Welcome Steven, and thanks for writing such a clear paper. Too many policy papers are so dense you can’t figure them out.

This is an innovative plan. Can you tell us about the thought process that led to it?

Welcome to Firedoglake – glad you could join us today!

What prompted me to write this paper, with a great deal of help from my former colleagues at the new America foundation, was the realization that the American retirement system is completely broken. Here’s the dilemma that the U.S. faces. Since WWII, retirement has been conceived as a “three-legged stool,” with the three legs being Social Security, pensions, and personal savings centered around homeownership. But today most private sector employers have quit providing pensions, and state and local government’s public pensions are drastically underfunded.

In addition, a collapsed housing and stock market, combined with increased inequality even before the Great Recession, have drastically reduced Americans’ personal savings. In short, the “retirement stool” no longer is stable and secure, and suddenly Social Security, which always has been viewed as a supplement to private savings, is the only leg left for hundreds of millions of Americans.

Studies show that people in the bottom two income quartiles depend on Social Security for 84 percent of their retirement income, and even the second richest quartile depends on Social Security for 55 percent of its retirement income. Only the richest 25% of Americans don’t rely heavily on Social Security.

But the real problem with Social Security is not, as its critics say, that it is underfunded. As Guardian columnist Dean Baker points out, contrary to gloomy predictions the program is on solid financial footing, with the Congressional Budget Office projecting that Social Security can pay all scheduled benefits out of its own tax revenue stream through at least 2037.

The bigger problem is that Social Security’s payout is so meager, which is problematic since it has been thrust into this new role as a de facto national retirement plan. Currently it replaces only about 33 to 40 percent of a worker’s average wage from the year prior to retirement (compared to Germany where it replaces 70 percent). That is simply not enough money to live on when it is your primary — perhaps your only — source of retirement income.

Welcome to FDL this afternoon Steven and good afternoon to you masaccio.

I’m one of those who is just a few years away from SS eligibility (58) and have been monitoring things for a number of years now (tho would like to find a decent job to help me make it).

As it is, I’ve determined that I most likely will have to keep on doing at least some work in order to do much more than survive based on current SS pay outs.

It’s a great idea, but it’s never going to fly in this country at this time. It just isn’t. I certainly wish it could–due to the dismal job market for people over 60, I’m going to have to start taking benefits 3 years early, so mine will be less than meager.

So why is letting the government take on the task a good idea?

Those are such good ideas, and we really need help right now.

Many Americans like you are facing similar difficulties and challenges. The debate over Social Security unfortunate has become incredibly narrow between those who want to cut it and those who are defending the status quo. But neither are sufficient anymore. Social Security has become, de facto, a national retirement system in which more more Americans are going to be relying on it to a greater degree than ever before. And yet the payout is simply too low for that purpose. The current “debate” is proceeding along a pathway that is not even close to representing reality.

Thank you, Steven, for being with us this afternoon.

Your ideas seems refreshingly reasonable and humane, and surely to be attacked as “un-American, communistic and dangerous to free enterprise …”

And precisely the kind of bold and daring thinking that SHOULD be coming from the White House, which no doubt has been in touch with you?/s

(The “/s” means “snark” as in, “nevah going to happen”, in this case.)

DW

It’s not a question of whether or not to let the government take on the task, the government is already performing this task. And, I would point out, Social Security has turned out to be much more stable than any of the other “legs” of our three-legged retirement stool, i.e. company pensions and private savings/homeownership. Who else is going to step into the void that has been created by allowing the great recession, but the ongoing task of inequality that has been plaguing America for decades? Government has to play a role here, it has to step up.
I should point out, that in my study for the New America Foundation, I identified revenue sources that would mean we would not have to increase taxes at all to do this. This is a matter of having the correct PRIORITIES, not more tax revenue

Thank you, thank you, THANK YOU!

I’ve been trying to think of ways to get beyond playing defense on this topic and moving the dialog to offense, and the points you provide so clearly make it possible.

It certainly is the case, as you note, that people have lost huge chunks of their retirements in the last couple of years, either in the Great Crash or because they needed the money to live on now. That puts a lot of pressure on the younger generation, one more thing to worry about as they get older.

It’s like just after their kids leave, they have to worry about their parents.

Excellent article and Thank You for bring up the real facts. Folks out there are getting really hurt and I simply do not understand where the Democrtic party has gone except for Barry Sanders. We, as a country, need to take care of each other.

As a technical note, there is a “Reply” button in the lower right corner of each comment. Pressing the “Reply” will pre-fill the comment number and commenter name to whom you are replying and makes it easier for all to follow the “conversation.”

Note: Some browsers don’t work correctly with the Reply if it is pressed before the page completes loading after a page refresh.

Here are the revenue sources I have identified to pay for this. I’m sure you could think of others, like halving the defense budget. But I tried to play with the numbers in a way that would have some political feasibility. These led to changes in our tax priorities, and the short equation shows that TAX FAIRNESS = SOCIAL SECURITY EXPANSION.

In brief, doubling Social Security’s individual payout would cost about $650 billion annually for the 51 million Americans who receive benefits. Here are some ways to pay for it.

First, lift Social Security’s payroll cap that favors the wealthy. Currently Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle class, and even moderately upper middle class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthy pay a much lower percentage. Millionaire bankers effectively pay a paltry 1.2 percent.

Making all income levels pay the same percentage — that’s how Medicare works – is popular with Americans and would raise about $377 billion.

Second, with all Americans receiving Social Security Plus, employer-based pensions would be redundant so businesses no longer would need the substantial federal deductions they currently receive for providing employees’ retirement plans. These deductions total a whopping $126 billion annually.

Those two alone would provide three-fourths of the revenue needed to double Social Security’s payout. Other possible revenue streams exist, such as reducing or eliminating other unfair deductions in the tax code which currently allow the top 20 percent of income earners to reap generous deductions that most low and moderate income Americans cannot enjoy. These include deductions for private retirement savings, homeownership, health care and education. For example, individuals who have enough income to divert for savings or investment are allowed considerable tax deductions for their 401(k)s, IRAs and pensions. Similarly the homeownership deduction for mortgage interest only benefits people with sufficient income to buy a home. But the poor and working class rarely can take advantage of these since they don’t make enough to itemize deductions.

These personal deductions were enacted by Congress in part as a means to incentivize savings. While a certain number of moderate income Americans benefit from these, if we enacted Social Security Plus they would no longer need to rely on these deductions as vehicles for retirement savings. Instead of buying a home as part of their retirement plan — which as we have seen is a risky investment — they could put their money into Social Security Plus. In 2010 the mortgage interest deduction alone will amount to about $108 billion.

We also could implement this in stages, targeting first those who are most in need. We also could allow active seniors who have not yet reached full retirement age to take a half-pension and work at half-time without losing their right to a full pension upon their retirement.

Steven, I imagine labor unions would turn violently against a proposal like this if it meant taking away their pensions. How do you sell this to those individuals who still have generous pensions?

Thanks for being here today.

Kelly, I couldn’t agree more. Right now the “debate” over Social Security has become a depressing landscape of those who say we need to cut it in order to rein in our deficits and others who are simply defending the status quo. But neither are sufficient. They just aren’t. The debate is not grounded in reality of what is happening to our country. So when it comes to Social Security, a proposal like mine to double it could help to move the debate to a different playing field. In this case, the best defense is a good offense!

David, I don’t see why labor unions would be opposed to this. Currently workers receive lower salaries because those businesses that still provide a pension — and it’s not many, only about 10% of private businesses are still providing a pension — they take that directly out of wages and salaries. In other words, they have a certain amount of money they can pay per employee, they can pay in wages, or they can pay it in pensions, or they can pay it in health care. So if suddenly pensions were off the table because they enacted some version of my proposal to double Social Security payout — which I am calling Social Security Plus — that just means they can negotiate over other things like wages. So I really don’t see why labor unions would have a problem with this at all.

It isn’t just the last few years. For the past 3 decades, we’ve had one boom-bust after another, and it is consistently those of us long-term-saving-for-retirement investors who have been repeatedly fleeced: S&L crisis, junk bonds, high-tech/dot.com, housing, …

Without real reforms for Wall Street we will continue to get robbed by the insiders (just as happened during the roaring ’20s).

Given that financial environment, how does the government invest large sums of money in a way that will be stable? I’m not doubting that it can be done, I just don’t know how it is done.

Is your study based on retirement at age 65? What are your thoughts about early as opposed to later retirement?

“…active seniors who have not yet reached full retirement age to take a half-pension and work half-time without losing their right to a full pension upon their retirement.”

People over 50 are some of the hardest hit by the current high unemployment. Lowering the age of eligibility immediately makes a lot sense along with early admission to medicare.

Thank-you Mr. Hill for your excellent work. Do you have any specific suggestions for how we can help spread the word?

Yes, I agree, the Democrats are not showing much leadership on this issue. They are completely on the defensive, instead of going on the offensive with a proposal like this. If any of you know Democratic members of Congress, such as Bernie Sanders, e-mail them the paper I have written about this for the New America Foundation, called “Secure Retirement for All Americans,” here is the link:

http://growth.newamerica.net/sites/newamerica.net/files/policydocs/Hill%20-%20Social%20Security%20-%2013-Aug-10%20-%20spaced%20graphs.pdf

There’s a great moment in Fawlty Towers where John Cleese says “and our next contestent: Sybil Fawlty. Her category: the bloody obvious.”

Thanks for saying what everyone should be saying: we should be raising Social Security benefits, not cutting them.

The question is — why are they saying just the opposite? I cannot for the life of me wrap my head around it.

In a nutshell, you have placed the essence of the Social Security “dilemma” the people of this nation, those who are not making $108,000 or more, face. Those whom the politicians mock as the “have-nots”.

And your last sentence IS the cure.

But that will take guts and stamina, both qualities singularly lacking in our form of “representative” governance – democracy it is not.

DW

Yes, I assume retirement at 65 in my study.

I’d like to point out that this idea is not completely new here. In the 1930s, Francis Townsend proposed a pension of $200 for everyone over 60, provided that they had to spend it quickly. People loved this idea, and thousands joined groups to discuss and push it.

It was too radical for FDR, who supported the Social Security Act in place of it.

Politically as some have already pointed out this won’t fly. Our political scene, Congress and the White House are dominated by corporatists. They will just stick their fingers in their ears, go “lalala” I can’t hear you, and then complain that this would blow the budget and deficits up. Not saying that their math is right, just saying this is what they would do.

Jane, the power of ideology is so strong. And Americans have been hammered for a very long time about how “GOVT IS THE PROBLEM.” Remember, that’s what Ronald Reagan said in his first inaugural address. And unfortunately Democrats have done a lousy job of defending government. Bill Clinton, in order to win reelection announced that “the era of big government is over.” At that point there was no major political party who could make the case for “smart government”, not the government. This is obviously another long discussion, but it really does come down to American’s views on govt. but the fact is, Social Security is a popular program, and it is STABLE. It just celebrated its 75th year, and there is a history of slowly expanding Social Security. Now it’s time to build upon that history to create a true national retirement system for all Americans. It couldn’t be a better time, because at this point Social Sec has become a de facto retirement system

Here is a wikipedia link on the Townsend Plan. There were a few congressfolk who were elected on a platform that included the Townsend Plan, and they spoke fiercely in its favor during the debates on the Social Security Act.

Hugh, if you mean this won’t fly today, or tomorrow, I agree with you. But every journey begins with the first step, and there’s no question that we need to make this journey. What choice does America have at this point? The three-legged stool of retirement — company pensions, personal savings centered around homeownership and Social Security — is essentially a one legged stool at this point. And those other two legs are not coming back anytime soon, perhaps not ever. Certainly come a pensions are not coming back. Personal savings? Homeownership? It doesn’t look likely for a very long time. So Social Security is it folks. This is the “new normal.” But of course it’s going to take our system — and our political leaders — some time to understand that and grapple with it.

I think the time to move on this and on revisiting healthcare is 2012 post the next financial collapse in 2011. The political landscape will be very different. The elites will be more frightened and a lot more discredited. There may come a time in order to save their skins they may entertain ideas like these.

“…why are they saying just the opposite?”

Its not about the money. Never was. “We can’t afford it” is simply easier to sell to most people than “we never should have done it in the first place.” The small government people cannot abide a government program that actually works as intended

Yes, all good points. The history of Social Security has been one of expansion, not retraction. IN fact, the New America Foundation put out another paper that shows the history of some of these expansions. Here is a link

http://growth.newamerica.net/sites/newamerica.net/files/policydocs/FreedomFromFear.pdf

How similar is the overall plan to the systems in place in other countries, like Germany and France?

Following up on my previous post, here is a brief summary of the history of Soc Sec expansion:

In 1935, eligibility for social security was so limited that only a minority of the population could hope to benefit from social insurance. Entire categories of Americans were excluded, most notably the majority of blacks and women. In addition, huge occupational categories such as sailors and transportation workers were excluded, so that even the majority of white men were ineligible. Benefits were extremely low by today’s standards (the initial Social Security benefit, for example, was only about $300 a month in 2008 dollars), and were kept that way by an alliance of conservative Republicans and Southern Dixiecrats who first blocked then delayed the expansion of payroll tax rates after 1937, which kept the system underfinanced.

Thus, during the first twenty years of Social Security’s operation, the combination of ongoing political opposition, limited revenue, and limited benefits, and a series of decisions on how private pensions would be treated by the Internal Revenue Service, changed the nature of Social Security from a system that originally was supposed to support workers on its own to a system that would provide a basic foundation for private employer pensions to build upon.

Over the next 40 years, the Social Security system was amended repeatedly to expand eligibility, raise the level and variety of benefits, and establish innovative programs to cover new populations. A Trust Fund was established which allowed the system to support a higher benefit level. In 1956, agricultural and domestic workers were added, bringing the majority of African-Americans within both Old Age and Unemployment Insurance programs. In 1972, Social Security benefits were indexed to inflation with a permanent COLA (Cost-of- Living Adjustment), and Supplemental Security Income (which provides an additional pension for the elderly poor) was established two years later.

In 1937, Social Security had barely 53,000 beneficiaries and they were paid a total of only $1.3 million. These rose to 222,000 beneficiaries and $35 million by 1940; 3.5 million beneficiaries and $961 million in 1950; 14.8 million beneficiaries and $11.2 billion in 1960; 26 million beneficiaries and $31.9 billion in 1970; nearly 36 million beneficiaries and $120.6 billion in 1980; and about 40 million beneficiaries and $247.8 billion in 1990 (all figures in nominal dollars, not adjusted for inflation). In 2004, $493 billion of benefits were paid to 47.7 million beneficiaries. In 2010, about 51 million Americans will receive $650 billion in Social Security benefits. By dollars paid, the Social Security program is one of the single greatest expenditures in the federal budget, with 20.8 percent of the budget spent on Social Security, compared to 20.1 percent for Medicare/Medicaid and 20.5 percent for discretionary defense (though much more has been spent on the Iraqi and Afghan wars, as well as on other federal agencies involved in defense-related activities, such as the Department of Homeland Security, Department of Energy, Veterans Administration, and others). Social Security is currently the largest social insurance program in the United States, estimated to keep roughly 40 percent of all Americans age 65 or older out of poverty.

This history of gradual change has made the Social Security Act a vehicle for reform that builds on the known habits and customs of Congress. Members of Congress are very familiar with the stakeholders and interest groups, as well as the ins and outs of the amendment process. Perhaps not coincidentally, virtually all of these Social Security amendments were passed in the autumn of election years when voters were paying the most attention to Congress. Amending the Social Security Act has permitted sweeping public policy changes to be cut down to a manageable size that the political system could deal with.

Welcome.
This whole topic can be so time-consuming and confusing that basically — although I sheepishly admit it — I just want simple answers.
I find the whole topic exhausting.

In my own case, during the ‘dot com’ era, I worked for several companies;
– one went belly-up (young, egotistical management),
– one moved most of the jobs to Asia (because they’ll work for much less money there), and
– one was sold to a European-based company (a sane and socially responsible outfit, FWIW). It was a wonderful company, but the European company could better support and distribute the products. The buyout meant that about 80% of us were no longer needed by the parent company.
The upshot: a lot of great experiences, but not a lot of long term stability.

(I’ve also worked in education, and compared with the ‘volatility’ of boom-and-bust business cycles, the public employee sector is wonderfully sane, and not greedy.)

At this historical moment, I assume that the US Social Security funds are the Last Big Moneypot the Big Finance thieves have not yet pillaged. So they’ll put everyone in a panic about Social Security ‘going broke’. I figure that’s their strategy to delegitimize government so that they can then be handed the hammer that is dressed up as ‘saving’ SS. They’ll then use it to smash what they view as a premier piggy bank in order to cream off ‘fees’.

I would love to be mistaken about my assumptions.

Thank you Margot. So far the response to this proposal has been positive. People seem to recognize that we have a big challenge here, a real crisis in the making, and it’s not the crisis they are saying about Soc Sec, i.e. that it costs too much. It’s that, given its new role as the de facto national retirement system, it simply doesn’t pay enough. More and more Americans are starting to feel the bite, and realizing, “yes, I could use a more robust Social Security.” So I think this idea is going to move forward at some point, it’s just a matter of time. What other choice do we have?

I see this happening only as part of a general redistribution of wealth. For the last 30 years, wealth has only been transferred upward. 1% owns 1/3 of the country. The top 10% own 2/3 of it. What you are suggesting is feasible but only by reversing the current malallocation of resources and wealth in the country.

One of the other advantages of this Social Security Plus proposal is that your retirement would be “portable.” So when you move from job to job, you could still pay into the same system. Currently many American workers are stuck in the jobs are in simply because they already have some sort of retirement or pension would that employer, and if they go to another job they will no longer be able to keep paying into their previous pension system with a previous employer. By having one national retirement system, it means no matter what job you are working, or where, you would be able to pay into your retirement. That also would make the retirement system more stable.

Certainly the US needs to reevaluate the growing inequality, and this of course would be part of that conversation. There was a great article in the Financial Times on July 30 by Edward Luce making this point, when he wrote:

Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.

The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.

For more of that article, see http://www.ft.com/cms/s/2/1a8a5cb2-9ab2-11df-87e6-00144feab49a.html

You’re really suggesting single-payer retirement; coupled with single payer medical, and all the cost reductions achieved, this country would literally roar back to economic life in non-financial products.

And, I would point out, Social Security has turned out to be much more stable than any of the other “legs” of our three-legged retirement stool, i.e. company pensions and private savings/homeownership.

Bingo.

And might I just opine a bit more…?

It thoroughly cheeses me to be told on the newz that Social Security is being examined, when not one single Wall Street or finance exec or employee (other than Madoff and Stanford) going to prison. Those of us who have seen ‘portfolio’s’ impacted have had to bail out these ba*stards, there is clear evidence of incredible fraud from A to Z in the Wall Street Meltdown and the securitization and mortgage fraud mess, and all we get on the news is yammering about how SS is ‘going broke’?

This is outrageous.
No justice.
The thieves get to keep all their loot.
And now we’re supposed to roll over on Social Security?

Unbelievable.

Part of the trouble is that pols no longer fear losing elections since the wages of sin always seem to include a lucrative job offer when they leave office. The inevitable result of lost elections is that both parties work even harder on behalf of the MOTU.

Yes, for starters, you can spread the word by emailing to your friends and colleagues my article that is in today’s New York Daily News.

Slash Social Security? No – double it
BY Steven Hill
New York Daily News
Thursday, September 2nd 2010
http://www.nydailynews.com/opinions/2010/09/02/2010-09-02_slash_social_security_no__double_it.html

Go the Daily News website and leave a comment, show them there is support for this proposal. And mail the article to your member of Congress, asked them to introduce legislation. Ask your local newspaper to reprint the op-ed. Do whatever you can to help this article go “viral” as they say

I agree with David Dayen’s concern re union opposition. If you make pension plans gained via collective bargaining one of the sources for funding, labor would logically oppose this. It’s a bird in the hand. Same thing happened with taxing health plans to subsidize health insurance in the exchanges.

Employer based pensions will decline without an explicit threat. Let that dynamic create support for SS plus, rather than be a threat.

There is another idea that may be more possible. Cut the social security tax in half and apply the new rate to everyone. The lower rate would put money in the pocket of almost every person who works, especially the self-employeed. It would progressively help the lowest income workers since social security is the majority tax they pay. It would be a plus for all small businesses who have to pay the other half. It would also set up an interesting political struggle between the very rich and everyone else. The numbers looked like this was quite feasible the other year.

Thanks. Will do.

The other important point that I have yet to make in this discussion is that, besides being better for Americans retirement needs, Social Security Plus also would be better for the macro economy because it would act as an “automatic stabilizer” during economic downturns, keeping money in retirees’ pockets and stimulating consumer demand. Benefits would be portable when changing from one job to another. It also would help American businesses trying to compete with foreign companies that don’t provide pensions to their employees, because those countries already have generous national retirement plans.

Most economists agree that low and middle income people are more likely to spend an extra dollar on goods and services than are affluent individuals because they put much less money aside. so it would act as an automatic stabilizer during downturns, discourage investment asset bubbles from developing in the future, and help increase retirement security.

US Social Security funds are the Last Big Moneypot the Big Finance thieves have not yet pillaged

You and I see this the same way and it was what I was trying to get at earlier. Financial insiders have spent decades (since Congress battened down the hatches in the 30s against the bankers predations of the 20s) looking for ways to game the system and loot what little ordinary people manage to accumulate. They want SS so bad they can taste it and they will steal that from us, too.

Which is why I was asking, how the government invests money in a way that it can safely grow, against this backdrop of unregulated fraudulent thievery which remains largely untouched by the shiny new finreg bill.

I don’t see unions opposing, I don’t think this threatens them any more than the status quo does. Labor unions have been steadily losing membership and contracts, currently only representing about 8% of private-sector workers at this point. And as my report points out, since the early 1980s businesses have shifted pension risk onto workers through a conversion from defined-benefit plans to one of defined-contribution. In 1981, approximately 60 percent of private sector workers were covered by a pension with a guaranteed payout; about 80 percent of employees in medium-size and large companies had such plans in 1985, according to the Labor Department. Today only about 10 percent of private sector workers have guaranteed payout pensions. Meanwhile, defined contribution and 401(k) retirement plans have gone from covering only about 17 percent of the private workforce to about 65 percent today.

So unions are clearly losing this battle. They need new tactics, and I think they would embrace this.

You and I are in complete agreement on every word in your comment.

That’s an interesting way of putting it Kelly. Though I don’t think single-payer health care is necessarily the way to go. France, Belgium and Germany show that there is a “third way” that is successful between our current privatized system and single-payer. Germany, for example, has 200 PRIVATE insurance companies are the backbone of their health care system. PRIVATE INSURANCE COMPANIES. But here’s the key difference: they’re all nonprofits. In addition, every year or two they negotiate all costs and fees for every service, which helps to get a handle on cost (kind of like what we do in Medicare). And the waiting lists for complex procedures is shorter than the US, as well as in single-payer Britain. This suggests that we can do this with private entities that might be more in keeping with the traditions of America. Just to be clear, I’m not saying I oppose single-payer, it’s clearly way better than what we have in the US right now. I’m just saying that there is another option that unfortunately has not been explored. Too often in the US the debates get boiled down to simplistic terms, such single-payer versus privatized healthcare, or cut Social Sec vs. the status quo. Yet looking around at other countries, there are clearly other options that we need to explore.

So you are convinced, Steven, that the money class and the political class who, together, comprise the ruling class will come to see the need of concerning themselves with the reality of the “have-nots”?

“Choice” is an interesting term. The people have little choice. They do not profit from the endless wars, which presumably will go on until they are no longer profitable, the people did not choose to “bail out” Wall Street and they certainly do not have any say regarding the obscene bonuses those “astute” types so admired by Obama are giving themselves.

Perhaps you have heard of Mother Jones’ assessment?

“If voting could change anything, if it could make a difference, then it would be illegal.”

The question is this; who is the “we” to whom you refer?

Those in charge seem perfectly willing to bring a return to feudal society to this nation, “looking forward” …

This nation now tortures and kills with impunity, where shall it find a human consensus that understands your last sentence? Are “we” in this, all together, or are we are deliberately fractured and fragmented society?

What do you suppose will wake up the selfish and the greedy?

Remember, the powers-that-be are neoliberals who believe that “greed is good” and that Goldman Sachs is doing “God’s work”.

Nonetheless your ideas will, eventually resonate among the masses, the elites, who are already the most fearful among us will have to come to some fresh “enlightenment” before “they” will go along, willingly or even grudgingly with such rational, reasonable, and human “change” as you suggest.

(Just so you know, I shall be talking your “suggestions” to everyone whose ears I may bend, from now until all the chickens come home to roost, and then, I’ll take a long breath and start in again.)

DW

Better response than normal to the Republican noise machine.
There is no retirement system left in the US. This current group of swindler CEO’s stole the US pension system.

If we don’t double Social Security, we’re going to be spend more than double on nursing home care for people who’s health falls apart trying to live on current SS payment levels.

Yes, there is certainly a danger that the financial industry is licking its chops over getting its already-bloody hands on Social Security. That’s another reason why I like the Social Security Plus proposal. The current system leads to excessive cost and risk resulting from managers of pension funds who gamble with future retirees money in a bid to achieve above-average returns. As Yeva Nersisyan and L. Randall Wray have argued, the entire industry can be justified only if, through skill or luck, pension fund management can beat the average risk-free return on Treasuries by enough to pay for all of those industry compensations plus add growth to the fund portfolio. But experience has shown no strong evidence that the typical fund manager can consistently beat the average return on Treasuries. Hence, it makes no economic sense to either pay fees to financial managers or send as much as 40 percent of corporate profits to the finance, insurance, and real estate sector, as the U.S. did at the peak of the bubble.

Workers would be better off if employers directed their pension money into a Social Security Plus system with investments restricted to Treasuries, and at the same time removed the tax advantages and government guarantees provided to pension plans. This would boost Social Security and ensure that anyone who works long enough to qualify would achieve a comfortable retirement. No accumulation of financial assets would be required to back up “Social Security Treasuries” in the case of an economic downturn since the full faith and credit of the U.S. government stands behind the promised benefits. Under such a system, at most each pension plan would require a very small management staff that would transfer funds out of the employing firm‟s bank deposit and into Treasuries. workers wouldn‟t have to pay fees that drain their pension funds and assume all that investment risk.

But the real problem with Social Security is not, as its critics say, that it is underfunded. Contrary to gloomy predictions, the program is on solid financial footing, with the Congressional Budget Office projecting that Social Security can pay all scheduled benefits out of its own tax revenue stream through at least 2037.

That is not how I understand the CBO, which in the analytical section of its 1999 budget wrote:

Primarily because of these changes, but also because of the impact of
real growth and inflation, trust fund balances increased sevenfold
from 1982 to 1997, from $205 billion to $1.5 trillion. Under the
proposals in the President’s budget, the balances are estimated to
increase by another 71 percent by the year 2003, rising to $2.6
trillion. Almost all of these balances are invested in Treasury
securities and earn interest. Therefore, they effectively represent
the value, in current dollars, of taxes and user fees that have been
paid in advance for future benefits and services.

These balances are available to finance future benefit payments and
other trust fund expenditures — but only in a bookkeeping
sense. Unlike the assets of private pension plans, they do not consist
of real economic assets that can be drawn down in the future to fund
benefits. Instead, they are claims on the Treasury that, when
redeemed, will have to be financed by raising taxes, borrowing from
the public, or reducing benefits or other expenditures. The existence
of large trust fund balances, therefore, does not, by itself, make it
easier for the Government to pay benefits.

From an economic standpoint, the Government is able to prefund
benefits only by increasing saving and investment in the economy as a
whole. This can be fully accomplished only by simultaneously running
trust fund surpluses equal to the actuarial present value of the
accumulating benefits and not allowing the Federal fund deficit to
increase, so that the trust fund surplus reduces a unified budget
deficit or increases a unified budget surplus. This would reduce
Federal borrowing by the amount of the trust funds surplus and
increase the amount of national saving available to finance
investment. Greater investment would increase future incomes and
wealth, particularly if it increased the rate of productivity
growth. In turn, this would make it possible for the trust funds to
draw down on their investments in Treasury debt to pay future benefits
without having to increase the burden on future workers by raising tax
rates, reducing spending, or increasing Government borrowing.out
having to increase the burden on future workers by raising tax rates,
reducing spending, or increasing Government borrowing.

Please understand that in quoting the CBO, I’m not agreeing with them but merely questioning masaccio’s claim regarding their position.

Time for a contrary view.
* SS benefits have outstripped SS tax revenue already.
http://www.nytimes.com/2010/03/25/business/economy/25social.html?_r=1
* Since 47% of the nation pays no income tax, that shortfall falls on the well to do by definition.
* SS is viewed as a defined benefit plan with a defined premium. Change that and it’s just another welfare program. No thanks, taxpayers have enough dependents already.
* It’s another half trillion in debt/year. If it were in force this year the deficit would be well over $2 trillion, considerably more than all the personal income tax collected.

IRAs are after-tax contributions, so taxing them is a second hit. And a whole lot of people are paying into 401(k)s, even if they aren’t able to reach the cap on contributions.

Good point. If we don’t take better care of our seniors — and of course someday we all will be seniors — we will just pay for it higher medical care. And already healthcare costs in the US a double per capita what other countries pay, nearly 17% of our GDP consumed by healthcare costs. THAT’S what is threatening to bankrupt the country, not Social Security

This is what makes the politics of this so unlikely now. Government does not invest wisely. Government has become a vehicle for looting by our elites whether they are Republicans or Democrats. Again they will not entertain ideas of reform until their backs are against the wall and maybe not even then.

They have already engineered $400 billion in cuts to Medicare in their healthcare bill. Now they are taking aim at Social Security. They will never do this because it is fair or makes sense economically. They will only do it if they are scared to death that they will lose everything they have stolen accumulated over the years.

Wonderful!!!!!

I plead guilty to the soundbite. Ya gotta sizzle first for the rest of the sales job to work.

Yes, but part of the point here is that those are savings vehicles created by Congress and the banks to encourage private savings. But those have not worked out too well, because they were invested in things like the stock market and housing market which as we have seen are cyclical and can crash. When they crash, everybody loses their savings. In addition, only those people who have a certain amount of income can benefit from these savings vehicles. By creating something like Social Security Plus, everyone could pay into that regardless of income. And it would be more stable and secure, not prone to the ups and downs of “the markets.”

Social Security taxes were raised in 1983, but only on the bottom part of the income pyramid. The highest part of the income pyramid, the richest people in the country, got a huge tax cut, and they got even more tax cuts under the last administration, while the country was running enormous deficits.

The excess Social Security tax money was loaned to the Treasury. Now it’s time to start repaying it. The people who got the tax cut should repay that loan. The rest of us have already paid.

Two of the three legs are indeed in trouble. But in a country with the likes of Angle, palin, Kochs, et. al. even taking the first step on this sort of plan could suck the ozygen out of everything. This year the dems are now likely to lose both houses of congress and in 2012 the presidency. Do you really think the other guys will take this up? The dems will be fighting for many years in the future to get back what they will likely lose this year. Do you want this in the platform? Maybe you are passionate enough about it. I’m not at this time but maybe I can warm up. Just curious about the realism.

* It’s another half trillion in debt/year. If it were in force this year the deficit would be well over $2 trillion, considerably more than all the personal income tax collected.

Huh? The Social Security Trust Fund is sitting on $2.4 trillion of securities back by “the full faith and credit of the U.S. Government.” How can “it’s” deficit “be well over $2 trillion”?

Equally important, as you point out, money moved into retirement accounts receives very favorable tax treatment. That benefits high-income people a lot more than low income people. In fact, the entire tax system tilts in favor of the wealthy. Several of your revenue proposals address this gross unfairness.

I don’t have time to read the New York Times article at the moment, but right now there is a short-term shortfall in Social Security due to the economic crisis. But the credible projections I have seen still show it doing fine for another 30 to 40 years.

I don’t know what you mean what you write “SS is viewed as a defined benefit plan with a defined premium. Change that and it’s just another welfare program. No thanks, taxpayers have enough dependents already.”

This would not change the nature of SS still being a defined benefit plan with a defined premium. Quite the contrary, this proposal would DOUBLE the benefit, it would not cost American taxpayers a single penny more. this would all be paid for by changing our tax priorities. You will have to read my previous post on this subject during this forum or read the report. Again, THIS WILL NOT COST MORE IN TAXES

Since 47% of the nation pays no income tax, that shortfall falls on the well to do by definition.

You’re assuming the well-to-do are the only ones who pay taxes. I submit to you that they very often pay nothing at all. The infamous divorce of the California couple that owns the LA baseball team is proof of that.

Social Security Plus also would be better for the macro economy because it would act as an “automatic stabilizer” during economic downturns, keeping money in retirees’ pockets and stimulating consumer demand. Benefits would be portable when changing from one job to another.

1. Please define ‘macro economy’ because my kids, my cousins, many of my acquaintance, and my siblings go into eyes-glaze-over mode when they hear terms like this. (And quite a few of them are meticulous about their own finances, as near as I can tell.)
2. “Stablity” has a certain appeal, at least for me, when I think of long term planning. Part of what has occurred is that part of my ‘financial planning’ has been upended by market weirdness and other factors completely beyond my control.

The message of the Bush II era: greed pays magnificently.
Yet, greed does not scale well.

We badly need new economic thinking, and I assume that you’re up against people who assume that ‘market’s’ are always, everywhere, no matter what type of market (bond, currency, commodity, stock, etc, etc) efficient and self-correcting.

I think the True Believers in the Efficient Market Hypothesis and other muddle-headed economic sillyness are going to put up a huge fuss over your notions.

They really do believe that ‘the market’ is the answer to every problem.
But it isn’t.

They can’t seem to grasp that markets do not always function wisely or well, and are often manipulated.
So their default mode is to give up on government, including Social Security, altogether.

Boy, I hope you have a chance to talk with Drew Westen and George Lakoff about how to explain your ideas to the public in sound bites ;-)

I know you referenced that $400 billion cut in medicare before. I confess it went right by me. What was it they cut out?

“The bigger problem is that Social Security’s payout is so meager, which is problematic since it has been thrust into this new role as a de facto national retirement plan. Currently it replaces only about 33 to 40 percent of a worker’s average wage from the year prior to retirement (compared to Germany where it replaces 70 percent). That is simply not enough money to live on when it is your primary — perhaps your only — source of retirement income.”

Spot on comment – Well said.

FDR’s 3 legged stool for retirement of union/corporate pension, money from savings, and Social Security is gone in a world of few unions and thus severely limited pensions from employment, and savings that drops 80% in a year for those of us that listened to retirement advisors and bough high dividend safe bank stocks.

We now have 3rd world benefits and a distribution of wealth that mirrors that in the 3rd world. The result in the 3rd world is political unrest that gets violent. I wonder if that is due to come to the US.

Taxpayers have to chose between paying reasonable SS retirement costs, OR you will be paying outrageous nursing home costs when the health of retirees falls apart trying to live on current Social Security payments.

There is no “neither” option. You pay double to keep seniors at home eating healthy, or you pay way more than that on nursing home costs.

Any attempt by the Republicans to claim there is another lower cost option is a LIE!

But experience has shown no strong evidence that the typical fund manager can consistently beat the average return on Treasuries. Hence, it makes no economic sense to either pay fees to financial managers or send as much as 40 percent of corporate profits to the finance, insurance, and real estate sector, as the U.S. did at the peak of the bubble.

Heresy ;-))

Steven proposes several steps to raise the money to fund this proposal. Social Security is supported by designated taxes, and Social Security Plus would be supported by these and other taxes. In addition, it doesn’t depend on building up a surplus, so there isn’t any need for the government to invest the money.

Thanks so much for your response. I really appreciate it. And thanks for coming to talk to us here at the Lake!

The realities are ratehr stark, at some point even the American political system has to deal with them. Though I agree with you, the political realities are somewhat severe. No one ever thought that Obama would need to have 60 votes out of 100 in the U.S. Senate to get anything done. I really don’t understand why Democrats aren’t trying to change the filibuster. It is an anti-majoritarian and antidemocratic feature of the Senate that is not in our Constitution, it is merely a “rule” passed by the Senate and a long time ago. A majority of senators could change this rule.

Still, I think that if we give in to pessimism and cynicism, we will be in even more trouble than we are now.

Just sent the following to my local paper. They lean right, however it is a safe bet that their largest demographic is comprised of seniors, so I think there is a chance they’ll pick up the article.

The accepted wisdom in Washington these days seems to be that cuts in Social Security benefits are required. I hope that you will consider reprinting an op-ed from the New York Daily News which describes an alternate point of view.

Slash Social Security? No – double it
By Steven Hill
New York Daily News
Thursday, September 2, 2010
http://www.nydailynews.com/opinions/2010/09/02/2010-09-02_slash_social_security_no__double_it.html

Surely all Americans beat the Average return in the financial markets.

Our Lake Woebegone Investors: all above average.

Sorry but your “facts” are not true.

Please google the Social Security Trustee’s Report and read it. Social Security is running a surplus – it takes in more in taxes and interest on the assets it hold than it pays out in benefits.

And please, when you are ready to tell China that you will no longer pay them interest or will no longer honor the US bonds they have purchased, then you get to tell the seniors that their investment in government bonds in useless – until then you just sound irrational.

All taxation is about social engineering. In the last 30 years, it has been about creating an uber-class of the hyper wealthy. As a percent of income, the burden continues to fall on lower and middle class wage earners. Of course, because the rich have so very much more than the rest of us they will and should pay more. The current inequality in wealth is unsustainable and has been the result of taxation policy. This can and should be reversed.

As for welfare, that word used to mean something positive, as in the welfare of the country. Now it is just a bastardized slur of the far right. So calling something welfare adds nothing to the conversation and completely obfuscates what the point of taxation is about.

… it doesn’t depend on building up a surplus, so there isn’t any need for the government to invest the money.

First of all, the government doesn’t “invest” money, rather it borrows money, e.g., from the Social Security Trust Fund.

Secondly, I’m not disagreeing with Steven’s plan. I like it. But currently there is $2.4 trillion of working-class money that has been borrowed by the government (i.e., invested in Treasury Bonds). When and where in Steven’s plan do we get that money back?

Steven, it looks like there is a lot of support for this idea here, and I appreciate your action suggestions above.

What do you personally think is the biggest hurdle for this proposal?

The Medicare “cut” was the appropriation estimate – not any benefits. The appropriation was cut because of anticipate new efficiencies and fraud control.

My report was focused on a very narrow aspect of this entire discussion. It was not focused on government borrowing from the Social Security trust fund. But I agree with you, that’s a very real issue.

I really don’t understand why Democrats aren’t trying to change the filibuster. It is an anti-majoritarian and antidemocratic feature of the Senate that is not in our Constitution, it is merely a “rule” passed by the Senate and a long time ago. A majority of senators could change this rule.

I’m happy for the filibuster rule, since the democrats will soon be the minority party.

I understand your points. The investment note was more a response to an earlier comment. The existing $2.4 trillion is a good question.

In Lakoffian terms, this can be boiled down to a very simple equation:

TAX FAIRNESS = DOUBLING SOCIAL SECURITY.

That in essence sums up what my report concludes. Is that simple enough for you? :-)

Well, I am not completely sold on this plan but … Everyone who works pays SS taxes so it does not fall on the shoulders of the wealthy. The trust fund has enough money in treasury notes to pay benefits to 2037 *unless, of course, the government decides to default on the loan we gave them. Because private pensions are going in the tank and because there are fewer and fewer of them, it is time to think about something else. This plan is pretty ambitious though and the timing is not right.

That money – the Trust Fund, makes up the tax short fall that begins in 2017 and pays the difference between tax collection and benifit payouts until the year 2037. To do that the Trust Fund cashes the bonds in for cash each year.

When bonds are cashed in, the government must make up that money by bringing more cash in via taxes, or by selling new bonds.

It is the “bringing in more tax” – the replaying of the tax cut for the rich that was finance by the Social Security loaning money to the government – via a tax rate increase on monies earned by the rich – that is the “crisis”.

There is no other Social Security crisis.

The biggest hurdle, of course, is inertia. People are used to things as they are. And there are always certain special interests invested in the status quo. Also, it’s important to never forget that as individuals things change in our lives on a matter of days, weeks and months. But societies change of the order of decades. The trick is always to try and see which way the curve is bending. It seems to me that given the trends of the last three decades — increasing inequality, decline in private savings, decline in company pensions, decline in retirement security in general — this proposal is something whose time is coming. What other choices do we have?

Great idea, but far too humane and equitable to happen in America. None of our priorities at least over the last thirty years even come close to something like this. In fact they’re on the absolute other end of the spectrum.

If not now, when?

I misspoke. I looked in my Obama scandals list. The figure I have is $313 billion. It is supposed to come from gerater “efficiencies”. This is usually code for cuts in services. I was going to send you the link

http://www.whitehouse.gov/MedicareFactSheetFinal/

but the White House has apparently pulled it.

Everyone who works pays SS taxes so it does not fall on the shoulders of the wealthy.

In fact, quite the opposite. SS taxes are extremely regressive wage taxes and fall mostly on the working class. Investment income, inheritance, etc. are excluded, as is all wages above $102,000/year.

The “three-legged stool” of retirement security in the United States — Social Security, pensions, and private savings (mostly derived from homeownership) — has become wobbly and unstable. With employers walking away from their traditional role of providing a private pension, with homeownership crashing and with inequality increasing and personal savings declining in the years even before the Great Recession, Social Security now is the only leg left for hundreds of millions of Americans. An expansion of Social Security — one of the most successful and popular government programs in U.S. history — into a more robust retirement system that doubles the current payout to individuals would build upon the most stable components of the current system. Imagine, for a moment, being able to pay into a retirmement pension no matter where you work that, over your lifetime, will contribute to REAL retirement security, instead of teh faux security we have had. That’s what Social Security Plus could do.

When and where in Steven’s plan do we get that money back?

I would suggest the wealthy.

On the rule change, I believe they can only do that at the beginning of a session. Look for the republicans to try it, maybe. I understand the cynicism criticism, and I would not simply ignore this. But,still, timing is not good, so I am not sure how this gets voice. Not another big, crazy spending idea from the professional left, I hope?? We knew those people were socialists.

One other thing killed the dems and Obama, I think, and that was the unrelenting assault of the right wing beginning last summer at the town halls and continuing to this day. It has changed the conversation about nearly everything and has been wildly successful for the other guys.

I would only add that a lot of pension plans have collapsed, and the Pension Benefit Guarantee Company isn’t doing well. A whole lot of people lose their retirement benefits when companies file bankruptcy.

We forgot somewhere how to make convincing arguments on our own issues

Public welfare programs and public housing and education are cheaper than prisons and hospitals.

There just aren’t that many people who are going to stay happily homeless when they are broke. Some veterans who have been trained by the military to be self-sustaining outdoors can survive being homeless and broke outdoors. We’re paying for everyone else’s housing and health care somewhere, either in prisons or hospital emergency rooms, drug rehab, or nursing homes.

There is no real option for a taxpayer not to pay. It’s a big fat lie.

Paying for someone’s food and shelter is a lot cheaper than hospital, nursing home, or prison.

There is no other Social Security crisis.

Exactly. It’s not broke now, so why fix it now? In 2037, when the Trust Fund is gone we will have to cut benefits by 22% or increase revenues by the corresponding amount. But why the fuss now? And why has Obama commissioned vampires to save the blood bank?

I’m with you, brother!

Certainly this discussion is part of a broader discussion that needs to occur in the US. If consumer-driven growth was the order of the day in the post-World War II era, now it needs to evolve toward steady-state economic growth for the developed world, and learn to do more with less. The world needs to figure out how an economy can provide for its people without having roaring growth rates like China. It’s not strictly about economic growth anymore, it’s about ecological sustainability and steady-state economic growth – growing not too fast, but not too slowly. This is the path that Germany, France, Japan and others are choosing. Germany has been able to lead with its social capitalist economy at the heart of this European Union experiment that has grown to become the largest economy in the world, with more Fortune 500 companies than the U.S. and China combined, as well as more small businesses than in the U.S. Compared to the United States and China, Europe continues to provide a generous workfare support system to families and workers, at the same time that is has impressively reduced its carbon emissions and environmental impact.

I take your point but see my 99.Really think you could sneak this by anyone this year, for example?

Thanks massaccio, I know the investment comment was for my clueless benefit : ) I think what is throwing me is the fact that we have a Social Security Trust Fund, which implies (to me anyway) that the money is invested somewhere. Except it isn’t really, because it’s been loaned out to pay for all sort of other things. So if we need a trust fund now, why would we not for SS+? Or is it the sort of thing where we never needed the trust fund in the first place, but Greenspan set things up as he did in 1983, specifically to create a tasty little honey pot to be raided at will?

It’s not a question of SS beign broken now — it’s our RETIREMENT system that is broken now. the collapse of the housing bubble has created a situation in which the vast majority of baby boomers and other retirees will be almost completely dependent on Social Security for their retirement. Even upper middle class baby boomers will likely rely on Social Security for the bulk of their retirement income, as their accumulated savings will only be sufficient to provide a modest supplement to Social Security. Financial experts say it will take about 70-80 percent of pre-retirement income levels — or at least $200,000 to $300,000 in personal savings — for the average American to have a secure retirement. Yet most older Americans have saved only a fraction of that. As a result, about half of all Americans are at risk of not having sufficient retirement income, and fully 60 percent of low-income households are at risk of not having sufficient income to maintain their pre-retirement standards of living at age 65

As we near the end of this chat, I want to thank Steven both for his excellent ideas and clear presentation, and most important for coming in to chat with us today.

Please take a good look at his action suggestion in commment 45 and others, and give this a good shove.

Excellent! Thanks.

The only thing I recall as a cut was to one or more of the medicare advantage plans and I am not sure what that was. I was believing it was not significant for persons insured.

Conditions are ripe in the US for having these broader discussions. I travel aroudn the US giving lectures and there is unrest and dissatisfaction out there. Right now that’s being captured by the tea party movement, but it doesn’t have to be. People who have a different vision have to be bold and put our proposals out there. Stop playing defense, play some offense

You are thinking we could get our corporations to agree to let a part of their flock – the insurance companies and the companies involved in health services delivery – to be considered utilities with heavy German standard regulation of all things including price of services and premiums charged – what you call negotiations every two years.

Single payer with a national budget and Medicare “approved procedure” cost control has a better chance, in my opinion.

I’d be interested in why you say an across the board tax hike only affected a certain subset of the population.
I’m also going to assume you’re referring to income tax cuts as unfair. Well, like they say if you don’t pay income taxes you don’t get a cut. Surely I don’t have to resurrect the “dinner story” to illustrate?

Yes, I get that.

Thanks, Steven, for the excellent discussion. I’ll enjoy seeing popular reaction to this 180 degress shift in the terms of discussion. I’ll try it out in a bar this very evening. ;-)

Thanks again.

Certainly the success of other countries like Germany and France in creating a true national retirement system shows that it can be done. In Germany the national pension pays about 70% of the workers last salary, in France about 75% (FYI, I go into this in my recent book,”Europe’s Promise: Why the European Way is the Best Hope in an Insecure Age” (www.EuropesPromise.org) . In the US it pays about 33 to 40%. That’s the difference right there, and for multiple reasons that I have laid out in this forum, hopefully, it would be good for our country to look to double the Social Security payout.

I don’t know what to make of the recommendations of the Greenspan Commission for the massive increase in the Trust Fund. One of his major recommendations was to remove the Trust Fund from the unified budget so the deficits would be apparent. That wasn’t adopted. It isn’t much, but it did seem like a sign of good faith.

When the budget was in surplus under Clinton, Greenspan made it seem like a problem that we would pay down the national debt. I never understood that, and it seems like it is contradictory to the idea of th Trust Fund. If we had run the national debt way down under the Last Bush administration, this current disaster would be much less serious.

It makes me think of the story of Joseph, in the Bible: save during the fat years so you can survive the lean years.

If consumer-driven growth was the order of the day in the post-World War II era, now it needs to evolve toward steady-state economic growth for the developed world

Amen. And thank you for saying so. This is an argument I have made often over the years, motivated simply by the notion of a finite planet with finite resources and a limited carrying capacity. It is wonderful to hear it come from an economist.

You know maybe we should just run this out on the flag poll this time around. Things can’t get any worse this year,can they?

I must have been unclear. Since the SS+ plan is budgeted at an extra $650 billion, if it were in force, the extra $650 billion, plus our current deficit of $1.5 trillion would be well over $2 trillion. Yes?

Thank you, Steven, for joining us.

Return soon and often, if you may, as this discussion is a critical portioin of the national dialogue our nation MUST engage.

DW

Thanks massaccio, maybe someday I’ll understand how all of this stuff works. Probably no day soon, though ; )

Conditions are ripe in the US for having these broader discussions.

Do you think the WH believes this?

If it had been removed from the budget the surplus under clinton would not have been so much and the deficits under Bush would have been larger. I argued this with a PHD Accountant to no end one day, including the fact that he claimed the money paid to the treasury was “funny money” and were not a debt of the government at all.

So, here’s a story. I was stationed at Fort Bragg, NC, in the summer of 1970. Shortly before I arrived, there was an election that included a proposal to increase the sales tax and lower the property tax. The citizens of Fayetteville were told it would help them because the soldiers at Fort Bragg would pay more of their local bill.

In fact, the proposal was funded and pushed by the biggest landowners in the city. Their sales taxes went up a tiny bit, and their property taxes fell dramatically. The result was that the average citizen had a tax increase, and the wealthiest citizens had a tax cut. I called in to a talk radio show and asked why people would do something so silly. The host told me that no one ever discussed it that way.

That is correct. There was a surplus in the unified budget under Clinton and a tiny deficit excluding SS. However, the trend line under the tax system in place under Clinton was for steadily increasing surpluses. That led Greenspan to complain that we would pay off the national debt, which he thought was a bad idea.

Good story. Really. But the WH is now telling the lies.

Ouch! Woebegone… and gone… and… goner… ;-)

Who cares if the WH believes it?
We’re doing it, and if they are paying any attention the fact that there are 128 comments here, and this has just hit the wires — AND comes from the New America Foundation — means it ain’t just old, stale donuts.

The WH may have to play catch-up on this one.

I don’t follow all of the funding for this – although I support it and any tax changes needed to make it happen.

Steve notes that lifting the Social Security’s payroll cap (currently $106,800 a year) would raise about $377 billion – and I agree.

But taxing employer-based pensions means the end of all employer based pensions except the “top-hat” plans for the rich executives. The current deductions for contributions of $126 billion annually would disappear in a few years, but more important the tax revenue gain would be at best 35% of that number, and more likely less than 10% of that number as the usual corporate tax game is applied to the new “earnings”.

Then the other “possible revenue streams” mentioned are tightening our enforcement of our tax code – and maybe the elimination of a few loopholes that one needs high income to get involved with – both of which based on my experience as head of a Fortune 100 Tax Dept will not work, plus targeting first those who are most in need – which means the right will call it welfare – as they do to all programs that means test. There is simple way to get corporate income taxes back up – kill Section 482 in the Code and go to world wide income taxation less tax credits for what is paid in other countries – then add a VAT the size of Canada’s GST. Then add excise taxes and tariffs. Then say the VAT is dedicated to the program.

Thank you, masaccio, as well, for making this most-excellent salon possible.

Hopefully, you may entice Steven to join us again, often, as I suggested, as this discussion is most necessary and vital to a humane future.

DW

Of course it will require more taxes, as you point out…

“First, lift Social Security’s payroll cap that favors the wealthy. Currently, Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed.”

And also here…

“Other possible revenue streams exist, such as reducing or eliminating other unfair deductions in the tax code”.

Are you representing that increasing the cap and cutting deductions isn’t raising taxes?

In Lakoffian terms, this can be boiled down to a very simple equation:

TAX FAIRNESS = DOUBLING SOCIAL SECURITY.

That in essence sums up what my report concludes. Is that simple enough for you? :-)

2Fair2Lose might be the text version…?

The extra $650 billion is offset by an additional revenue stream of $377 billion from payroll cap removal, plus $273 billion of other revenue raisers that not made clear.

The intent is to obviously make it deficit neutral – perhaps the estate tax, currently zero, could be dedicated to it.

Actually Clinton had one year – the calendar year 1/1/2000 to 1/1/2001 – where the total national debt decreased – a real surplus. A surplus that does not need to steal from Social Security in order to exist.

They are included in the 47%, but recognized as atypical. “So it goes.”

We don’t need Social Security in America as much as we need Sécurité Sociale.

I must have been unclear. Since the SS+ plan is budgeted at an extra $650 billion, if it were in force, the extra $650 billion, plus our current deficit of $1.5 trillion would be well over $2 trillion. Yes?
replyReply

Hmmmmmmm. So, here’s you comment that I was responding to:

Time for a contrary view.
* SS benefits have outstripped SS tax revenue already.
http://www.nytimes.com/2010/03/25/business/economy/25social.html?_r=1
* Since 47% of the nation pays no income tax, that shortfall falls on the well to do by definition.
* SS is viewed as a defined benefit plan with a defined premium. Change that and it’s just another welfare program. No thanks, taxpayers have enough dependents already.
* It’s another half trillion in debt/year. If it were in force this year the deficit would be well over $2 trillion, considerably more than all the personal income tax collected.

Was I incorrect to assume that the “It’s,” in the last line, refers to SS? SS+ was never mentioned in the previous lines.

In any case, if you meant “SS+”, my reply was incorrect.

So sorry to have missed this chat — thanks for a wonderful discussion.

How can we get this idea into public discourse right now?

The trustee report agrees with the NYT. And me.

Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983.

http://www.ssa.gov/OACT/TRSUM/index.html

Not “atypical.”

Most corps paid no taxes during the boom times.

Many of those corporations were shams to shelter income.

That’s cash flow for one annual period – not the projection or the foundation of the program, where the assets still far outstrip liabilities.

Une personne après mon propre cœur

Because, Jane, that would be socialist. Totally kidding!

This is a fantastic idea. And, you know, it’s not exactly radical. Several countries have a national retirement plan people can actually live on. I think these people want to be in with the in crowd. All the serious people want Americans to learn the hard truths, and they want the pols to make the tough choices, nevermind none of these people will have to live with the hard truths or the tough choices. It’s sadistic.

SLIGHT CORRECTION to one of my previous posts, post #69. I wrote:

“This would not change the nature of [Social Security] still being a defined benefit plan with a defined premium. Quite the contrary, this proposal would DOUBLE the benefit, it would not cost American taxpayers a single penny more. this would all be paid for by changing our tax priorities. You will have to read my previous post on this subject during this forum or read the report. Again, THIS WILL NOT COST MORE IN TAXES”

In reading that again, it’s perhaps not completely clear on this point. One of the funding sources that I have identified for doubling the Social Security payout is lifting the payroll cap on Social Security so that all income levels pay the same rate (you might recall that anyone making above $106,800 does not pay any additional Social Security tax on their income above that level — in practice, this “payroll cap” as it’s called is very regressive and means that millionaires pay about 1% of their income toward Social Security, while most Americans pay 12.4%, equally divided between the employer and the employee). So my proposal calls for everyone to pay the same effective tax rate by lifting that payroll cap, which would raise approximately $377 billion toward funding Social Security Plus. That doesn’t seem quite like a “tax” to me because it just means everyone will be paying the same percentage at all income levels, unlike now. But certainly to those earning above $106,800 and who suddenly find themselves paying the same amount of taxes as everyone else, that is going to feel like a tax increase.

Similarly, if you remove the other deductions that I have identified for either roll back or elimination — such as sizable deductions given to businesses that provide some sort of retirement for their employees, amounting to$126 billion annually — that also is going to feel like a “tax” to that business that no longer is allowed the deduction.

But to my way of thinking, all of these changes are not really taxes, instead they are harmonizations that would bring about more tax fairness in the current, regressive system. And that increased tax fairness, in turn, could be plowed into doubling the Social Security payout. Probably most of those people/businesses that are losing their deductions in pursuit of tax fairness are going to feel as if they are being taxed more. But in point of fact, even those higher-income Americans who lose some of their tax deductions in order to fund Social Security Plus would see part of that money returned to them in the form of a greater Social Security payout.

Post-event, allow me to say something briefly about another important aspect of the overall American landscape that greatly affects our Social Security “options.” That is the rather stark increase in inequality in the United States over the last three decades. Indeed, the Great Recession that began in the fall of 2008 did not create this retirement crisis, it only exacerbated existing trends. Various scholars and journalists such as Jacob Hacker, Larry Bartels, Kevin Phillips and others have shown that economic insecurity and instability were on the rise long before this recession hit. Indeed, the middle class only was able to withstand three decades of stagnant wages because for a time they enjoyed the benefits of rising home prices and easier credit. But with the crash of both housing markets and credit access, the ugly truth has been exposed: the forces that have rendered financial security elusive for so many older Americans are rooted in fundamental social and economic shifts of the last 30 years.

The result is that, compared to most other OECD societies, America has become a country plagued by great inequality. The poverty rate in 2008, at the outset of the Great Recession’s impacts, swelled to over 13 percent of the population, nearly 40 million Americans living in poverty, and those numbers are undoubtedly higher today (compared to 8 percent or less in places like France, Germany, Sweden). Before the current downturn, the OECD found that child poverty in the U.S. was 20 percent and elderly poverty 23 percent, the highest by far in the Western world with the exceptions of Russia and Mexico. According to a Federal Reserve study, the top 10 percent of wealthiest people in the United States now owns 70 percent of the wealth, and the wealthiest 1 percent owns more than the bottom 95 percent (compared, for example, to another advanced economy like Germany, where the top 10 percent owns 44 percent). The OECD says that social mobility is lower in the United States than in other countries like Denmark, Sweden and Australia, which means that children of poor parents are less likely to become rich than children of rich parents. Higher levels of inequality have meant that the United States has higher rates than other nations of other social ills related to inequality, such as mental illness, homicides, crime rates, people in prison, and levels of trust (see The Spirit Level: Why More Equal Societies Almost Always Do Better” by Richard Wilkinson and Kate Pickett).

All of this has been exacerbated by the Great Recession, since the comparatively underdeveloped U.S. social support system does a poor job of cushioning Americans from economic dislocations. Since the Great Recession began in December 2007, and with official unemployment hovering around 10 percent (and the UNDERemployment rate nearly 20 percent), the ranks of America’s poor have swollen by at least an additional 2.3 million. One in eight Americans, including one in four children, are now on food stamps. Nearly 50 million Americans lack health insurance, and over half (57 percent) of middle-income, non-elderly adults report that they or another household family member had cut back or skimped on needed health care because of its cost; a quarter say they or a family member failed to fill a prescription because of cost, while 16 percent are cutting pills in half or skipping doses to stretch them, and 37 percent are relying on home remedies or over-the-counter drugs instead of going to the doctor. No fewer than 15 states have had to borrow billions from the U.S Department of Labor because their unemployment funds have run dry and one in four Americans over 62 are putting off retirement for financial reasons.

These longer-term trends, which culminated in the Great Recession, mark one of the great social transformations of the postwar era. Consequently, America’s retirement system already has been operating in a climate of relatively high levels of inequality and poverty, and that is not going away anytime soon. Indeed, if we don’t figure out a way to shore up our retirement system, things inevitably will get worse for elderly Americans.

Another important point, related to a broader view of the economy and how it affects America’s retirement system: that has to do with the centrality of “homeownership” in the American Dream. The economic collapse which began in the fall of 2008 resulted from the bursting of housing, credit and stock market bubbles that had become a core feature of the U.S. economy over the past decade and a half. Mistaken for economic dynamism, the precarious nature of bubble-fueled economic growth has created dilemmas for all nations and for the global economy itself. More than other OECD economies the United States has embraced the idea of “homeownership” as a core feature of the “ownership society,” with the individual theorized as the core actor responsible for her or his own safe passage through life (as well as that of their family).

So in the alluring narrative of the American Dream, homeownership performed triple duty: not only as a means for providing a secure domicile but also as a core element of an individual’s savings and retirement plan, and as a psychological wellspring of happiness and welfare. Throughout the 2000s, as wages increasingly stagnated, homeownership became a personal ATM machine, with rising home prices and easy credit becoming an essential tool for working families to maintain their standard of living.

Given the centrality of homeownership in the American psyche, the collapse of the housing market and the subsequent loss of approximately $8 trillion in housing-based wealth has been devastating. It amounts to a direct attack on not only the macro economy and housing security, but also on retirement security and many American’s sense of self-esteem, a quadruple blow to the American dream. The deleveraging of massive levels of debt left in the wake of the housing crash is dragging down millions of American families.

As one final note: All of these longer-term trends, which culminated in the Great Recession, mark one of the great social transformations of the postwar era. Not since the Great Depression has the United States been so in need of a system of social insurance and retirement security to act as “automatic stabilizers” capable not only of steadying the macro economy but also of buffering individuals and families from the sudden shocks of bursting asset bubbles and economic downturns, which have become recurring features of advanced capitalist economies.

A universal social support system, whether in Europe, Canada, Japan or Australia, is guided by a philosophy that values the creation of mechanisms that help individuals and families better prepare for retirement. Universal social insurance means everyone pools their money, which allows for better planning and the creation of efficient and less expensive support systems. The Swedish Social Insurance Agency publishes a brochure that captures the prevailing philosophy: “Social insurance is founded on the idea of people helping each other through a kind of social safety net, which is in place from birth to retirement.” One European political has argued that Europe’s social state is based on “enlightened self-interest” since “we all run the same risks, so we might as well collectively insure ourselves against those risks.” This is a philosophy with broad agreement across the political spectrum in most advanced countries today; even conservatives and the so-called far right agree, forming the basis for a broad consensus, whether in Europe, Japan, Canada, Australia and elsewhere.

The U.S., on the other hand, is more like China in that way, with a threadbare system of support for families and workers. Indeed, in the U.S. we have more ad hoc, decentralized and inefficient systems where some people get the support and others don’t, and the national price tag is often exorbitantly expensive. The more deregulated U.S. system is known for allowing individuals to keep more of their paycheck—presidents from Ronald Reagan to George W. Bush were famous for declaring, “We let you keep your own money”—and leaves it up to Americans’ discretion whether to prepare for the long run by saving money and handling the costs of retirement, or to spend it all in the short run. The U.S.-style “ownership society” should be called “on your own” society, because you are truly left on your own to decide these things, for better or worse.

But in an age of globalized capitalism and increasing economic insecurity, funds for an adequate retirement are necessary in order to enjoy a basic level of security and comfort. What this points to is that in today’s insecure age, a middle-class standard of living is not only about income levels or economic growth rates but also about adequate support institutions and social insurance for individuals and families. Europe, Japan, Canada and elsewhere have established various vehicles to ensure their health, productivity, and quality of life, not only in the present, but also in the future. While all of these nations, like the United States, rely on powerful capitalist engines as the core wealth-generator of their economies, the presence of a more robust social insurance infrastructure is the reason that these other nations have a higher level of economic security for their people than the United States has. Social insurance in turn stimulates consumer spending which creates jobs, and acts as an automatic stabilizer during downturns, which are two necessary components of a modern capitalist economy today. A more comprehensive social insurance system forms the foundation for these other countries’ way of ensuring one of America’s chief principles, namely “life, liberty, and the pursuit of happiness,” with results that are vastly different from America’s “on your own” society.

Ironically, the prophetic words of President Franklin Roosevelt are as true today as they were during the Great Depression, when FDR argued “We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence.”

Cordially yours,
Steven Hill

http://www.Steven-Hill.com
http://www.EuropesPromise.org

Thank you for mentioning a steady-state economy. This worship of growth makes me insane- unlimited growth is NOT sustainable ( ideology of the cancer cell and all that.)

Exactly. But, it’s significant, since it gives lie to the claim that “the Trust Fund has no ‘real’ money, just a bunch of worthless IOUs.” If those “IOUs” are indeed worthless, how are they covering this year’s SS deficit?

Yet another right-wing talking point shot down by reality.

lie to the claim that “the Trust Fund has no ‘real’ money, just a bunch of worthless IOUs

Absolutely True. Most of us here know it could be some paid MSM talk. It is the collective savings of the Americans of 12.5% of their paycheck (Employer + Employee contributions to Social Security) every month in the form of treasury bonds same as any bonds held by foreign countries including totalitarian regimes and same as any bonds held by sensible part of the wall street as part of its portfolio. No country in the world can match these kind of savings by Americans on a regular basis as my Economics teacher told us once.

It is because of Social Security we will never have Depression since 30 to 40% of the economy will just keep on humming even if DOW crashes to Absolute Zero which is not possible anyways since substantial portion of economy still be humming and saying for argument sake. All that we can have is Recession. This social security concept is the gift of the FDR generation which experienced the ravages of the Depression to its children which is all the Americans right now. If we still had Glass-Steagall Act we would not even had any kind of serious recession. But thats another topic for discussion.

Remove the income caps is a awesome fix in view of widening income gaps but I really doubt it will happen because of the bait and switch stuff right at the end we experienced in health care bill. So my best hope as David said in another blog which I thought I would never say is Gridlock in Senate and Congress with no action on Social Security, this gridlock resulting in Estate Taxes automatically coming back and this gridlock resulting in Progressive taxation making a slight appearence.

The question is — why are they saying just the opposite? I cannot for the life of me wrap my head around it.

Some guesses:

Reduce Financial Independence and make 99% of the population dependent during the final years when they should be having a peaceful time after a lifetime of hard work.
If privatized then be at the mercy of the whims of the wall street i.e. everybody having sleepless nights hoping DOW will not crash tomorrow.
Push people to have even lesser involvement in their self elected government. Democracy works at optimum level as long as people pay some attention to laws and policies which happens because of social security, schools etc. and introduce more regressive taxation like VAT, flat taxes etc, introduce regressive concepts like landed gentry to borrow the word from David which our founding fathers fought against.
Reduce savings of the people. 12.5 % of the savings every month in treasury bonds by social security is too much savings for 99% of the folk.

Just some guesses but really I do not understand why such a unique first time in the humanity progressive concept of social security gutting is taken up by this commission which is asked to look into based on the commission name a totally different thing is beyond me just as everybody. Such a wonderful concept which not only takes care of the vulnerable section of the population, enables a habit of savings on all Americans and keeps our economy safe from another Depression. Lets work towards keeping this concept from getting tweaked into some entitlement thing from the wonderful security concept as it is right now.

Steven, in terms of additional revenue measures– The Citizens for Tax Justice’s unearned income Medicare tax proposal was added to HCR reconciliation bill (trading out the word “tax” for “contribution”). Their original proposal was taxing unearned income (interest, capital gains, etc) from dollar one– just as FICA taxes earned income.

The final bill put in a 3.8% tax contribution on unearned income above $200k/250k (indiv./family) So amend the provision to create an “unearned income Social Security contribution”. Depending on where you set the income exemption (if any), that could raise $100 to $300 billion a year. Of course you’d raise at least twice as much by taking the next step and adding unrealized capital gains to “unearned income” tax base.

I do disagree with you about regulating health insurance. The problem is our federal system of government makes it too easy for corporations to game any regulatory system by playing the Feds (state’s rights!) off against the states (Supremacy Clause!). Yes, I know Germany is a federal republic, but their Constitution was written by New Dealers, ours wasn’t. Its rather unrealistic to expect the government to adequately regulate the one industry that long ago convinced ($$$) Congress to exempt it from antitrust laws.

I agree with what University of Chicago economist Henry Simons said on the subject in his 1934 book, A Positive Program for Laissez Faire:

We may endure regulation for a time, on the dubious assumption that governments are more nearly competent to regulate than to operate. In general, however, the state should face the necessity of actually taking over, owning, and managing directly… industries in which it is impossible to maintain effectively competitive conditions.

Steven, One other point before I punch out for work.

There are other ways to increase benefits without, well increasing Social Security benefits. For example, amending food stamps rules to provide SNAP benefits to every Social Security recipient without means testing. That would be worth at least another $2400 a year (18% of average benefits). Closer to home, its run by SSA, is Supplemental Security Income (SSI), the vestige of Richard Nixon’s negative income tax proposal that Congress approved for the indigent elderly and disabled.
http://www.ssa.gov/ssi/

You could expand SSI eligibity by dropping the asset limits and moving the earnings exemption from $20 a month to, oh, $13,000 a year (the average SS benefit). Every dollar of earned income above the exemption reduces SSI by 50 cents. Let’s see, SSI benefits are $8088 a year, 62% of average SS benefits. Combined with food stamps, that’s 80% of average SS benefits.

The most interesting part is, it wouldn’t cost the Social Security trust funds a penny. Both programs are paid out of general revenue and are funded automatically, with no annual appropriation needed, as entitlements. In other words, If Congress approved the change in eligibility rules, you wouldn’t actually have to raises taxes to increase benefits for Social Security recipients (but not of Social Security benefits, see the difference?). It would, however, make Pete Peterson’s brain explode, so you have to (as judges say) balance the equities.

Two points:
First, the present system does not favor high income people and should not be “fixed” by hitting productive people further. This is a bit complex, but consider one example. Poor works for 34 years at half the average SS income. Rich works also for 34 years at twice average SS income. Both are set to retire. The employers asks them to work one more year for the same specific salary. In considering this both look at the effect it will have on their SS benefits. Poor will get six times as much increase in SS payments than will Rich. This is before the taxation of SS payments. After taking in the income tax effect the ratio is nine times as much. So should we fix SS by increasing the ratio to still greater injustice?

Second:
SS taxes are 12.4 per cent of work pay. 6.2 per cent is taken before workers get paid, then when they are paid there is another 6.2 per cent. These taxes are used to pay for retirees benefits, sometimes for survivors of a marriage benefits, some for disabilities, and just maybe some for previous retirees who would not have had been taxed enough to cover their retirement costs.
Now suppose that we allow workers to take four per cent of their pay and put it in the equivalent of a Roth I.R.A., leaving 8.2 per cent with government to be used as above plus better financing of retirement benefits for retirees that their taxation does not provide for.
Now suppose that the equivalent of a Roth I.R.A. earns the same return as the average srock market return. Thus examine what happens if the employee went to work in 1960 and always earned exactly the same amount as the average SS participant. Further his investment was such that it was exactly like the Standard and Poor 500 Index. Each month his contribution to the fund was invested in stock at the end of the following month at the same price as that index.
He would reach retirement age at 2006. If he the retired he would have in the fund over $360,000. The average annual return on investment would be over 11.309 per cent.
I have the figures to prove this.
There are complications required in a plan that had SS allow people to choose this arrangement over the present system, but this is the important base.
Note this is voluntary. Also it would make the 8.2 per cent the government keeps go lots further. Also the rate of return is far highher than for those electing against this opportunity. After all the average return they would get on the present system is a bit under zero, not over plus eleven,

We should note that a so called stock market crash only applies if one sells stocks, either because a smart person sells only minimal amounts or because one is a short sighted scaried cat. For people with character and foresight it is an OPORTUNITY to buy more at giveeaway prices. Combining wirh improved soc sec would tend to make us all buyers at distressed prices. And also the whole economy would be stronger making such declines weaker , shorter, and less frequent. It is dollar cost averaging working for us.

Not so sure. Eg. Bernie Madoff was able to pull off a ponzi scheme for decades and not sure how many such schemes are still lurking.

Another thing is a fact :If one held stocks in Dow Index for less decade they have less now than they started and please add inflation to accentuate the effect.

Social Security concept did not come out of thin air due to some ones whim. Stock Market was there before Social Security concept was created and when Stock Market crashed due to irresponsible investments which always happen all the time Depression happened which led to rising to the top of the horrible people both on the far right and far left in some countries whose horrible actions were never seen before in the history of the humanity and universally people all over the world had to undergo despair and travails which was totally avoidable. We can lose some in ponzi schemes and recover but not everything right at the end of ones life due to Madoff like peoples actions when one is most vulnerable and needs peace and happiness.

Social Security is a wonderful concept which keeps the economy Depression Proof and it has already proved its worth and is time-tested for close 70 years.