Friday, January 28, 2005

Problem solved!

In today's New York Times Op Ed, Paul Krugman discusses Bush's 'reasoning' that leads to the conclusion that blacks don't get a fair shake from Social Security: (emp add)
... Mr. Bush's remarks on African-Americans perpetuate a crude misunderstanding about what life expectancy means. It's true that the current life expectancy for black males at birth is only 68.8 years - but that doesn't mean that a black man who has worked all his life can expect to die after collecting only a few years' worth of Social Security benefits. Blacks' low life expectancy is largely due to high death rates in childhood and young adulthood. African-American men who make it to age 65 can expect to live, and collect benefits, for an additional 14.6 years - not that far short of the 16.6-year figure for white men.
Childhood death includes infant mortality. But why stop there? Last week Bush, speaking to the "March for Life" participants, said:
We are working to ... promote compassion for ... unborn babies.

[In] The America of our dreams ... every child is ... protected in law ...
Bush considers an unborn baby to be a child. A person.

If so, then life expectancy would have to be adjusted to include fetal deaths along with infant and childhood mortality. Then we can argue about Social Security with the new number - which counts persons who never attain working-age - just like Bush does with blacks.

Here is a quick back-of-the-envelope review:
  • Life expectancy at birth: 77 years (total: m + f)
  • Abortions per 1000 live births: 314
  • Adjustment to life expectancy when including aborted fetuses as children: 1000/1314 = .76
    NOTE: We do not include miscarriages (don't have the data), which would further lower life expectancy.
  • Apply this expanded definition of "persons" to the existing reckoning of life expectancy: 77 years * .76 = 58.5 years
  • Invoke the Tim Russert argument* where the overall life expectancy is what matters (not life expectancy upon reaching age 65). That means that nobody will collect any Social Security retirement, since nobody reaches age 65.
  • No money disbursed means no shortfall, worker-to-retiree ratios are irrelevant since there aren't any retirees. Etc.
  • The system is solvent!
* - "Roosevelt said eligibility 65, which was genius, because if you made it to 65, you were on Social Security for a month or two and that was it."


1. Social security is not life insurance. It is a social welfare program. Either you believe that the wealthiest nation in the world should not let the elderly, the very young, or the desperately ill suffer, or you don't believe it. If you believe it, keep reading. If you don't, well, you're outnumbered on polls and I wish you'd get outnumbered on elections. (And quit calling 98-year-old people, invalids who are bedridden, and 2-year-old kids without access to good food or medical care "entitlements" - they're people).

2. If we believe social security is a desirable thing, and I for one do, then it's simply a matter of a dedicated tax. Person A pays a tax dedicated to relieve the suffering of Person B. The "good" reason is because Person A WANTS to relieve the suffering of Person B. The "intelligent" reason is because Person A may end up having to pay for Person B all by his/her lonesome (want to have to pay your parents' medical bills on your own?). The second reason was the main reason Medicare was created in the 1960s. And the selfish reason is that you may be Person B some day (not just by getting old either - you're just one disabling illness away from poverty, whether you know it or not).

3. If Social Security is a good thing, then one way to fund it -- the way we currently do -- is with a "dedicated tax" (like we fund bridges and toll roads) -- that means you are taxed and the money raised is dedicated to a specific purpose -- then why on earth is this tax so REGRESSIVE? 7 1/2 percent of income UNDER a certain amount is taxed from the employee; and a matching amount from his/her employer, which means 15 percent of all income from people earning UNDER a certain amount goes straight to Uncle Sam. Hmmmmm. Why doesn't EVERYBODY pay into the pot? All the way up to billionaire? They talk about raising the limit from $68,000 to, say, $90,000. WHY? Get rid of the limit etirely! We all live in the same country. Everybody should pay the same rate. (That's what we call a flat tax, by the way) And boy, wouldn't that fix the revenue problem? I bet we'd make enough that we wouldn't have to tax the employer the matching amount, which would make life a lot easier for small businesses, wouldn't it?

4. Keep following me here -- if we don't have the matching tax from business, then - hey, why not require the same contribution from "unearned" income as "earned" income -- in other words, EVERYBODY pays the same on ALL forms of income, period. Why? because it is smart, and because it is the right thing to do.

5. The way we do things now -- a 15 percent tax on labor (under a certain income) off the top goes to Uncle Sam, a huge chunk goes to administering and sometimes actually paying out benefits -- this really skews the labor market in the U.S. Perhaps not a problem when we didn't compete much with labor abroad, but a big-time problem today.

6. So, there you go. How about ... 7 percent on ALL FORMS OF INCOME, no matter how high, no matter how earned. (Why should someone get a break on putting money into another office building in Houston when doctors don't get a break on the money they spend to get educated -- that's the type of capital we REALLY need). Funding problem solved.

7. If you are worried about the baby boom, first let me reassure you that the baby bubble is coming along and is exactly the same size! Just not bigger, that's all. However, you can front load the benefits by putting money into geriatric medicine and nursing homes now, before the baby boom starts to retire.

8. If anybody out there is still a sucker for the "private accounts" switcheroo -- keep in mind that the reason we HAVE social security is because the stock market completely tanked in 1929-1932, taking real estate values along as well. Theoretically, "investment" pays because you take on risks. If you take on risks, by definition one risk is that it won't be there. You really want to do this???

9, and final. The life expectancy of a 65-year-old in 1935 was much greater than 65! That number was from BIRTH, and included childhood deaths, war deaths, and for that age cohort, the flu of 1918, which they had already gotten past. The real secret of the 65 number is that it paired well with getting more workers employed (taking over the jobs when the others retired) which was a major labor goal during the Great Depression.

(Mary Anonymous)

By Anonymous Anonymous, at 1/29/2005 7:49 PM  

Temptation to extend the theme in a different direction left unchecked: You figure quality of life is evenly distributed?
Me too!
I'm sure that the blacks would jump at the opportunity to throw in the towel given the chance.
Why grind on about extending your misery when you can end it now before you lose interest in a project that has some merit?
"Quantity is quality." Don't believe a word of it --no matter how small and insignificant your unit.

By Blogger calmo, at 1/30/2005 9:21 AM  

Mary, if the wealthy were to pay more into Social Security, they would draw more in benefits. Bill Gates will receive an SS check based on his FICA income of $90,000, about $1700 a month. If he were to pay tax on his full income of $865,114, he would receive about $17,000 a month.

Increasing the income cap is more or less a wash. Because Social Security is mildly progressive, there is some advantage to the idea, but it's not the bonanza it appears to be.

Of course, you could add means-testing, and pay Bill G. nothing, but the wealthy would rebel at that. Means-testing wakes up a demon better left alone. Social Security is popular because it's basically a fair deal for everybody.

Jim Anonymous (no relation)

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