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View Diary: The Demographic Horror Story and Other Children’s Tales (26 comments)

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  •  Pernicious is as pernicious does (1+ / 0-)
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    icemilkcoffee

    There are many people who both recognize that Social Security has a long-term imbalance between costs and revenues--driven primarily by demography-- who are not trying to scaremonger anyone. They are not trying to divert attention. They are not trying to justify cutting the program. In fact by highlighting the fact that the problem is basically mechanical, the result of historically high and then sustained lower birth rates, that response to fix it can be just as a mechanical.  We can do exactly what we did from the 1960's through 1980's--raise the payroll tax rate (and as you point out counteract the erosion of system finances that is the result purely of unequal wage growth) and raise the tax cap.

    The system's costs are emphatically not out of control because somehow benefits are growing at unexpectedly rapid rates (for example the way it happened in the 1970's when policy makers mistakenly implemented a double-indexing scheme into the benefit formula during a period of very high inflation). Pointing out that the problem is demographic points out that nothing fundamental needs to change. The system is pretty well insulated from economic shocks for example. (one fix that is needed, however,  is to index the taxable maximum not to wage growth but to wage shares above and blew the threshold). AS yo know there are ways to index against demographic risks as well.

    By contrast, the health care system is clearly fundamentally broken. Cost have risen for reasons that are based on the fundamental flaws of the "system" itself.

    Likewise, the 401k pension system has proven that it is is exposed to massive risks, and has tons of inherent flaws having to do with skewed tax incentives, high fees, too low participation, lack of diversification, and premature access to funds. Saving is not a broken concept, but the 401k system is clearly broken as a means of securing broad levels of retirement security precisely because of policy design.

    There is a big debate ongoing currently about the disability program. It is complicated and has many parts, but fundamentally the question is about whether the program's growth is due primary to entirely expected changes in demographics or to flaws in program design. If it is demographics then we can just allocate a few more dollars of revenue and clam down. If it is program design then we  have to do something else more disruptive.

    Unfortunately the effect of your post here is not to cause people to clam down and pay attention to facts, it is to cause more people to scream at anyone who understands demography.

    •  You don't see the giant hole in your argument. (3+ / 0-)
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      AoT, aliasalias, Calamity Jean

      That huge demographic hitting the rolls have already paid their share of the burden into the system throughout their working lives.

      "Til you're so fucking crazy you can't follow their rules" John Lennon - Working Class Hero

      by Horace Boothroyd III on Fri Mar 29, 2013 at 11:11:27 AM PDT

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      •  The problem is that the social security trust (2+ / 0-)

        was raided and the government is trying to "fix" a problem that was already fixed. There is no problem with Social Security that can't be fixed by paying back what the government raided from it. Of course, we had to go spend that on wars and other shit, but it's still worth doing.

        If debt were a moral issue then, lacking morals, corporations could never be in debt.

        by AoT on Fri Mar 29, 2013 at 11:47:04 AM PDT

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        •  Correct. (3+ / 0-)
          Recommended by:
          AoT, Don midwest, aliasalias

          But the 'lets start generational discord' propaganda had to be addressed.

          "Til you're so fucking crazy you can't follow their rules" John Lennon - Working Class Hero

          by Horace Boothroyd III on Fri Mar 29, 2013 at 11:48:43 AM PDT

          [ Parent ]

        •  This is incorrect (0+ / 0-)

          The revenue available for future social security beneficiaries is equal to payroll tax collections, taxation of benefits, and income form the Trust funds built up between 1984-2009. Every dollar in the Trust funds is owed to Social Security beneficiaries, and there is nothing about spending in the rest of the government that can change that.  In other words the bond obligations are real. I am pretty sure Dean baker agrees with this.

          Now you could argue that  the Treasury should have used the proceeds from excess payroll taxes increase national savings or invest more in improving future productive capacity (say by funding all our infrastructure needs). You could argue we should have a more fiscally responsible budget. But nothing about what has gone on in the rest of budget changes the fact that the Trust Fund assets are owed to Social Security beneficiaries.

      •  What do you think happens in 2033? (0+ / 0-)

        1. When Baby boomers retire, most of their benefits will be paid for by current payroll taxes. Interest income is a significant source of revenue and was funded so to speak by excess payroll taxes in the past. but by and large this is still mostly pay as you go. Current workers will pay for current (Boomer) retirees.

        You can see how it works here:
        http://www.ssa.gov/...

        2. The financing shortfall starts in (best guess) 2033 and thereafter. When the Trust fund, built up between 1984-2009, exhausts in 2033 that is when everybody would have to take a ~25% haircut.

        The problem per se is not the baby boom, but that all subsequent generations only have two kids per family. The expectation is that the program is permanently more expensive when there are 2 worker per retiree compared to 3.

        •  This was already fixed until (1+ / 0-)
          Recommended by:
          Horace Boothroyd III

          the trust fund was raided. And there's no reason we can't have a social security system that works even with a population that is getting smaller. Just pull more form the rich.

          If debt were a moral issue then, lacking morals, corporations could never be in debt.

          by AoT on Fri Mar 29, 2013 at 12:58:39 PM PDT

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          •  What are you talking about? (0+ / 0-)

            When was it fixed? You should be more specific because makes no sense. Are you talking about 1983 amendments?

            You cannot raid the Trust funds. The bonds held there are backed by the full faith and credit of  the government and they can only be used to pay beneficiaries. Yes the funds deposited in the treasury were used for other expenses, exactly the same way we treat the proceeds of any other bond we sell. But absolutely nothing in that descriptions removes the responsibility of the Treasury to redeem the bonds.

          •  They don't understand. (1+ / 0-)
            Recommended by:
            Roger Fox

            They've swallowed the generation war claptrap.

            "Til you're so fucking crazy you can't follow their rules" John Lennon - Working Class Hero

            by Horace Boothroyd III on Fri Mar 29, 2013 at 01:29:48 PM PDT

            [ Parent ]

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