Today's Washington Post (21 Dec 10 pg. A14) published an irresponsible misrepresentation of social Security funding by Allan Sloan which undermines the system's integrity and gravely disadvantages workers.
Sloan contends that the Social Security trust fund, currently valued at $2.6 trillion, is "a snare and a delusion for people who think that it makes Social Security financially sound. " Sloan falsely claims that "This year (2010) ... Social security (is) collecting less cash than it pays out." Sloan masks this dishonesty by assuming that the Social Security trust fund does not collect interest on the U.S. bonds it holds. In fact, it does, and that interest puts Social Security comfortably in the black for 2010 and for the foreseeable future.
Sloan also supports his falsehoods by claiming that the Social Security trust fund " ... is merely an accounting fiction that has no economic value when it comes to protecting Social Security beneficiaries." Sloan is contending that U.S. laws passed in 1985 which taxed workers to pay all Social Security benefits since that date plus taxes to build up a surplus that will soon reach $3 trillion to pay their future benefits "has no real funds" and only an "economically useless" .... "moral" claim on the U.S. government.
Sloan and all the other foes of Social Security should stand reminded that the trust fund is the sovereign debt of the United States government and has at least the same value as such debt held by the governments of China, Japan, Great Britain and other investors at home and around the world.
To state, as Sloan does in the Washington Post today, that the Social Security trust fund is worthless, is to endanger far more than the hard-earned benefits of American workers, it is to cast into doubt the very survival of our country as a capitalist constitutional democracy.
Wednesday, December 22, 2010
Thursday, November 11, 2010
Is Social Security a Pension Plan?
Floyd Norris writing in the New York Times on November 5, 2010 asks "Is Social Security a pension plan?" and answers "No." He supports his answer by noting that when Social Security was established (in 1935 in response to the Great Depression) it immediately paid benefits to individuals who had not paid Social Security taxes. Norris infers these initial recipients received a windfall benefit which forever taints as welfare the benefits of future Social Security recipients, which are fully earned by their social security tax payments. Yes, Mr. Norris, Social Security is a genuine pension plan with workers and employers fully funding the benefits paid to the workers in their retirement.
In fact, the government has collected approximately 2 trillion dollars more in Social Security taxes than it has thus far paid out, insuring that the Social Security system without any increases in taxes or reductions in benefits or improvements in US economic growth, will be fully funded for the next 30 years. Moreover, if average future US economic growth were to even modestly exceed the worst case projections of US growth used to calculate the 30 year horizon, the unchanged current system would be fully funded for the next 75 years. This represents a government fiscal policy of unprecedented and unmatched success, revealing talk of a Social Security funding "crisis" as insidious disinformation.
By contrast, trillions of dollars have been and are being spent for our wars on "terror" and in Iraq and Afghanistan without any funds being raised to pay for them. These huge, unfunded war costs are the cause of our fiscal crisis, not Social Security.
Of course, there is a problem with future Social Security funding. The 2 trillion dollar surplus in Social Security taxes which by law may be spent only on Social Security benefits, have been "borrowed" by the government to partially offset the huge budget deficits caused by simultaneously fighting wars and cutting taxes. In return, the Social Security trust fund has received U.S. government treasury bonds. Those who claim Social Security faces a funding crisis describe these bonds as "just paper" or as an "imaginary" trust fund. But these bonds are also held by China, Japan and other governments and individual investors in the U.S. and around the world. It is inconceivable that the U.S. would default on this sovereign debt including that held by the Social Security trust fund.
In the absence of an unthinkable default, the bonds held by the Social Security trust fund must be made good by either raising taxes or cutting Social Security benefits. Mr. Norris favors cutting benefits through a means test. High earners (he uses Warren Buffet as an example) would receive reduced benefits. Social
Security benefits are already justifiably structured to favor low wage earners and Mr. Norris' suggestion would not materially change it.
Mr. Norris does, however, raise a much more serious question. He asks,"If government spending must be reduced in some areas to deal with the soaring level of national debt, would it make sense to cut spending that benefits those who need it least?" Norris' puny answer to reduce Social Security benefits for high earners ignores the reality that the average Social Security benefit is slightly more than $1000 per month and the highest is only $2500 per month. These are not deep pockets suitable for reducing "soaring national debt". Norris joins the consensus among the wealthiest Americans that the place to balance the budget is on the backs of citizens with the lowest incomes in the country which includes almost all Social Security recipients.
The answer to Norris' question is, yes, of course, cut spending on "those who need it least." Most urgently that includes hedge fund managers with multi-billion dollar annual salaries paying taxes at a rate barely above payroll tax rates. If this country desperately needs to reduce its debt and deficit and make good on the bonds held by the Social Security trust fund, begin by taxing all income at earned income rates by eliminating the tax expenditure entirely for capital gains and dividends which go to those who clearly "need it least."
Maybe soon we will see articles in the New York Times truthfully and informatively reporting that Social Security is fiscally sound and that the Departments of Defence and Homeland Security and the Office of the Director of National Intelligence are bankrupt.
In fact, the government has collected approximately 2 trillion dollars more in Social Security taxes than it has thus far paid out, insuring that the Social Security system without any increases in taxes or reductions in benefits or improvements in US economic growth, will be fully funded for the next 30 years. Moreover, if average future US economic growth were to even modestly exceed the worst case projections of US growth used to calculate the 30 year horizon, the unchanged current system would be fully funded for the next 75 years. This represents a government fiscal policy of unprecedented and unmatched success, revealing talk of a Social Security funding "crisis" as insidious disinformation.
By contrast, trillions of dollars have been and are being spent for our wars on "terror" and in Iraq and Afghanistan without any funds being raised to pay for them. These huge, unfunded war costs are the cause of our fiscal crisis, not Social Security.
Of course, there is a problem with future Social Security funding. The 2 trillion dollar surplus in Social Security taxes which by law may be spent only on Social Security benefits, have been "borrowed" by the government to partially offset the huge budget deficits caused by simultaneously fighting wars and cutting taxes. In return, the Social Security trust fund has received U.S. government treasury bonds. Those who claim Social Security faces a funding crisis describe these bonds as "just paper" or as an "imaginary" trust fund. But these bonds are also held by China, Japan and other governments and individual investors in the U.S. and around the world. It is inconceivable that the U.S. would default on this sovereign debt including that held by the Social Security trust fund.
In the absence of an unthinkable default, the bonds held by the Social Security trust fund must be made good by either raising taxes or cutting Social Security benefits. Mr. Norris favors cutting benefits through a means test. High earners (he uses Warren Buffet as an example) would receive reduced benefits. Social
Security benefits are already justifiably structured to favor low wage earners and Mr. Norris' suggestion would not materially change it.
Mr. Norris does, however, raise a much more serious question. He asks,"If government spending must be reduced in some areas to deal with the soaring level of national debt, would it make sense to cut spending that benefits those who need it least?" Norris' puny answer to reduce Social Security benefits for high earners ignores the reality that the average Social Security benefit is slightly more than $1000 per month and the highest is only $2500 per month. These are not deep pockets suitable for reducing "soaring national debt". Norris joins the consensus among the wealthiest Americans that the place to balance the budget is on the backs of citizens with the lowest incomes in the country which includes almost all Social Security recipients.
The answer to Norris' question is, yes, of course, cut spending on "those who need it least." Most urgently that includes hedge fund managers with multi-billion dollar annual salaries paying taxes at a rate barely above payroll tax rates. If this country desperately needs to reduce its debt and deficit and make good on the bonds held by the Social Security trust fund, begin by taxing all income at earned income rates by eliminating the tax expenditure entirely for capital gains and dividends which go to those who clearly "need it least."
Maybe soon we will see articles in the New York Times truthfully and informatively reporting that Social Security is fiscally sound and that the Departments of Defence and Homeland Security and the Office of the Director of National Intelligence are bankrupt.
Sunday, April 18, 2010
Understand Goldman Sachs
Grumpy highly recommends you listen to last week's This American Life:
http://www.thisamericanlife.org/radio-archives/episode/405/inside-job
http://www.thisamericanlife.org/radio-archives/episode/405/inside-job
Tuesday, April 13, 2010
Distorting the Budget Deficit
Since 2001 the perennial gap between the richest and poorest Americans has reached an all-time high. Income for the top 2 percent of the population has increased dramatically while income has stagnated for those in the middle and has actually decreased for workers at the lowest income levels.
As this shift of income from the poor to the rich occurred, the federal budget accumulated huge deficits which Fed Chairman Bernanke now calls "unsustainable". Voices in the media respond with a clamor for an end to "fiscal irresponsibility" which has led to "unsustainable" deficits.
Despite vast discrepancies in wealth between the richest and poorest people in America, voices in the corporate media, led by the Washington Post, relentlessly propose even greater sacrifices from our poorest citizens as the solution to "fiscal irresponsibility."
In an April 13, 2010 column by Walter Pincus the Washington Post presents its latest argument for balancing the budget on the backs of our poorest citizens. Pincus praises a study prepared for the Industrial College of the Armed Forces by military officers and civilians employed in the national security apparatus which - surprise, surprise - finds that the solution to our fiscal problems is to reduce the benefits of Social Security and Medicare without even a mention that defense spending could be a factor.
Of course some wealthy people receive Social Security and Medicare benefits, but it cannot be denied that the overwhelming majority of those benefiting from Social Security and Medicare are individuals who are being kept out of poverty and provided health care only because of those benefits. It is unconscionable to call spending for those benefits "irresponsible."
It is irresponsible to ignore the budget impacts of Bush tax cuts for the wealthy or to support waging trillion-dollar-plus unfunded wars in Afghanistan and Iraq or to support maintaining a defense structure designed to defeat a Soviet Union threat that ended twenty years ago, all of which the Post has done. Until those positions can be justified, the Post should stop its efforts to undermine Social Security and Medicare benefit levels. Current benefits are the least that should be provided by the richest country in the history of the world. Social Security and medicare benefits are not the causes of our overall budget deficit, which stems from tax cuts and wars, nor are they unaffordable. As even Pincus acknowledges, if all income earned and unearned were taxed without a cap - so that the highest incomes were taxed at the same rate as the lowest incomes - then current Social Security benefits would be fully funded. Medicare funding will be fixed when the overall health care system is fixed, when U.S. costs for health care are brought down to levels achieved by every other industrialized country in the world, levels at which they achieve better outcomes.
Finally, the distortions of the Pincus column in the Post are exposed by the clumsy and heavy-handed misrepresentation of Chairman Bernanke's quote on budget deficits. In small print, the Post gives the full quote: "to avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs and Medicare, less spending on everything else from education to defense or some combination of the above." Somehow in the big-print version of the quote superimposed on a photo of Bernanke, the multiple options for cuts offered by the Chairman are quoted as only "more taxes or modifications to entitlements and Medicare." Cuts in defense spending disappear as an option in the big print.
It can only be hoped that some day the Post will treat this issue with the honesty it deserves.
As this shift of income from the poor to the rich occurred, the federal budget accumulated huge deficits which Fed Chairman Bernanke now calls "unsustainable". Voices in the media respond with a clamor for an end to "fiscal irresponsibility" which has led to "unsustainable" deficits.
Despite vast discrepancies in wealth between the richest and poorest people in America, voices in the corporate media, led by the Washington Post, relentlessly propose even greater sacrifices from our poorest citizens as the solution to "fiscal irresponsibility."
In an April 13, 2010 column by Walter Pincus the Washington Post presents its latest argument for balancing the budget on the backs of our poorest citizens. Pincus praises a study prepared for the Industrial College of the Armed Forces by military officers and civilians employed in the national security apparatus which - surprise, surprise - finds that the solution to our fiscal problems is to reduce the benefits of Social Security and Medicare without even a mention that defense spending could be a factor.
Of course some wealthy people receive Social Security and Medicare benefits, but it cannot be denied that the overwhelming majority of those benefiting from Social Security and Medicare are individuals who are being kept out of poverty and provided health care only because of those benefits. It is unconscionable to call spending for those benefits "irresponsible."
It is irresponsible to ignore the budget impacts of Bush tax cuts for the wealthy or to support waging trillion-dollar-plus unfunded wars in Afghanistan and Iraq or to support maintaining a defense structure designed to defeat a Soviet Union threat that ended twenty years ago, all of which the Post has done. Until those positions can be justified, the Post should stop its efforts to undermine Social Security and Medicare benefit levels. Current benefits are the least that should be provided by the richest country in the history of the world. Social Security and medicare benefits are not the causes of our overall budget deficit, which stems from tax cuts and wars, nor are they unaffordable. As even Pincus acknowledges, if all income earned and unearned were taxed without a cap - so that the highest incomes were taxed at the same rate as the lowest incomes - then current Social Security benefits would be fully funded. Medicare funding will be fixed when the overall health care system is fixed, when U.S. costs for health care are brought down to levels achieved by every other industrialized country in the world, levels at which they achieve better outcomes.
Finally, the distortions of the Pincus column in the Post are exposed by the clumsy and heavy-handed misrepresentation of Chairman Bernanke's quote on budget deficits. In small print, the Post gives the full quote: "to avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs and Medicare, less spending on everything else from education to defense or some combination of the above." Somehow in the big-print version of the quote superimposed on a photo of Bernanke, the multiple options for cuts offered by the Chairman are quoted as only "more taxes or modifications to entitlements and Medicare." Cuts in defense spending disappear as an option in the big print.
It can only be hoped that some day the Post will treat this issue with the honesty it deserves.
Monday, March 8, 2010
The Chump Generation?!
Robert J. Samuelson is a liar and a provocateur. In his Washington Post op-ed March 8, 2010 he once again blames Social Security, Medicare and Medicaid for the fiscal woes of the US economy.
In a report ostensibly reviewing polling reflecting differing opinions held by separate generations he reaches the conclusion, without any substantiation, that the "millenials could become the chump generation. They could suffer for their elders' economic sins, particularly the failure to confront the predicable costs of the baby boomers' retirement." Facts present a much different picture. Today, baby boomers aged 67 and eligible for full Social Security benefits have for 25 years been paying Social Security taxes at a rate far in excess of the amount necessary to pay current benefit costs. This has resulted in a Social Security trust fund surplus nearing 2 trillion dollars. Samuelson's statement that there has been a "failure" to confront predictable baby boom retirement costs is a lie. And his description of the millenials as the "chump generation" is a shameless incitement to generational conflict.
Unlike the Social Security system surplus, two fiscal policies of the US government over the past 25 years are abject failures. First, trillions of dollars of military spending have been expended on wars and weapons of profoundly questionable value to our national security without even a pretense of raising the taxes to pay for them. And second, tax policy itself has been corrupted to provide huge tax cuts to the wealthiest and most favored of Americans.
Samuelson and the Washington Post know these facts, and their relentless efforts to shield their sponsors among the rich and powerful leaders of the national security state from their responsibility for the US economy's fiscal catastrophe by placing it upon the poorest and least powerful members of society must be resisted and defeated.
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