Wednesday, June 09, 2010
Dean Baker on proposals to "adjust" Social Security:
I'll just post the first two paragraphs: (emp add)
Will a Partial Default on the National Debt be Necessary to Get the Deficit Under Control?
That is what the Washington Post argued in an article on President Obama's deficit commission today. The article told readers that: "Adjusting Social Security benefits is a likely point of consensus, commission members say." [The word "adjusting" is presumably a typo. The only way to reduce the deficit is by cutting benefits.]
The Social Security trust fund holds more than $2.6 trillion in government bonds. According to the Congressional Budget Office, this money will be sufficient, along with current tax revenue, to pay all scheduled benefits through the year 2044. The decision to cut benefits would effectively mean defaulting on these bonds -- denying workers the benefits that they have already paid for through the designated Social Security tax.
Readers of this blog know that I'm insistent that the word "default" should be used when it comes to trying to weasel out of paying the full amount to the generation that paid "extra" (i.e. pre-funded) into the system.
From the Post article
[Social Security's] defenders argue that there is no crisis: If Treasury would repay billions of dollars in surplus Social Security taxes borrowed over the years, the program could pay full benefits through 2037. But many budget experts question whether supporting the existing benefit structure should be a cash-strapped nation's first priority.
Got that? Many "budget experts" question supporting the existing benefit structure that has already been paid for
. Where were these experts when the opportunity to pay down a substantial part of the debt (so that it could be raised again during the SS-bond payout period) was lost? Instead, we got Bush tax cuts and a pair of unfunded wars.
You sound like a Bernie Madoff investor who just doesn't get it.
What about the money I paid in? Why don't I get it back with interest?
Answer: Because it has already been spent. It no longer exists, and there is no possible way to raise that sort of money.
Too bad we weren't able to privatize Social Security. Had we done so, everyone would have an individual account, backed by assets. The money would still exist. But it doesn't, because the liberal belief in the virtue of government control was so strong that liberals were more willing to allow their entire futures to be robbed from them right in front of their eyes than to entertain the notion that there might be a better way to run the world than socialism.
Anonymous wrote, "Had we done so, everyone would have an individual account, backed by assets. The money would still exist."
LOL! At least we liberals are intelligent enough to know what's happened to the stock market over the relevant time frame, you blithering right-wing idiot.
Anonymous #1 is correct to a point. The taxes paid into Social Security today are used to pay the benefits of today. This is how Social Security has always worked. And in the past several decades, any surplus after benefits were paid out went into a trust fund to help smooth out the eventual deficit of future revenues to pay future benefits.
Where Anonymous #1 is wrong and where the Dean Baker article accomodates him or her is that Social Security has never been set up in the privitized way both want to set it into. The money goes in, the money goes out. I don't own a piece of Social Security. The money I pay in affects the amount of money that I will recieve later on, but I don't own a piece of Social Security. It's not mine in any sense except a collective one - it is all of ours.
However, I believe the current peril of the Social Security system is ironically the trust fund set up to help save it. It's bad enough in government to set up a gigantic flow of cash from point A to point B. It's even worse to set up a gigantic pile of money. Then the buzzards of Wall Street really do begin to gather.
Many times they have almost clawed Social Security apart into easily digested sections, subject to investment fees, maintainance fees, etc. Always they have been resisted. And in the meantime, Social Security funds were spared the financial meltdown they would have been decimated by, if they had been cut apart into individual investment accounts.
The Wall Street Journal's sour grapes suggestion should be avoided. Defaulting on SS bonds would further cripple the federal government's ability to regulate their industry.
The trust fund was never a gigantic pile of money. It was, by design, a gigantic pile of debt. Hard cash came in from payroll taxes, replaced with IOUs, and was immediately sent away to the treasury to be spent.
As for anonymous #2, yes, the stock market goes up, the stock market goes down. I don't think you understand that retaining the fraudulent "trust fund" has destroyed Social Security. Something is better than nothing, and right now Social Security has nothing but IOUs from a bankrupt government.
HUH.. bankrupt hmmm...
They seem to have no problem coming up with $1,000,000,000,000,000 a year to kill people and bomb their houses and keep defense contractors happy....