US Social Security

[Mark1031]

Well this is a young group. I wonder what you think of social security. The so-called crisis in SS is largely fabricated to scare people into dumping the whole system. What do yoo think: 2 part poll vote 2 times.

Inventing a Crisis
By PAUL KRUGMAN

rivatizing Social Security - replacing the current system, in whole or in part, with personal investment accounts - won't do anything to strengthen the system's finances. If anything, it will make things worse. Nonetheless, the politics of privatization depend crucially on convincing the public that the system is in imminent danger of collapse, that we must destroy Social Security in order to save it.

I'll have a lot to say about all this when I return to my regular schedule in January. But right now it seems important to take a break from my break, and debunk the hype about a Social Security crisis.

There's nothing strange or mysterious about how Social Security works: it's just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline.

Right now the revenues from the payroll tax exceed the amount paid out in benefits. This is deliberate, the result of a payroll tax increase - recommended by none other than Alan Greenspan - two decades ago. His justification at the time for raising a tax that falls mainly on lower- and middle-income families, even though Ronald Reagan had just cut the taxes that fall mainly on the very well-off, was that the extra revenue was needed to build up a trust fund. This could be drawn on to pay benefits once the baby boomers began to retire.

The grain of truth in claims of a Social Security crisis is that this tax increase wasn't quite big enough. Projections in a recent report by the Congressional Budget Office (which are probably more realistic than the very cautious projections of the Social Security Administration) say that the trust fund will run out in 2052. The system won't become "bankrupt" at that point; even after the trust fund is gone, Social Security revenues will cover 81 percent of the promised benefits. Still, there is a long-run financing problem.

But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year.

Given these numbers, it's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come.

It's true that the federal government as a whole faces a very large financial shortfall. That shortfall, however, has much more to do with tax cuts - cuts that Mr. Bush nonetheless insists on making permanent - than it does with Social Security.

But since the politics of privatization depend on convincing the public that there is a Social Security crisis, the privatizers have done their best to invent one.

My favorite example of their three-card-monte logic goes like this: first, they insist that the Social Security system's current surplus and the trust fund it has been accumulating with that surplus are meaningless. Social Security, they say, isn't really an independent entity - it's just part of the federal government.

If the trust fund is meaningless, by the way, that Greenspan-sponsored tax increase in the 1980's was nothing but an exercise in class warfare: taxes on working-class Americans went up, taxes on the affluent went down, and the workers have nothing to show for their sacrifice.

But never mind: the same people who claim that Social Security isn't an independent entity when it runs surpluses also insist that late next decade, when the benefit payments start to exceed the payroll tax receipts, this will represent a crisis - you see, Social Security has its own dedicated financing, and therefore must stand on its own.

There's no honest way anyone can hold both these positions, but very little about the privatizers' position is honest. They come to bury Social Security, not to save it. They aren't sincerely concerned about the possibility that the system will someday fail; they're disturbed by the system's historic success.

For Social Security is a government program that works, a demonstration that a modest amount of taxing and spending can make people's lives better and more secure. And that's why the right wants to destroy it.


E-mail: krugman@nytimes.com

 

[emzie]

Well, for a system that was designed to help un-wed mothers, it has changed a bit.

I say keep it, if not upgrade it. Give the retired worker more benifits. I'm in favour of raising taxes. That's just me though. I love raising taxes. And I think it will be around in 60 years.

 

[Hitro]

"I think SS will be there when I retire" - always wanted to vote for an option like that.

 

[Riesstiu IV]

I thought the allies disbanded the SS after WWII?

I say we keep social security but require mandatory euthanization of all people over 64 years of age thus lowering stress placed by baby boomers.

 

[Godwynn]

I want it privatized, and if it stays as is, it won't be there when I retire.

 

[BassDude726]

I think it would present a pretty bad economic fix if it stays as is. The Baby Boom generation is retiring and the math doesn't add up. The money from my paycheck that goes to SS will be long gone by the time I retire. Get rid of it.

 

[SeleucusNicator]

There is a simple fact: Social Security as it exists today will cease to be financially possible in a few years. Therefore, it should be eliminated to avoid causing further damage to the American economy.

That doesn't mean, of course, that it can't be replaced with a more viable alternative. But it must go.

 

[JohnRM]

I'm a mature adult. I can be responsible for my own retirement. Social Security needs to go. Dive into the records and mark-up what everyone has paid and refund them accordingly. If that isn't possible, refund what we can and I will be perfectly happy to take the loss in order to keep what I will lose in the future.

At very least, make Social Security and optional plan. Allow those who feel they are big boys and girls to be responsible for their own financial safety.

 

[Mark1031]

Did anyone read the article?? guess not. Solvent till 2052 with no changes (not a few years). Solvent past 2100 with increase = 3% of Fed spending and no reduction in benifits. Hardly the crisis everyone is clamoring about.

 

[Mise]

Did anyone read the article?? guess not. Solvent till 2052 with no changes (not a few years). Solvent past 2100 with increase = 3% of Fed spending and no reduction in benifits. Hardly the crisis everyone is clamoring about.

Be warned that people will now start criticising your source. If it disagrees with the populist POV, it's obviously leftist propaganda...

 

[Mark1031]

Be warned that people will now start criticising your source. If it disagrees with the populist POV, it's obviously leftist propaganda...

I'll preempt that. It's a left wing Princeton Economics Professor writing an opinion piece in the NY Times . So get me some better numbers/sources but don't ignore his.

 

[betazed]

I agree that as such social security should not be changed. Krugman's numbers are as always correct. So if anyone says that we have to dismantle it then they have to show cause first.

At very least, make Social Security and optional plan. Allow those who feel they are big boys and girls to be responsible for their own financial safety.

However, I must say that i agree with this too. Keep social security and make it voluntary. Which means that if I do not want to contribute then I cannot also claim any benefit, ever. This makes sense. Because personally, the money that I put in into my social security tax can be put to better use for me. I can just pay down my mortgage faster with that money and hence end up with more money when I retire. as simple as that.

 

[CIVPhilzilla]

I dislkie the idea of social security. I think if I got the money I put in to keep earlier I could invest it better and live off of it much better than with the Feds investing it.

 

[Mark1031]

However, I must say that i agree with this too. Keep social security and make it voluntary. Which means that if I do not want to contribute then I cannot also claim any benefit, ever. This makes sense. Because personally, the money that I put in into my social security tax can be put to better use for me. I can just pay down my mortgage faster with that money and hence end up with more money when I retire. as simple as that.

To make its voluntary is to eliminate it. No one will sign up for it. Will they invest the money wisely saving for their retirement, maybe you would but the statistics on savings in this country demonstrate that the majority most certainly will not. Thus, we would be back to a situation where huge numbers of the elderly would be unable to work and have no income. I must say, I think I could invest the money more wisely and I'm sure you could as well but the system is frankly not for people like us it is for the bulk of people who cannot make the decision to save for a period which will arrive from 20 to 40 years in the future. I personally do not mind throwing a few grand a year into the kitty to provide a social safety net for the elderly. I simply cannot understand the animosity toward collective action with the goal of social stability in this country. Should we all just throw in money only for the roads that we drive on and want to fund. Should we each personally pick scientific projects that we think should be funded. How about decide which military units we're going to throw in money for and which we won't. We must be free.

 

[Cuivienen]

Abandoned and replaced by a new system. The current one is too far gone to revive, and it's doomed.

 

[Mark1031]

Abandoned and replaced by a new system. The current one is too far gone to revive, and it's doomed.

This is pure right wing propaganda! God they are effective. Read the article .

 

[Cuivienen]

Did anyone read the article?? guess not. Solvent till 2052 with no changes (not a few years). Solvent past 2100 with increase = 3% of Fed spending and no reduction in benifits. Hardly the crisis everyone is clamoring about.

The problem is that these are just one set of numbers. The Green Party claims that Social Security will remain stable for ~200 years before we need to change anything about it. The Democrats say 30 years. The Republicans say 50 years. The Libertarians don't care how long it will last, they just want it gone. There are so many different ways to interpret the numbers that presenting one interpretation means nothing.

(Plus, even if a 3% increase of Fed spending is instated, the odds are that another neo-Conservative spendaholic will barge into the presidency and cut that funding out.)

 

[Mark1031]

Well a system that is stable for from 30-200 yrs depending on the estimates is not really consistent with the statement 'The current one is too far gone to revive, and it's doomed' Wouldn't it be better to investigate the numbers to find out what the actual state of affairs is? Also fear of a political change as an argument against a government program would eliminate government, which is what some want for some foolish reason.

 

[Elrohir]

Social Security is a very socialistic system that doesn't work very well. If it was up to me I'd probably abandon it, (Those who had put their money into already would have that amount to use when they retire, but they couldn't put anymore in, they'd have to invest it elsewhere, and everyone who's just starting would have to find other places to put their money)

 

[SeleucusNicator]

Regardless of when it breaks, Social Security is still a $500 billion per year drain on the US budget. Decreasing that number would go a long way to solving our problem of budget deficits.