Tuesday, February 10, 2009

Social Security and Medicare: Doing Fine

It seems to be 'state that which is (or should be) obvious' day on this precious, precious blog, and in that spirit, I offer the full text of something economist Dean Baker has been repeating for years, and has been repeating because so many members of the chattering classes have been denying and distorting it for years. Dean Baker:

According to the Congressional Budget Office, Social Security is fully funded through the year 2049 with no changes whatsoever. Medicare is projected to face serious shortfalls, but only because private sector health care costs are projected to grow explosively over the next four decades. Since Medicare pays for a large portion of private sector health care costs, the projected explosion in costs will have a devastating impact on Medicare and the budget as a whole.

If the United States can fix its health care system to bring costs more in line with health care costs in other wealthy countries (all of whom have longer life expectancies), then there is no reason for painful cuts in Medicare. The problem is the power of interest groups like the insurance industry and the pharmaceutical industry, not the generosity of Medicare.
Given the widespread passion for "entitlements reform"* among the millionaire pundits who dominate the airwaves, this will not be the last time Dean Baker needs to state this truth.

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* This is the preferred euphemism for kicking old and sick people back to the situation they were in before the New Deal.

42 comments:

larryniven said...

I have to admit, this is the first time I've heard anybody say that. It's a small relief, and it would be larger if the crazies on the right weren't so adamant that those things were going to kill us all, which predisposed me somewhat towards believing everything would be okay.

2049, though, huh? Unless memory fails me, that was the year Marvel picked for its future-superhero thing back in the 90s. It, uh, didn't work out too well. But at least none of the superheroes were fighting crime caused by insufficient social security benefits, I guess.

larryniven said...

Argh, nope - that was 2099, apparently. I prefer 2049 myself, but then again, that's why I don't write comics. The rest of my comment stands, though.

(my captcha this time is "hydra"?! I thought they didn't use real words)

Dale said...

Dean Baker is a national treasure. He was way far ahead of the dot com bubble/burst, and then he was way far ahead of the housing bubble/burst. And that's "way far ahead" as in really thoroughly and consistently on top of those things before they happened, not just able to point to a column or two in which he kinda-sorta hinted that something might be amiss.

He's good and knowledgeable in a way that we need more people to be.

Bill Woessner said...

Social Security could be fully funded until 9999 and it still wouldn't be a good deal. According to the very same CBO, we can only expect to receive get back about 87% of the money we pay in to Social Security. Forget about the stock market, I'd rather put my money in TIPS. At least then, I'd be guaranteed to get back 100% of what I put in.

Dale said...

Bill, that's almost a good point. Almost.

Social Security is a defined benefit plan. Like any defined benefit plan -- public or private -- it is not designed or structured to pay beneficiaries the amount they paid in premiums on a dollar-for-dollar basis.

Some beneficiaries will get out more than they paid in; some beneficiaries will get out less.

In this it resembles, say, earthquake insurance or car accident insurance.

The biggest driver of whether you individually get back 87%, less than that, or more than that is your longevity. If you retire at 67 and live to 120, chances are quite good you'll get out considerably more than 87%. If you retire at 67 and die a month later, you'll get considerably less, even counting the small payout to your designated beneficiaries.

This is how defined benefit plans work -- again, private and public ones.

87% is an outcome of a lot of statistical number crunching and actuarial tables. Your experience may well differ. Which is to say, if you live long enough, you may well get a *very good deal* out of Social Security.

So live long and prosper.

Bill Woessner said...

87% is an outcome of a lot of statistical number crunching and actuarial tables. Your experience may well differ.

My experience will absolutely differ. I was born in 1978 and I pay the maximum every year. So, on average, I can only expect to get back about 64% of my Social Security taxes. Is the fact that Social Security is only a losing proposition on average supposed to make the average worker feel better?

OK, so now compare to the stock market. Since 1871, the dollar cost average real return from the S&P 500 is 6.1%. So if a worker were allowed to invest his Social Security taxes over a working career of 49 years, he would end up with (e^(.061*49)-1)/(.061*49) = 6.31 times what he invested. And that's immediately upon retirement, not if he lives to be 120 years old.

Oh, but what if the stock market crashes? Well, for starters, that 6.1% includes the crashes of 29, 98 and 08. But let's say, for sake of argument, that our retiree loses ANOTHER 50%. He's still got more than 3.16 times what he invested. In other words, he's still way better off than under Social Security.

larryniven said...

Careful, Bill - which average are you talking about? If you're talking about the mean, that's irrelevant: we're interested in the mode. On average, if super-rich people lose big on social security, what do I care? In fact, that's how the system ought (in a sense) to work: criticizing it for the effect it has on the mean is really silly.

Furthermore, you make a big mistake when you talk about what a hypothetical worker might be allowed to do. Because, you see, what workers can do is glaringly different from what they will do. Let me give you a recent example that you might remember. Given the opportunity either to invest their money in the stock market or dump it all into houses they cannot possibly afford, workers have recently chosen en masse to do the latter. Likewise for racking up huge credit card and student loan debt - and don't even get me started on how many idiots are throwing their money away playing poker. What your hypothetical ideal worker would or would not do with his money is wholly irrelevant. Social security makes sense when actual workers actually waste their money and harm the economy, and - surprise! - that's what happens in the real world. If you have some way to magically convince every working citizen of the U.S. to be smart with their money, more power to you; until then, you don't know what you're talking about.

Dale said...

All math aside, Bill, you're making a category mistake, albeit a common one. Social Security is not a 401(k). It is not an IRA. It is not a personal savings vehicle. It is a form of insurance with a defined benefit.

Just as you don't lie awake at night anguishing over whether your car insurance policy will ever generate positive returns (all "principle" + earnings) vis-a-vis the premiums you pay, you shouldn't anguish over Social Security's payouts vis-a-vis the SS withholding taxes you pay. It's just not that kind of animal, and has no business being evaluated as such. You have been lied to about this in a fundamental way.

It may be that you could take that same money, invest it, and generate better returns on it -- either by way of mutual funds indexed to the S&P 500 (you did mean 1971 not 1871 right?), annuities, TIPS, municipal bonds, a promising trifecta at the dog track, or whatever. I happily stipulate your investing acumen.

It doesn't change the fact that you are comparing apples and oranges. Nor does it change the fact that the SS/Medicare "shortfall" is bullshit.

Bill Woessner said...

If you're talking about the mean, that's irrelevant: we're interested in the mode.

Actually, you should be interested in the median. The mode is equally irrelevent.

On average, if super-rich people lose big on social security, what do I care?

Right, because the super rich are evil dogs. Shame on them for their success. The deserve to be treated like second class citizens.

If you have some way to magically convince every working citizen of the U.S. to be smart with their money, more power to you

Well, you could just make it mandatory, like Social Security is now. Personally, I think that's an awful idea (isn't liberty supposedly one of our inalienable rights?). But if it means that I get positive return on my payroll taxes, I'm all for it.

larryniven said...

No, I'm pretty sure I mean the mode. The median will help to determine that in this case, but ultimately it's a question of relative amounts of workers (i.e., whether the most people benefit), not their relative position to each other (i.e., how much they benefit). I'd guess in this case they're similar enough that it doesn't matter, but it is a distinction worth making. And either way, neither would make Social Security a losing proposition on average in the way that the mean would.

"Right, because the super rich are evil dogs. Shame on them for their success. The deserve to be treated like second class citizens."

Chill out, Bill - you were the one who began the argument as though it were wholly a matter of what the average worker would want. Are you now telling me that the average worker wouldn't want to benefit economically? If you are, then this whole discussion has been a joke; if you aren't, then you need to go talk to the average worker about who deserves to be treated badly, not me. I have a much better reason for being a proponent of social security than this, but it's customary to argue with your opponent's premises, and in this case, that means me talking about what would "make the average worker feel better."

As for mandating contributions to the stock market, I could think of worse ideas. I'd have to see more details of how that would work - how it got taxed, how it was distributed in the market, whether or not we ought to have an insurance policy for its own sake like Dale says - but I like that idea much better than just giving up on the idea of mandatory investment altogether.

Bill Woessner said...

Social Security is not a 401(k). It is not an IRA. It is not a personal savings vehicle. It is a form of insurance with a defined benefit.

Whole life insurance is a form of insurance with a defined benefit. If you had whole insurance (maybe you do), wouldn't you worry about the returns? Wouldn't you be concerned if the premiums were too high? Survivors and disability aside, what is Social Security insurance against? Old age? Insurance against old age is absurd. It happens to just about everyone.

It may be that you could take that same money, invest it, and generate better returns on it

I disagree with your use of the word "may". Why force workers in to a system that generates substandard returns when there aare clearly better alternatives? Keep the real insurance portions of Social Security (disability and survivors) if you must. But let workers build actual wealth instead of becoming addicted to entitlements.

Nor does it change the fact that the SS/Medicare "shortfall" is bullshit.

The last trustees' report under Clinton said there's a shortfall. The CBO says there's a shortfall. I would give you any odds you want that the first trustees' report under Obama will say there's a shortfall. Just because the shortfall is 40 years away does not mean there's no shortfall. Maybe you're not planning on being around when the shortfall hits. Or do you just advocate raising taxes or cutting benefits to make the shortfall go away? There go my "premiums". Or is it my "returns"?

Bill Woessner said...

No, I'm pretty sure I mean the mode

The mode is irrelevent. Moreover, the mode might not even exist. Even if it does exist, what if the mode were just a blip on the high end the distribution (curse those evil rich). Trust me, I'm a mathematician.

And either way, neither would make Social Security a losing proposition on average in the way that the mean would.

If you actually look at the CBO's report, you'll see that they always report the median. So I will revise my original statement (and perhaps even coin a new phrase): On median, Social Security is a losing proposition.

Are you now telling me that the average worker wouldn't want to benefit economically?

Not at all. But I don't think that we need to punish the rich to accomplish this. What ever happened to "e pluribus unum"? Modern politics is more like "ex uno plura" (out of one, many). Instead of coming up with policies to govern the ENTIRE nation, politicians divide us in to smaller and smaller groups and come up with different rules for each. Separate but equal? Hardly.

Dale said...

Punishing the rich? Ha! Perhaps you aren't aware that SS withholdings top out at around 100,000k of income -- meaning a person who makes $100,000 / year will pay the exact same amount in witholding taxes as their neighbor who makes $100,000,000 per year.

This isn't about punishing anyone. It's about the observation -- observation, not theory, not speculation -- that people get old and too feeble to work not having saved, and yet still need food, housing, and medical care. We can pay for that with social insurance that we fund up front, or we can wish it away and pay much more for it later.

And as for this shortfall, no, I am not worried about a shortfall that's coming in 40 years. When you're talking about forty years, the line between actuary and wild-eyed futurist gets awfully blurry, which just might explain why we're not talking about a great many 40-year projections in public policy. There's no shortage of heavy breathing about this one, though. Interesting little fact, that.

And yes, I do expect to be around in 40 years -- in the middle of my retirement years, in fact, so I do have skin in this game.

A great many reasonably painless and equitable adjustments can be made over those 40 years, assuming (dubiously) that they're entirely accurate.

Bill Woessner said...

Perhaps you aren't aware that SS withholdings top out at around 100,000k of income

I'm perfectly aware of that. Of the benefit base is also $100K. So while someone making $100M per year pays no more than someone making $100K, they also receive no more benefits. Seems equitable. However, even though the Social Security tax is flat (on the first $100K of income), Social Security benefits are paid out progressively. So yes, that's punishing people for making more money. They don't get the same deal as.

that people get old and too feeble to work not having saved, and yet still need food, housing, and medical care.

OK, then take care of those people. In fact, why discriminate against younger people? How about we just put together a welfare program to completely eliminate poverty. Total cost: $217 billion. Want to tackle health care? Make it $472 billion. Less than we spend on Social Security ALONE.

A great many reasonably painless and equitable adjustments can be made over those 40 years

Such as? Raising taxes? Cutting benefits? Pushing back the retirement age? Social Security is already a bad deal. Any of these moves will just make it worse. Why would you wish that on hard working Americans? How about eliminate the cap on Social Security taxes (or Obama's "donut")? Heck, it's already been done to Medicare taxes. Well are you then going to then pay those people higher benefits? It is, after all, called the contribution AND benefit base. If so, I don't think that will do much to shore up Social Security. If not, well... it's not like the rich needed that money, anyway. So it's not punishing them, right?

larryniven said...

Boy, you and me must not be looking at the same report. Cause on mine, on the Scheduled Ratios sheet, it says that the median worker can expect to gain from social security if they were born during or after 1970 and aren't in the highest quintile of lifetime earners, and even on the Payable Rations sheet you would have to be doing pretty well in order to experience a loss of even 10%. The mode - or a reasonable mode approximation, if you insist - would, like I said, probably reveal about the same thing, only tilted slightly in the other way (i.e., to make the gains rather than the losses seem exaggerated), and since (I reiterate) it's more a matter of who benefits than by how much, I still think the mode (which, be serious, is not anywhere near "rich") would be a better indicator of the program's success. Anyway, it's not exactly a major disaster. I wouldn't even classify a 10% loss on social security as a minor disaster, personally.

But let's return for a moment to the notion of averageness. Up until now, we've been talking about it as a purely mathematical idea. I think that's misleading, although I'm just as guilty in that as you are. Average, here, indicates not just an income level but - statistically speaking - a lifestyle. Part, if not the entire, point of social security is to allow people who live average-meaning-ordinary lives to retire in some meaningful sense even if they've chosen not to invest their money wisely during the course of their working life. For various reasons, it's easier to do this with a government-controlled regular payment than with the market. So the questions, then, are:

1. Is this something the government should help with?
and
2. Is this something that should be done by, let us call it what it is, a redistribution of wealth?

I think the answer to 1 is plainly "yes" - if you think otherwise, you'd better have a damn good reason. As for 2, this is where you seem to have a problem. You feel - quite obviously - that you're being picked on. Social security taxes are "punishment" that can only be justified if you're "evil," you're being treated in a different way than everyone else, etc. But then let me hear your alternative.

Let us pretend that there is enforced investment in the market. Though known for its long-term stability, the market does experience major short-term drops. What would be your suggestion when about half of an entire generation has their prospects for timely retirement totally erased? If they keep working, they're occupying jobs that would be better filled by younger people (for several reasons). If they stop working, they become - to use your phrase - addicted to entitlements, either from the government, charitable organizations, their families, or whoever. And so on and so forth: in order for a near-future source of wealth to be reliable, it has to be primarily based in currently existing wealth.

But now we are off the topic of what the average (meaning median or ordinary) worker wants altogether, and rightly so - that was a distraction to begin with. What the average worker wants is often incompatible with what the government needs to do. The government's role with respect to the economy, it seems to me, has nothing to do with equality or making people feel warm and fuzzy about their taxes. What the government ought to do is, at least on the American conception of government, whatever it takes to provide both universal equality of opportunity and stability of the market. To my mind, social security helps achieve both of these things in a way that many other programs - including forced investment in the market - could not. (Poverty, too, is not like a disease in that it can be cured: buying people out of poverty is much more like treating AIDS than it is treating, say, polio.) But maybe you have either a different vision of the role of government or another proposal to replace social security?

Bill Woessner said...

I wouldn't even classify a 10% loss on social security as a minor disaster, personally.

It's all a matter of perspective. A 10% loss without context may not sound bad. But when compared to a 500% gain from the S&P 500? That's not just a disaster, it's pure robbery.

Part, if not the entire, point of social security is to allow people who live average-meaning-ordinary lives to retire in some meaningful sense even if they've chosen not to invest their money wisely during the course of their working life.

Well it's clear that Social Security falls short of that goal. Despite the $564 billion spent on Social Security in 2005, 2.4 million seniors were still living in poverty (compared to 13.7 million without Social Security). That's nearly 83% effective at eliminating poverty among seniors. Sounds pretty good, right? But, again, it's all about context. For a mere $217 billion, we could completely eliminate poverty - not just among seniors. Completely. But I guess I know what outcome you prefer.

But then let me hear your alternative.

I have no problem with wealth redistribution as long as it's going from the rich to the poor. But Social Security doesn't do that. It takes money from workers, no matter how poor, and gives it to seniors, no matter how rich. So a minimum wage worker loses part of his paycheck so Warren Buffett can have his Social Security benefits. Fabulous system.

My alternative is to set up a true welfare system. If people are living in poverty, help them out. Don't draw arbitrary distinctions such as a 62 year old deserves help but a 61.99 year old doesn't. And don't pay for it with a special tax that only applies to wages below $100K. Pay for it out of general revenues (you know, our supposedly progressive tax code?). That way the rich end up paying for most of it.

What would be your suggestion when about half of an entire generation has their prospects for timely retirement totally erased?

There is no historical data to suggest this would ever happen. Even over the 40 years leading up to the very bottom of the Great Depression, the S&P 500 had a dollar cost average real return of 2.36%. That makes for a payout ratio of 1.67: STILL better than Social Security.

But just for the sake of argument, let's say it did happen. Suppose the S&P 500 was 86% below its mean (which is so many sigmas as to be laughable). If that actually happened, the entire economy of the United States would be in a state of absolute ruin. Do you really think the government would be able to keep up Social Security payments? To be fair, we probably could, but only by printing the money and hyperdeflating the dollar.

universal equality of opportunity

I'm not even sure what that means. Is the government somehow responsible for providing me with the same opportunities as, say, Paris Hilton? Wouldn't that require some kind of genetic resequencing? And maybe some cosmetic surgery...

If anything, Social Security PREVENTS equality of opportunity. At the very least, it discourages it. How is the working class supposed to join the investor class when they're being taxed to the hilt by Social Security and Medicare? Payroll taxes can and do tax people INTO poverty. I may not be certain what "universal equality of opportunity" means, but I'm pretty sure that's not it.

larryniven said...

You keep talking about eliminating poverty like it's actually something you can just up and get rid of. Poverty cannot be completely fixed or eliminated, and it certainly cannot be completely fixed or eliminated simply by giving people who are currently poor a one-time payment. The same thing is true of businesses: the reason that bailing out the banks was a bad idea was because we didn't do anything to modify the behavior that causes poverty. Similarly, unless your "pay everyone" plan includes some kind of crazy provision wherein the government gets to control everyone's economic behavior, it won't work. (I have to wonder, too, if your number takes into account debt - I feel as though it doesn't).

Your history, too, could use some updating. The entire point of social security - and I hate to repeat myself, but you don't listen - is to give people who are poor planners a way to retire. People who are good planners are already planning on working more - google it if you don't believe me. The problem is that people don't react well to the idea of readjusting their standard of living downwards, so no matter how much money you give them, when that amount dips significantly - as in times of market turbulence - many of them will choose to keep working rather than accept their losses. The relative ceilings of social security earnings vs. market earnings are irrelevant because this isn't a question of reaching a fixed wealth threshold.

You yourself should understand this: if your boss offered to raise your salary enough to cover your losses from social security, would you quit your bitching? Or if you won the lottery for that exact amount of money, or any other situation - would that make you any more satisfied? Of course not, because it's the act of "losing" money that bothers you, not the fact that you are being prevented from reaching some arbitrarily high level of wealth.

Your last little spiel about opportunity is almost entirely besides the point. First of all, leave our Medicare - that's not only not what we're talking about, it's something we liberals have been trying to fix for years now. Second, you seem to be fundamentally confused about how taxation works. The government isn't the biggest cause of poverty because - and pay attention here, this is important - they don't determine anyone's salary. If the higher-ups were really as concerned with economic mobility as you make them out to be, they would just pay people more. But okay - let's assume that this is the government's responsibility. It'd be trivially easy to shift the tax burden more to those who can afford it and thus free workers to join the investor class - except, oh wait, that's "punishing the wealthy" and we can't do that. So let me re-ask my question from last time: what is your vision of the role of government?

You seem to say that part of it is to enable social mobility, but simply cutting taxes is no way whatsoever to accomplish this. Perhaps more to the point, social mobility is nice, but it would be even nicer if we could as much as possible make extravagance the only difference between the working and the other classes. (More fundamental differences, such as unequal access to quality health care or education, too strongly affect future economic performance.) But tax cuts do exactly the opposite of that. Okay, well, how about economic stability? If low, flat taxes don't help mobility or the general quality of life, can they at least help stabilize the economy? Nope! As we continue to witness, the more opportunity people have to entangle themselves in financial situations they can't realistically get out of, the more they actually will - and that applies to wealthy people, too. So I ask: which goals do you think your tax system will meet? Or, if you aren't goal-oriented, which virtues do you think your system would honor?

Bill Woessner said...

Poverty cannot be completely fixed or eliminated, and it certainly cannot be completely fixed or eliminated simply by giving people who are currently poor a one-time payment.

It depends on your definition of poverty. The government defines poverty as having an income below a given threshold. If you accept that definition then, yes, you can eliminate poverty by simply giving those below the threshold enough money to be above the threshold. You may disagree with whether or not that will truly end your definition of poverty, but there would be no one below the poverty threshold.

The entire point of social security - and I hate to repeat myself, but you don't listen - is to give people who are poor planners a way to retire.

Why do we need to spend nearly $600 billion per year to give people who are poor planners a way to retire when the total income deficit in the United States is 1/3 of that? Do we need to give money to Warren Buffett to give people who are poor planners a way to retire? I can think of many cheaper ways to give people who are poor planners a way to retire - cheaper ways that don't involve taxing workers to the hilt.

it's the act of "losing" money that bothers you

Please don't put words in to my mouth. You are arrogant and presumptuous to do so. I have no problem paying taxes. I have no problem with helping the poor. I WANT to help the poor. I have a problem with transferring wealth from workers to seniors. People 65 and over are the 2nd wealthiest age group in America - second only to those between 55 and 64. But still... let's take money from workers and give it to them. After all, they vote in high numbers.

what is your vision of the role of government?
You seem to say that part of it is to enable social mobility


Actually didn't YOU say that enabling social mobility is the role of the government? Or did you mean something else by "universal equality of opportunity"? Personally, I don't think the government should necessarily enable social mobility. I just don't think the government should PREVENT it.

which goals do you think your tax system will meet?

End poverty, increase access to health care, balance the budget... heck, maybe even start paying off the national debt. All these things are possible IF we finally realize that the wholesale transfer of wealth from workers to seniors... may not be the best idea in the world.

What MEASURABLE goals would you have the government achieve? You mentioned "universal equality of opportunity". Can you suggest a metric with which to measure that?

larryniven said...

To use the appropriate medical terminology, your suggestion would send poverty into remission: no matter what level of money you pump into a certain economic class, over the long term it'll dissipate. Sure it will go away for a very short while, but that's not the point, is it?

"'it's the act of "losing" money that bothers you'

Please don't put words in to my mouth. You are arrogant and presumptuous to do so."

I'm not playing psychologist here, I'm citing research (you know what research is, don't you?) - and if I'm so far off, why didn't you answer my question? Would it still be "punishing" you if your boss paid you more or if you won the lottery, yes or no? Put another way: is there a salary high enough to make social security tax not a punishment? This would be a whole lot easier if you didn't consistently dodge my questions.

"Personally, I don't think the government should necessarily enable social mobility. I just don't think the government should PREVENT it. ... [The government should] End poverty, increase access to health care, balance the budget"

So, given that those things lead to increased social mobility...you do think the government should enable social mobility? But more to the point, which conditions would, for you, impede social mobility and yet not be suitable for government intervention? (I also have to point out, the government cannot do any of those things while at the same time lowering taxes.)

One good metric, although by no means the only good metric, by which to measure equality of opportunity is precisely social mobility, which we have relatively little of in this country. Another is the degree to which a member of any given class has to devote their money to the basics: food, shelter, health care, etc. (Or, as I said in my last comment, the extent to which "extravagance [is] the only difference between the working and the other classes.") Another is ease of access to quality education, another still is the differences in compensation between workers of various races or genders...there are more. Of particular relevance to this case, the relative tax burden has a fair amount to do with it.

Ideally, though, there would only be one measurement: the ratio of contribution to the economy vs. salary. I hope I do not need to actually cite numbers at you to convince you that this ratio is currently way higher in the upper echelons of our earners than it has any right to be. That kind of statistic is basically a fantasy, but that's the sort of thing I would check if I had the appropriate super power.

larryniven said...

Whoops - missed that bit about Warren Buffett. I'd be perfectly happy to means-test social security benefits, but here again, would that not add even more to how we are "punishing" the rich? I would also like to repeat my earlier question about the reliability of markets, but I've learned by now that you only respond to the objections that you have a pre-formed answer for, so I'll just skip it...

Bill Woessner said...

To use the appropriate medical terminology, your suggestion would send poverty into remission:

I'd be perfectly happy to send poverty into "remission". And if we repeat the "treatment" year after year and keep it in "remission", that's pretty much just as good as curing it, at least from the patients' point of view.

Would it still be "punishing" you if your boss paid you more or if you won the lottery, yes or no?

Absolutely. I fundamentally disagree with the policy of redistributing wealth from workers to seniors. If you want to talk about redistributing wealth from the rich to the poor, that's great. But that's just not what Social Security does.

So, given that those things lead to increased social mobility...you do think the government should enable social mobility?

If enabling social mobility is a side effect of ending poverty et al, that's fine. But I don't believe that should be the primary goal. I believe the primary goal should be making sure people have a safe place to sleep, enough to eat and access to basic medical care.

But more to the point, which conditions would, for you, impede social mobility and yet not be suitable for government intervention?

Since I don't particularly care about social mobility, I don't really have an answer to this question.

I also have to point out, the government cannot do any of those things while at the same time lowering taxes.

That's just patently untrue. According to the most recent Census CPS data, the government redistributed $1.1 trillion of wealth in 2007. Yet the market income deficit (including the cost of basic health care) was only $472 billion. More importantly, all that wealth redistribution only reduced the income deficit to $202 billion. So I have to wonder where the other $859 billion went. It must have gone to Social Security and Medicare benefits for seniors who are relatively well-off.

I hope I do not need to actually cite numbers at you to convince you that this ratio is currently way higher in the upper echelons of our earners than it has any right to be.

Who decides how high that number has a right to be? You? Is that somehow related to the objective notion of "fairness"? Furthermore, is lowering that gap more important to you than feeding, clothing and sheltering the poor?

I'd be perfectly happy to means-test social security benefits, but here again, would that not add even more to how we are "punishing" the rich?

Yes. If you take money out of someone's paycheck with the promise of giving them money later in life, you should follow through with that promise. Means-testing Social Security, at this point in time, would break that promise. But it just goes back to my basic premise that Social Security is just fundamentally flawed. Why should we promise to give money to seniors in the first place?

I would also like to repeat my earlier question about the reliability of markets, but I've learned by now that you only respond to the objections that you have a pre-formed answer for, so I'll just skip it...

I answered your question with the only means available: historical data. I even dared to predict a little bit. If you choose to ignore that answer, that's fine. But please don't be patronizing about it. You've been exceedingly rude to me and I certainly don't appreciate it.

larryniven said...

...

"'Would it still be "punishing" you if your boss paid you more or if you won the lottery, yes or no?'

Absolutely."

Don't put words in my mouth, he says, you're being patronizing, he says...

"...I don't particularly care about social mobility"

Then, and I say this just to report a fact and not to make a value judgment, you are probably in the wrong country. Social mobility is a quintessential part of the American dream, so I think you will have a hard time selling this to people without at least pretending to care about it.

If the government lowers taxes and cuts benefits by the same amount - you are suggesting something on the order of four hundred billion dollars per year, right? - then the budget deficit will remain constant (but I thought you were a mathematician?). Just cutting taxes, therefore, won't help. You have to propose ways to cut spending at much higher rates than taxes - and maybe you've got ideas about this, too, but if so, I don't think we've seen them yet. (I myself would go after the military.)

Sigh - and I was so hoping that I wouldn't have to cite numbers. Fine:

"During the past 12 months, overall total compensation of the highest-paid executive increased 20.5 percent while revenues increased 2.8 percent, the study found. As of February 2008, the average top executive received overall total compensation of $18,813,697, according to the study. In comparison, the median pay for workers rose only 3.5 percent to $36,140 in 2007, from $34,892 the previous year, according to the U.S. Bureau of Labor Statistics."

(source: http://www.aflcio.org/corporatewatch/paywatch/pay/index.cfm)

I have not yet figured out what a good ratio would be for input-to-output. But 20.5 to 2.8 doesn't make any damn sense. Right? How can an executive's contribution to the economy exceed by a factor of 6 his company's contribution to the economy?

Er, so if we set up social security on the premise that it was precisely to redistribute wealth downwards, you'd be happier with it? Because then we wouldn't be breaking a promise? I somehow doubt it...

Your explanation of market instability, again, is operating under the false assumption - that we have demonstrated false in just the course of this conversation, remember! - that people will be happy at a certain level of wealth. They will not. People - not all of them, but certainly enough - will look at market losses and go, "That's my money going away, I need to do something to get it back." By and large, that thing will be continuing to work. If and when that happens - as, I repeat, it is beginning to happen now - you will have the unfortunate scenario of the job market being absolutely glutted with workers (because the retirement age in effect has just gone up) when the market itself as at or nearing a local minimum in terms of how many jobs it can offer. Will you decree that nobody over the age of 60 is legally allowed to work? Will you simply tell the younger generations to suck it up and wait their turn? Will you somehow try to guarantee a rate of return for the entire working population of the country? What?

Dale said...

Bill: "I fundamentally disagree with the policy of redistributing wealth from workers to seniors. If you want to talk about redistributing wealth from the rich to the poor, that's great. But that's just not what Social Security does."

Um, any retirement plan (private or public) transfers wealth from current workers to current retirees. At any given time, by definition, current workers are the ones generating wealth and the prospect of more down the line, on which prospect stock valuations are based (if they're based on anything other than 'the bigger sucker' model).

This is fundamental. Whatever problems you think exist for Social Security program don't go away with the elimination of the program. No matter how you slice it, it will always be a question of currrently-productive workers "versus" non-productive retirees.

Bill Woessner said...

Social mobility is a quintessential part of the American dream

That's fine. As long as the government doesn't do anything to impede it, I firmly believe that social mobility will remain a quintessential part of the American dream. My grandfather didn't immigrate to the United States because he felt the government would give him a leg up. He came here because he believed there was a level playing field and a lot of opportunity. As it turned out, he was right, but it's becoming increasingly less so.

If the government lowers taxes and cuts benefits by the same amount - you are suggesting something on the order of four hundred billion dollars per year, right? - then the budget deficit will remain constant (but I thought you were a mathematician?)

You either failed to read what I actually wrote, couldn't understand it or are purposely misinterpreting it. So I will go through it explicitly. In 2007, the government redistributed $1.1 trillion in wealth. Stop doing that. Instead, redistribute $472 billion to the poor. That reduces outlays by $628 billion. The budget deficit in 2007 was $162 billion. So now we have a $466 billion surplus.

Now it gets even better. Amortize the national debt (public debt only; more on that later) over, say 20 years. The going rate on 20 year treasuries at the end of FY06 was 4.84%. That makes for an annual payment of $378 billion. But we were already paying $237 billion in interest so the difference is $141 billion. Take that out of the surplus. Now we can give a $325 billion tax break.

What about the intra-governmental debt, you ask? It was, after all, $3.7 trillion back in 2007. Of course, that's money that the government literally owes to itself. So I say just toss it.

And what about the promise of entitlements? No problem. Just tax all those stupid tax-deferred accounts. It will generate a huge windfall which we can then redistribute to people according to how much Social Security and Medicare taxes they paid. We can even weight it with compound interest so seniors will be naturally favored.

So let's see check the score card. End poverty, including basic health care? Check. Balance the budget? Check. Cut taxes? Check. Start paying off the national debt? Check. Extricate us from the morass of entitlements? Check. Hot damn! I hit the perfecta!

I have not yet figured out what a good ratio would be for input-to-output. But 20.5 to 2.8 doesn't make any damn sense. Right? How can an executive's contribution to the economy exceed by a factor of 6 his company's contribution to the economy?

Don't know, don't care. It's just not an issue to me. This is a private sector matter. If we end poverty, that's victory enough for me. I have no desire to artificially lower executive compensation. I see no need to. I agree with the administration on limiting the compensation of executives at companies that receive government assistance (though I question the wisdom of providing that assistance in the first place). If some people are making 10,000 times more than I do, I don't hold it against them. I don't begrudge them their success. I just go about the business of taking care of myself and my family.

Er, so if we set up social security on the premise that it was precisely to redistribute wealth downwards, you'd be happier with it? Because then we wouldn't be breaking a promise? I somehow doubt it...

Well now on top of everything, you're calling me a liar. That is precisely what I said. If you refuse to take what I'm saying at face value, well... there's just nothing I can do about that.

Your explanation of market instability, again, is operating under the false assumption - that we have demonstrated false in just the course of this conversation, remember! - that people will be happy at a certain level of wealth.

OK. How does that change the fact that investing in the S&P 500 beat Social Security, even in the 40 years leading up to the bottom of the Great Depression? I'm not claiming that forcing people to invest in the S&P 500 will end greed or stop the quest for more wealth. I'm just saying that it provides better returns than Social Security, even in the worst of times.

Bill Woessner said...

No matter how you slice it, it will always be a question of currrently-productive workers "versus" non-productive retirees.

Why? Why can't retirees just save for their own retirement? Social Security will only give back 87% of what they paid in taxes. So why can't they just stuff that money in a mattress and sit on it until they retire? As long as they can find an investment that keeps up with inflation (TIPS comes to mind), they'll be better off, "on median", than they would under Social Security. That seems like a win-win to me.

Dale said...

Bill, assets increase on the assumption that something will make them cost more in the future. This is what makes something as basic as a P/E ratio possible -- stocks are market-priced according to *prospective* value to some (non-trivial!) extent or other. At some point, for that valuation to prove out, someone needs to redeem it with actual productive work.

A hypothetical. Consider a company -- a simple two-person partnership firm of painters who do their own work -- that's making gobs of money today but looks forward to a moment in a month when both employees will retire. At that point, the company stops. It's painting stops because the partners are no longer doing it. Would it be wise for the partners to sink their current earnings into the "investment" represented in that company's ongoing operations? And to retire on that?

No.

Consider the same company in the same circumstance where the partners are planning to hand off ongoing management/operation to two younger partners in a month. Existing customers will stay in place. The business will stay in place. Money will continue changing hands for painting work accomplished. They think the younger partners are exactly as talented as they are (no more, no less) but just happen to be younger. In this case, it makes sense to treat the company as a prospectively wise asset in which to invest. Over time, they can sell off fractional pieces of the business to fund their new life of fishing and RVing.

In principle, the latter can make perfect sense. The former cannot. The key difference is in the latter case, current workers still create ongoing value that matches or exceeds ongoing costs.

Which is to say, in the latter case -- to use your overheated formulation -- "wealth is being transferred from workers to seniors."

This is a simplified example but that seems called for.

The basic point is that no one can even think to do anything like retiring -- at any age, for any reason -- if there aren't others still engaged in valued, productive work.

The source of the Social Security program's 40-year shortfall is that the ratio of productive working people to non-productive non-working retired people is expected to decline. Change the ratio by adding workers (as by increasing immigration) and the problem vanishes immediately.

Note that changing the retirement age is just a way of altering this ratio by decreasing the number of retirees.

If this is a problem for Social Security in 40 years, there's no obvious reason why it's not a problem for everything else in exactly the same way. Any society with a low ratio of current workers to retirees is going to have trouble paying for everyone's needs. This is true of the firms in the S&P 500. This is why a household with one earner making $60,000 and no dependents enjoys a higher standard of living than his equally-paid neighbor with newborn octuplets. It's true across the board.

There's no magic savings vehicle that overcomes this, because the value of any savings vehicle is based, inescapably, on the same primary factor: the productivity of human beings.

If you say private funds can pull value from foreign sources -- say, countries with a more favorable worker-retiree ratio -- then there's no obvious way you've not just solved Social Security's problem too. The trustees of Social Security can shift their investments to those same foreign assets. It's one way of reforming the program among several. Increasing productivity will, all else held equal, solve this problem too. And that's where investments in infrastructure and education tie in.

Bill Woessner said...

Which is to say, in the latter case -- to use your overheated formulation -- "wealth is being transferred from workers to seniors."

No, it's not. Wealth is being transferred from employees to investor-owners. The investors don't have to be seniors or retired. Your simplified analogy falls far short.

Any society with a low ratio of current workers to retirees is going to have trouble paying for everyone's needs.

I propose the recent fiscal history of the United States as a counterexample to this statement. The ratio of workers to retirees has been dwindling steadily since the New Deal. But the wealth of the United States has increased tremendously. You may attribute that to increasing productivity. OK, fine. But then it strikes me that any argument you make about increasing productivity saving Social Security applies equally to the S&P 500. So I'm still left wondering why you would force people in to a subpar system like Social Security when there are simply better alternatives.

The trustees of Social Security can shift their investments to those same foreign assets.

I'm not certain, but I don't believe that's true. I'm fairly certain that Social Security is required to invest its surplus in those special-issue treasury bonds (i.e. government spending). Surely, Congress could amend this, but I don't think it would go over all that well.

On the flip side of that argument, increasing numbers of the S&P 500 companies are becoming globalized. They're already tapping in to foreign markets and it doesn't require an act of Congress to do so. Or you could just invest in foreign assets, directly. I'm sure Vanguard has a few international stock index funds.

Dale, I'm not an economist. I'm a mathematician. So I'm not qualified to comment on the ins and outs of macroeconomics. All I can do is interpret the numbers. And the numbers tell me that Social Security is simply a bad deal. No one has been able to come up with a quantifiable argument for why it persists. It's all hand waiving and warm fuzzies.

I want metrics. I want numbers. I want to see some hard data that justifies the ~$600 billion transferred from workers to seniors annually. And I completely reject the false dichotomy of "it's Social Security or nothing". That's the sort of absurd thinking that's been bred from the 2 party monopoly. It is possible to take care of the poor and not transfer huge sums of money from workers to retirees. I hope that, at the very least, I've demonstrated that much.

Dale said...

Bill: And the numbers tell me that Social Security is simply a bad deal. No one has been able to come up with a quantifiable argument for why it persists.

This takes us back to the beginning of this long and interesting discussion: to label SS "a bad deal" and to cast around for a "quantifiable argument" for it is to commit a category mistake.

The argument is not "SS as currently constituted generates the highest possible rates of return for its beneficiaries; no alternate mix of investments could beat it over any significant time horizon." That is not the truth, it is not the argument for SS, and it misses the fundamental raison d'etre for the system.

SS is an insurance arrangement designed to manage risk. Its pool of insured is a big one -- every working-age person in the USA and their dependents. The risk in question is the risk that people will get sick, old or feeble -- not cut out for the work force -- without having adequately saved enough money to meet their ongoing basic needs.

Maybe it's OK with you if people in large numbers reach their golden years and find, to their shock, that they have failed to save any money. At which point they can move in with their adult children, scrape by on charity, or just starve. But socially and politically speaking, that answer is not going to fly.

Under our free enterprise system, we are rightly loath to force people to purchase things that "we" think they need. But there are exceptions. "We" force people to buy car insurance, and "we" carefully regulate the terms of car insurance contracts, because there are serious risks (with big economic consequences) to be managed, and this is a way to deal with them.

Does this mean we're not a purely free market? Yes it does. And yet life goes on.

Defined benefit retirement plans that are not social security but entirely private have exactly the same flaws you cite. Namely, they characteristically produce unexciting rates of return. They typically experience "opportunity costs" if you prefer. If you look at them closely, you find that they are often in a mix of securities that will not foreseeably beat the S&P 500 index over a long time horizon. And yet there they are. And pension managers are not being fired for that per se. What's more, libertarians aren't pulling their hair out over these plans. So what's going on?

The same thing as SS. Pension plans are not trying to maximize rates of return for each individual participant. They are striking a balance between reserves, rates of return for various assets, the best actuarial projections of the insured pool's claims experience, and gawd knows how many other factors. Their goal is not to maximally enrich everyone who retires under the plan --- they know, for starters, certainly in every case I've ever heard about, that the pension is but one part of overall retirement funding. Their goal is not even to guarantee some relationship between dollars paid in and dollars paid out for each individual participant (e.g., thou shalt never withdraw more than thou paid in). They are aiming to hit a balance such that each participant gets what the plan has promised -- some or other regular schedule of payments upon retirement lasting until death or some defined number of years. (Much like this thread.)

There are valid criticisms of a pension plan, whether private or public -- are the reserves at adequate levels? Are the funding and payout schemes reasonable? Is the mix of investments the right one? Are we monitoring all the risks with due care? When the company/government dips into the reserves, are we absolutely sure they're paying it back?

'Does this pension plan generate maximal returns for each participant' is just the wrong question.

Bill Woessner said...

The risk in question is the risk that people will get sick, old or feeble -- not cut out for the work force -- without having adequately saved enough money to meet their ongoing basic needs.

NO. That is NOT the risk that Social Security insures against. Social Security insures against old age, NOT destitute old age. If Social Security only insured against destitute old age, it would be a lot cheaper and we wouldn't have to rape workers to fund it. And Warren Buffett would not collect it.

Maybe it's OK with you if people in large numbers reach their golden years and find, to their shock, that they have failed to save any money.

I don't know how you can POSSIBLY read all that I've written and believe I think that. On top of being arrogant and presumptuous by putting words in my mouth AND calling me a liar, you now won't even show me the dignity of reading and comprehending what I've written. Instead, you just make up whatever negative stuff you want and ascribe it to me. You are a real piece of work.

What's more, libertarians aren't pulling their hair out over these plans. So what's going on?

Do you really need to ask? Do you really not see a difference between private defined benefit plans and MANDATORY Social Security. If I could opt out of Social Security, I wouldn't be complaining. If a potential employer had a defined benefit plan, I would weight the costs and benefits along with the rest of their compensation package. But the federal government does not allow me that luxury. Or, at least, not without going to jail.

e.g., thou shalt never withdraw more than thou paid in

Someone should have told that to Ida May Fuller and the rest of her generation who made out like bandits from Social Security.

'Does this pension plan generate maximal returns for each participant' is just the wrong question.

In your opinion. I, quite obviously, disagree.

Dale said...

Bill, First, I have read what you've written. Second, I did not ascribe the view to you. The latter is signaled by the words "maybe it's OK with you if ..."

I didn't call you a liar, nor did I put words in your mouth.

If you doubt me on these points, I invite you to take a moment to check around this blog. I think you'll find that when I consider person X to be a Y, or believe that person X holds opinion Z, I don't mince words about it but state it clearly without conditionals or hedges. You might helpfully narrow your search by looking for words like "asshole" and "rape." Also, I often use "insipid" when I am really moved to invective (call it a tic).

I think what you've written here is reasonable (by and large - e.g., I don't think a word like 'rape' really captures the truth of social security withholding), I just don't agree with it. I've made my points and you've made yours. LarryNiven has made many fine points too, more agreeable to my side. So it goes.

It's really OK if we disagree. It's also OK if we exit this discussion without either side convincing the other (it's also OK if we find new grounds on which to continue it). It happens every day. It doesn't mean we have to be enemies or whatever.

-Dale, piece of work

larryniven said...

Now, see, this is the sort of thing that makes me dislike other people. First you say that we ought not punish the wealthy by taxing them so much, that social security taxes people into poverty, and that you can fix all of those things simply by switching out social security with this investment idea of yours. Then, when questioned, you say that your idea only cuts spending and has nothing to do with taxes - how, then, does it fix either of those things? You also have no apparent answer regarding what happens in the short term when a person's retirement savings go poof. This isn't exactly minutiae, and yet you have yet to give it any serious treatment in this discussion.

Forget the fact that you started off the conversation with a straw man - that taxes are there to punish the rich because they're evil - and that you continue to produce them now ("I have no desire to artificially lower executive compensation [in general]" - and who does??). Forget that your suggestion brings up all kinds of legality issues that neither you nor I have even the beginnings of the expertise necessary to discuss. Forget that your idea wouldn't even do what you say it would do (just because the entitlement isn't social security doesn't mean that government paychecks aren't an entitlement - and, by the way, in what world is it an entitlement to receive one's own money?). The problem here is that I see no real interest on your part in honest debate. I'd love to have a more efficient and yet equally reliable system to do what social security claims to do: yours is not it.

Now if you'll excuse me, I have a blog post to write about movies...

Dale said...

LN, if this long thread has taught me anything, it is that I should be very careful about entering an argument on the side opposite you. I don't think it would end well for me.

So if I disagree with you down the road, I will be inclined to lurk and grouse to myself over it.

Then again, I have a pretty mixed record when it comes to following common sense. And besides, we don't disagree on much of anything as far as I can see.

Thanks.

Bill Woessner said...

First you say that we ought not punish the wealthy by taxing them so much

I said nothing of the sort. YOU said, "On average, if super-rich people lose big on social security, what do I care?" I called on you blatant class warfare. Actually, had you bothered to ask, I would have told you that I believe the wealthy don't pay nearly enough taxes. But that's because I think the entire tax code is screwed up. I just don't feel that we should pick on the wealthy just because they're wealthy. Based on your remarks, I take it you disagree.

that social security taxes people into poverty

It absolutely, positively does. If you don't believe me, just go consult the Census's CPS data. According to the latest data, over 5 million people were taxed into poverty in 2007 (and that doesn't include any sales or excise taxes). I confess, that's not all necessarily due to payroll taxes. But payroll taxes kick in on the first dollar earned, so I think it's a pretty good bet.

Then, when questioned, you say that your idea only cuts spending and has nothing to do with taxes - how, then, does it fix either of those things?

Taxes and spending are pretty inextricably linked. True, I did not detail how I would disburse the huge cut in spending. But given my railing against payroll taxes, you could have taken a wild, completely unsubstantiated guess. You seem like a decently bright fellow. You might have even been right.

You also have no apparent answer regarding what happens in the short term when a person's retirement savings go poof.

First of all, I don't think that's a reasonable scenario. Second of all, if a retiree found himself below the poverty threshold, my welfare program would kick in. Does that answer your question?

Forget the fact that you started off the conversation with a straw man - that taxes are there to punish the rich because they're evil

No, that's not how I started the discussion. I started the discussion by saying that Social Security is a bad deal. You're the one who suggested that we soak the rich because.

Forget that your idea wouldn't even do what you say it would do

How does it fail to achieve the goals that I set out? Please, be specific, establish metrics and use real numbers.

by the way, in what world is it an entitlement to receive one's own money?

In the United States, evidently. Are you entitled to receive 100% of your paycheck? No, of course not. Furthermore, Social Security benefits are NOT one's own money. It is well established that you do not own your Social Security benefits. The government has merely promised that money to you. And, as we've seen over and over again, the government can unilaterally alter that agreement at any time (raising taxes, pushing back the retirement age, etc.).

The problem here is that I see no real interest on your part in honest debate.

I have implored you several times to establish real metrics and provide real numbers. All you respond with is hand waiving and rhetoric. I'm not the one who's refusing to participate in an honest debate. I strongly suspect the reason you refuse to establish any metrics is that Social Security will fail on all of them. However, until you actually agree to do so, my theory will just have to remain untested.

Bill Woessner said...

LN, if this long thread has taught me anything, it is that I should be very careful about entering an argument on the side opposite you.

Ah, yes. That must be some of that famous liberal tolerance we're always hearing about. So glad to see it in the flesh.

Dale said...

Bill, A while back you objected to my (imperfect) analogy thusly: "No, it's not. Wealth is being transferred from employees to investor-owners. The investors don't have to be seniors or retired. Your simplified analogy falls far short."

You still don't see what I'm getting at. There's no "value creation" in the mere act of owning something. Someone has to do work. Someone has to create value with ideas and effort (and capital). In the analogy, merely owning the firm became quickly worthless in the case where the partners retired and work ceased. It did not become worthless in the case where the work of comparable quality continued.

Owning without work can be a money-maker so long as work is being done.

The point was to illustrate, again, that there is no retirement for anyone, anywhere if there aren't people to carry forward productive work. All to the bigger point that the worker-retiree ratio is critical to any socio-economic scheme in which there will be (or where we will want there to be) retirees.

I think a lot of armchair libertarians have convinced themselves that merely owning something is, in and of itself, wealth-creating. It isn't.

Obviously it's useful and necessary to put up capital. Capitalism needs an "investor class" so to speak. Obviously. But somewhere along the line, someone has to take that capital and do something with it or there will be no new value generated. Holding a certificate of ownership doesn't count as value-creation.

Bill Woessner said...

Holding a certificate of ownership doesn't count as value-creation.

I agree. But neither does transferring wealth from workers to seniors. So with respect to creating value, what advantage does Social Security have over saving for one's own retirement?

Dale said...

Bill said: Ah, yes. That must be some of that famous liberal tolerance we're always hearing about. So glad to see it in the flesh.

Whuh? I honestly don't know what you're driving at. I had complimented LarryNiven as it seems to me that he has handed your ass to you over the course of this thread. And I made the comment that I want to be careful about blundering into the side opposite LarryNiven in the future, lest I have my ass handed to me. What this has to do with "liberal tolerance" escapes me.

You've made some fair points here and there, Bill. You're right that SS isn't exactly social insurance in that it pays out to rich people. True enough. It's really like a defined benefit retirement savings vehicle (pension), which is where I began with this. Relating it to social insurance was a way of trying to elucidate some of its features. Not all, some. Same with the mentions of car insurance.

But whatevs.

It's been a while since you've said anything new, so I expect you'll re-state one of your previous comments about how badly your feelings are hurt by the low rates of return on your social security tax payments. Godspeed!

Bill Woessner said...

I had complimented LarryNiven as it seems to me that he has handed your ass to you over the course of this thread.

If I had my ass handed to me then I guess I have a thing to learn about debating. Here I thought that one should be using facts and data to support your argument. But instead, LarryNiven used hand waiving, rhetoric and feel good fuzziness. It's illustrative to know which one you find more compelling.

The only data LarryNiven cited was his completely unrelated rant about executive compensation. I have no idea what that has to do with Social Security, but obviously it was compelling enough to hand me my ass. So goes it when the judge worries more about the warm fuzzies than the real world.

Furthermore, I asked LarryNiven multiple times (all but begged, really) to establish some kind of metric by which to measure the success of Social Security. My metrics are poverty elimination and cost, but I welcomed him to introduce any quantifiable measurement. He declined. And yet you claim he handed me my ass? Maybe I should employ his tactics in the future.

larryniven said...

Look, I just can't carry on a conversation with someone who believes that it's fundamentally wrong to redistribute wealth from the rich to the poor and yet proposes a progressive tax with which to end poverty. I equally cannot carry on a conversation with someone for whom "balancing the budget" means subtracting an equal amount of spending and revenue from said budget. And look: I have no real idea whether social security is working as such (because I simply have not done enough research), although all the stories I'm hearing tell me that it is. It's overfunded at the moment (other programs borrow from it, not the other way around); many recipients in fact rely on the money; it's stable (this last concern in particular is one that cannot be met in your system). That suffices for me, although I'm not trying to say it's a perfect program - and, unless I'm very much mistaken, our budget (SSA and all) was in great shape until someone named Bush took over. The fact that these truths do not suffice for you does not mean that social security has failed; rather, it means you and I have different priorities. Is that a surprise, at this point? It's called democracy: if you can get enough momentum behind your silly arguments, it'll change. Until then, either deal with it or lie on your taxes.

suggested reading:
http://oversight.house.gov/story.asp?ID=802
http://www.heritage.org/Research/SocialSecurity/bg1802.cfm
(in particular, "For now, Social Security is collecting more than enough money both to pay full bene­fits to current retirees and those about to retire and to fund PRAs [personal retirement accounts]")
http://oversight.house.gov/story.asp?ID=847

Anyway, Dale, you should totally disagree with me when the opportunity arises. For one thing, I love doing this (maybe you can tell?), although to a point, which I have now reached in this particular conversation. For another, you may well convince me I'm wrong - it has in fact happened before. Anyway, I'd hate to think that my readers are holding something back.

Dale said...

No worries, LN. I am confident in my strong track record of bounding into arguments without allowing qualities like "prudence" or "caution" or "thoughtfulness" to slow me.

Obviously opinions differ, but I've been impressed with the way you've kept focused and tried to keep the bouncing ball of Bill W's various arguments straight. And of course, your blog is a storehouse of this same quality.

Bill Woessner said...

Look, I just can't carry on a conversation with someone who believes that it's fundamentally wrong to redistribute wealth from the rich to the poor

I never said that. When did I say that? Please provide the date/time stamp and paragraph number of when I said that. You won't find it. I fundamentally disagree with transferring wealth from workers to seniors. I believe that's very different than transferring wealth from the rich to the poor. If you believe otherwise, please make a case for it.

I equally cannot carry on a conversation with someone for whom "balancing the budget" means subtracting an equal amount of spending and revenue from said budget.

Nor did I say that. Please reread the comment at 13/2/09 07:18, the 3rd and 4th paragraph. To summarize, I suggested cutting spending $487 billion and cutting taxes $325 billion. It's no accident that the budget deficit in 2007 was $487 billion - $325 billion = $162 billion.

I have no real idea whether social security is working as such (because I simply have not done enough research), although all the stories I'm hearing tell me that it is.

Stories? You're defending a $600 billion program (the largest single item in the federal budget) with anecdotal evidence? Come on, man, you have to give me more than that. You have the entire Internet at your disposal. Spend a few minutes, do some research. You'll be surprised what you can come up with. Though I suspect you'll also be dismayed at what you learn.

it's stable (this last concern in particular is one that cannot be met in your system)

I disagree. Suppose we cut taxes by $325 billion. Then, if it turns out that we have to raise taxes to support more anti-poverty spending, we have room to do so before we get back to the current level of taxation (roughly 2% of GDP). That's more than can be said of the status quo.

our budget (SSA and all) was in great shape until someone named Bush took over.

If you call $3.4 trillion in debt (34% of GDP) "great shape" then yes, I suppose we were. You won't trick me in to defending Bush and the Republicans. Nor will I fall for any false dichotomy trap. Just because I abhored the Republicans' spending spree under Bush doesn't mean I support the Democrats' spending sprees, past and present. There are more than two schools of thought on the matter.

The fact that these truths do not suffice for you does not mean that social security has failed

I agree. That's why I am imploring you, yet again, to establish some kind of quantifiable metric by which to measure the success of Social Security. I don't know how I can possibly stack the cards more in your favor. You get to set the rules by which the game is played. If there is any merit to Social Security (and there isn't an obviously superior alternative), you should win in a landslide.

Bill Woessner said...

OK, let's make it easier. Just DESCRIBE what you like about Social Security. Let me give you a simple example. This is just an example. I wouldn't want to put words in your mouth - that's your game. You might say, "Social Security is a good program because it keeps seniors out of poverty." There, that wasn't so hard.

To which I might respond, "That's not the whole truth, now is it?" Despite Social Security, 6.7% of seniors (roughly 2.4 million people) were still living in poverty in 2005. Moreover, the cost to elevate all seniors above the poverty line in 2007 was a mere $60 billion. So instead of spending $625 billion and having 6.7% of seniors still living in poverty, why not spend $60 billion and have 0% of seniors living in poverty?

Now you try.