEP THE FAITH AND PASS THE AMMUNITION, AND FOR GOD’S SAKE STOP SHOOTIN THE FRIENDLIES!
I’m afraid you’re right.
Just luv the vast collection of rhetorical Qs FDL is accumulating.
“Do they really think we’re that stupid?”
It matters not whether we are stupid or just powerless, the result is the same.
Anyone who paid attention to the health insurance debacle saw clearly that we did not get provisions with broad popular support and had industry friendly provisions adopted in spite of broad objections. We the people are the losers and are unwilling or unable to do a damn thing about it.
Citizen workingclass:
No Citizen, we are broke, out gunned, tired, and hungry but we are also mad as hell, smart and we make up millions to their thousands…so tell me who is powerless again?
They are going to get away with it. Just wait and see.
Yep. Completely.
This would be true if Obama cared what “people” thought.
We have to collect something since we aren’t going to collect SS.
ROFLMAO. So far, you win for tonight!
Where is Monica Lewinsky when we need her?
Rule by thieves.
“Kleptocracy is a term applied to a government that takes advantage of governmental corruption to extend the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service.
The term means ‘rule by thieves’.
[...]”
http://en.wikipedia.org/wiki/Kleptocracy
Citizen eCAHNomics:
The fascists have their Monica Lewinsky and his name is General McCrystal…he can even make General Patraeus sick to his stomach and make ObamaRahma look like the second coming of Harry Truman.
Nah, I doubt it. I mean to think that a large part of our population is so stupid as to support policies and people that go directly against their own self interests is just……. oh what’s the word I’m looking for???
Well–stupid or not, what are we going to do about it?
There is a condition known as “learned helplessness.” It is most often associated with a state of depression. However, it widely exists among those not depressed. We have all been subjected to this conditioning. Unfortunately, most people fall prey to this psychological warfare. It has been going on for a century. A major foothold was gained just before the end of WW II.
http://www.emotionalcompetency.com/helpless.htm
The roots of this can be found in the Fabian Socialist’s philosophy of incrementalism. It is comparable to the parable of the boiling frog. The Soviet Union came into existence through a violent revolution. In contrast, Hitler rose to power through incrementalism.
How do you break free from this conditioning? Stop watching television. Stop reading mainstream newspapers and magazines. If you choose to continue doing so, question everything you are being told. Conduct research on the Internet, at your public library and at numerous repositories of historic documents.
I fell prey to this conditioning. I can’t pinpoint the exact moment I broke free. I think it was an accumulation of facts that allowed me to “connect the dots.” Once you awaken to what is really going on, there is no going back.
Stop paying all debt. Protect your family and max your cards first.
Not much we can do about it. IIRC they made it so the up or down vote on the commission’s recomendations would be during the lame duck session after election day but before the new Congress begins.
So there could, in theory, be a slew of Critters voting on this whose political careers are over anyway because they just got voted out of office. What do they care if they piss us off more?
I was thinking as a read your article that it would be good to have some more info on exactly what the mechanism was that allowed the government to get it’s hands on our funds. Turns out wikipedia has a very good page on how it all works.
http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
A snippet.
“The trust funds run surpluses in that the amount paid in by current workers is more than the amount paid out to current beneficiaries. These surpluses are invested in special U.S. government securities, which are deposited into the trust funds. If the trust funds begin running deficits, meaning more in benefits are paid out than contributions paid in, the Social Security Administration is empowered to redeem the securities and use those funds to cover the deficit.”
Jon Walker is upstairs!
SC, NC, MS, UT Primary Runoff Liveblog – Part One
The evil criminal white man corporatists, aided by Obummer, want everyone to eat of garbage pails as they use our hard earned money to play casino games on Wall Street. Obummer is a Trojan Horse of epic dimensions. He has an inferiority complex. Truly. I knew who my enemy was the moment the corporatists laid me off. Capitalism is a despicable system which must be smashed just like feudalism, another form of white man hegemony.
Mother earth will have the final say. None of these amoral cretins will win in the end. Peace and anarchy forever!!!!
It’s hard for me to understand how those two co-exist.
Read Tolstoy.
And then we’d see debtor prisons re-open pretty quickly, wouldn’t we?
Maybe so, hard to predict. But what isn’t?
Two more suggestion the commission will ignore:
1. Raise incomes
2. Increase immigration increasing worker to retiree ratio and fertility rate
No, because they don’t care. They’re going to do what they want to do and if the can put some lipstick on it, fine. If not, also fine.
Eli is upstairs!
BP Looks On The Bright Side
I am one who has written for years on the scam that was the Social Security surpluses. It really is heartening to see what was once a fringe concept difficult for many to grasp to have become now a commonplace. And of course, they think we are that stupid.
workingclass we are not powerless
the american people are to nice and the elites pray on our weakness to believe their MEDIA talking heads and Politicians.
remember Obama lied his way to the white house.
Obama never told the people in the USA,he was going to cut social security.
What the american people must learn how to do is play the dirty game of politics. Remember there are no rules.
What would scare the elites; is if a tea party candidate got elected and turn into a hard core liberal once he got to washington dc.
See Obama campaign as a progressives, once he got elected he turn into BUSH. (the media has not said anything about the Obama transformation)
Bet the Tea Party picks up on this and starts demanding it be implemented to save their SS…
The subject at hand is the catfood commission and the Oligarchy it represents. “We” are at “their” mercy (they have no mercy) until we unite against them. We are not yet sufficiently angry and hungry but when critical mass is attained you will be proven right. When we rise up united we will trample them in the dirt.
I used to BEG people to stop watching television. Television makes you stupid. But I gave up. Nobody would even discuss it.
How bout that. Wiki has it exactly right. The plan is for the government to default on the debt it owes the S.S. surplus. This is the same as if I borrowed twenty from you until payday and when payday came I said fuck you. I will never pay what I owe you and there is nothing you can do about it because I control the army and the police.
It is not a “best estimates predict the Trust Fund is used up in the year 2037″ – it is the estimate from the middle (in terms of how conservative the assumptions used are) projection – the least conservative projection is based on history still much too conservative – and even this conservative projection shows no problem – unlike the middle projection that comes up with the 2037 date.
I do like the idea of just letting the Trust Fund dwindle down until close to 2037-38, and then implement the tax on wealthy to keep the benefit payments at 100% – in effect funding via the general FIT just as the national pension system is funded in other countries – but in the US where “what is in it for me” is the national thought, a dedicated tax makes for an accepted “entitlement” – and a general tax funding would kill that acceptance.
As date to implement a new tax, the need is for funds to retire the bonds that must be redeemed by the SS system so as to meet its cash flow needs – and that begins in 2016. The alternative is also a fine solution – just sell more bonds to China and use the money to retire bonds held by the SS Trust Fund. If the latter is the choice it does not change the need to get more funds into the system – if one is going by the “best estimate middle projection” – and for that purpose the funds increase via a wage cap removal should begin as soon as possible. Indeed there is a generational fairness concept that says we should avoid the larger tax required if the tax increase is delayed until 2037.
What to do with that surplus? – loan that surplus out to the Government at some nominal interest rate keeps the nonsense of worthless IOU around so investing in non-government assets – as in done in other countries – makes more sense – but would challenged as a “back door to socialism”.
Again the true pay as go approach and adjust it more often to keep close to target runs aground on the generational equity problem.
Confusion about the total US debt does not exist – but the media refuses to laugh at gov bonds are worthless IOU’s if held by SS nonsense spit out by the GOP — so investment in non-gov assets should be considered for the SS Trust fund as a whole (not for any individual accounts if that idea pops up again as an additional savings addon to the current SS system – those should invest in a single index fund of all stocks ala Wilshire 5000 Total Market Index).
So, what does this have to do with the trust fund? IIRC, the money in the trust fund is invested in Treasury bonds. Is Orszag seriously proposing that the Treasury default on those bonds?
Orszag seriously proposing that the Treasury default on those bonds?”
Orszag – and the commission – suggest the value of the bonds be ignore except in passing – and that the crisis date is when SS starts to redeem the bonds – causing a need for for higher taxes or alternatively for larger bond sales to China so as to get money for the SS redemption of bonds. Logic states the bonds were issued to get funds for the tax cut for the rich – so the rich should have higher taxes during the redemption so that they are paying off the money loaned them during the Bush years – but Commission logic is that rich should not pay higher taxes, so better to treat the bonds as if they are worthless and must never be redeemed – so they are left with cutting benefits and raising payroll taxes.
A wage cap removal (despite the higher benefit checks for the rich) solves everything because of the progressive nature of the SS benefit calculation formula – the extra money of the rich buys them only a small increase in benefit leaving cash amounting to 2% of payroll wages to be used to buy more SS Trust Fund bonds and/or just have more cash flow that will avoid SS Bond redemption via asking the FIT system to come up with cash flow to redeem bonds in the SS Trust, or asking China to buy bonds to replace the bonds the SS Trust is redeeming.
Yes. Their intent is to whittle SS down to the level of what is coming in (or increase that, but probably not) so that they never have to pay back the bonds. They’ll never say default, but that’s what they’re doing. The scam was ostensibly sold on the idea that it was to prefund the boomers, now that that’s here, they don’t want to pay.
“When looking at the aftermath of the Greenspan Commission’s recommendations, you have to put their recommendations into the proper context. In 1981, when the commission was conceived, Reagan had just become president and wanted to lower the Income tax rate for America’s highest wage earners. There were also reports of a funding shortage in the social security fund which needed to be addressed. He knew that in order to accomplish his desired tax cuts for the rich, since he was supposed to be a fiscal conservative, he would have to make up for the tax cut somehow. He also had huge spending plans that he needed to fund and spending on other programs couldn’t really be cut to the necessary extent. To prevent an increase in the public debt that would draw the ire of many of his supporters, Reagan followed the recommendation for the creation of a trust fund along with Congress. And for the rest of the 80’s and 90’s they cleaned up. Deficits grew which increased the overall debt, but more and more of the debt was being covered by the surpluses in FICA taxes (a similar scam is underway with the Medicare payroll tax as well) so the publicly-held debt didn’t grow as quickly.”
http://www.thedoomletter.com/2009/10/25/the-greenspan-commission-trap/
Btw, treasury bonds are ‘backed by the full faith and credit of the United States Government’.
Good to know, huh?
I favor A with a small fix. I don’t think there is a real crisis. The excess of benefits over revenues should be solved by paying down the Trust Fund from time to time while the economy is in the dumpster. I hope things will be better than predicted. As you know, the three estimates by the Social Security Administration are worst case, slightly better than worse case, and slightly better than than that, so there is reason to be hopeful.
I favor funding the paydown of the bonds in the Trust Fund by a special tax on the rich. Brad DeLong says that handing out tax cuts while the country is running a deficit is nothing but a loan. The loan went to the rich, and was disguised by higher FICA taxes on the middle class, up to the cap. It therefore makes sense to call that loan in from the rich. I suggest the top 1%, the principle beneficiaries of the tax cuts.
Calculation of the amount of the tax year by year is tricky. I would generally set it at a logical rate to reduce the surplus through some stated period, with the excess in the early years going into the Trust Fund. The Social Security statute requires that money to be invested in special non-negotiable Treasury Bonds. That could be changed, but I don’t have an opinion on that.
Excess funds from the special tax might extend the life of the Trust Fund for some time. As we get closer, we can figure out a fair way to manage revenues and benefits.
Above all, I don’t want decisions made by this panel and inflicted on the country by a lame-duck Congress. They have shown their true colors. They do not want to face up to the real problems of overspending and undertaxing now or ever. Fixing health care, cutting the never-enough demands of the military, dealing with subsidies to every special interest group with a lobbyist, these aren’t being discussed, at least publicly.
The Commission is a national disgrace. They are cowards and the politicians they cover for are worse cowards. Send the Commission home.
Brad DeLong is correct – its a loan that the rich should repay via higher taxes.
Simpson has “higher people” skills, he just not good dealing with “little” and “lesser” people.
As noted above it does not matter smart or stupid, they just know people will shut the f’up. They know they got it since they already stole a few 10′s of trillions in the last 4 years, and they must have a plan B (that Obama is part of, or that was shared with Obama). They also have their stupid media/political avatars that are somewhat under their control – and are sending the message that ooooohhh someone might bring guns to a meeting because they just can’t take the “socialism” anymore.
The only way to get our country back is not for the banks/etc – its to take it from “social security kings/queens” driving tricked-out golf carts to Canada to steal viagra.
They do think we’re that stupid, but we aren’t. And don’t forget that this is a multi-generational concern. It’s not just the already retired who are in danger, it’s all of us. Young people in particular care about keeping Social Security, as it will take care of their parents and then take care of them in retirement, which allows them to pursue their dreams right now. And they’re not staying silent about this, either–see this post today from a millennial, it’s very moving: http://www.newdeal20.org/2010/06/23/on-social-securitys-75th-anniversary-millennials-demand-75-more-13107/
Between what you have put in and your employer, if you live in a high cost of living area you may already have put in over $200,000 by the time you retire. With interest at 3% averaged on $100,000 compounded over 40 years that brings the total to above $320,000. And the Government doesn’t want you to collect ‘your money’.