Friday, May 27, 2005

Matt Yglesias on the political danger to Social Security

Matt Yglesias at Tapped writes about how Democrats need to learn how to lose votes in Congress, and he especially focuses on Social Security.

His key point is that the Republicans won the elections fairly in 2002 and 2004. As a result they now dominate Congress and the White House. If they want to pass something (like Social Security reform) they can do it.

The only protection from the Republicans is for the Democrats to take back the Congress in 2006 and the Presidency in 2008.

Armando at Daily Kos points out that "in opposition we oppose the policies we disagree with and we fight against those decisions and nominations we can not reverse with the one tool of power we have remaining against Republican abuse - the filibuster."

But the real point is that the Democrats can't do shit until they get back into power. There is no longer any room in the Democratic Party for single issue partisans.

Wednesday, May 25, 2005

This Letter says it all!

From Talking Points Memon (Josh Marshall)

A TPM Reader chimes in ...

Why is it Social Security that needs fixing when it is the Republicans’ runaway’ spending that is the problem?!

By their own admission, the problem will occur when the excessive SS contributions begin to slow down causing the government to look elsewhere for the money they need to cover all those tax cuts they gave their rich friends (and, I suspect, themselves).

So why is it Social Security that needs fixing?

Please explain.



That pretty much covers it. The real danger to Social Security is to be found in the president's first-term tax cuts.

-- Josh Marshall

Saturday, May 21, 2005

My letter to Congressman Wexler

Several days ago Congressman Rober Wexler offered his plan to "save" Social Security, breaking ranks with the Democratic Party leadership to do so. This is a copy of the letter I sent him.

May 21, 2005

Congressman Robert Wexler
Palm Beach County Office
2500 North Military Trail • Suite 100 • Boca Raton, FL 33431

Re: your recent Social Security proposal

Dear Congressman Wexler,

You aren’t my Congressman, but you are screwing with MY Social Security. I am retired and living on the benefits right now. I want my children and grandchildren to be as fortunate.

I don’t know who got to you, but your freelancing could be a major element in allowing the Republicans to get what they want – the destruction of the Social Security system.

Your plan isn’t a very bad one, but Robert Ball’s “Century Foundation Issue Brief” ( ) is a lot better. Go look at it. Then remember, when you deal with the Republicans, you get what they want you to get. Nothing more. And they won’t tell you want that want you to get because you won’t like it. Ask my recent Congressman, Martin Frost.

There is no serious problem with Social Security other than a political effort by the Republicans to destroy it. Think otherwise? Here are two points (among many) to consider.

1) If productivity stays at or near historical levels, there is no need to do one damn thing to fix SS, so buying into the Republican line that the program is in crisis is a bad idea. It is like an insurance salesman telling you all the risks you face just before he offers you his (over priced and under performing) insurance product.

2) Even if one were to want to guarantee the future financial sustainability of Social Security into perpetuity (not a bad idea in the abstract) by eliminating the cap, do you seriously think that any bill which touches SS will (a) get through a Republican Extremist Congress and Joint Committee without turning into privatization, and (b) be implemented in a competent way by the lunatics running the country now?

There are good Republicans, but even the good ones will do whatever it takes to destroy the Democratic Party, destroy Social Security, and support Tom DeLay and his crew. I don’t know if you have been bought, frightened or scammed, but you are not helping Social Security or yourself.

If you want a reasonable selection of writings on the Social Security Issue, try my blog (Social Security Notes - ). I speak for myself, and do not belong to any political organization other than the Democratic Party. I link to a lot of good articles and sources, and I worked for Social Security as a Claims Representative for eight years, so I have some idea of what is fact, what is politics, and what is pure hot air. Josh Marshall at Talking Points Memo ( ) is also an outstanding source.

Get together with the Democratic leadership to see how you can extricate yourself from the mess you have stepped in. And do it soon. We Democrats will soon have an organization similar to the Republican “Club for Growth” that penalizes freelancers. You will be high on the list for action if you don’t do something.


Richard Brewer

Copy sent to:

Congressman Robert Wexler
213 Cannon House Office Building
Washington, DC 20515

Thursday, May 19, 2005

A Realistic Look at the Social Security Issue

Is Social Security on an inevitable course to collapse?

The scare rhetoric about the ultimate failure of Social Security is still flying thick and fast. The reality is that other than having a politician destroy it, Social Security will NOT become bankrupt or collapse. It is a strong system and probably will not face the alleged problems in 2041.

The severely oversold possible problem

The first piece of scare rhetoric is that about 2018 the Social Security System will begin paying out more money than it pays in because the baby boomers start retiring. True. But notice the caveat "about." That is an estimate and no one really knows when that will occur. It is also not a problem for the Social Security System.

The anticipated retirement of the baby boom generation was anticipated a long time ago. That is why in 1983 the FICA tax was increased. Since then the trust funds have built up to provide the benefits to the baby boomers from the excess taxes they have paid. The excess taxes - the trust fund - is invested in government bonds. Those bonds are the single most secure investment in the world today.

Those same government bonds are what the majority of George Bush's wealth is currently invested in. See Talking Points Memo and Bush's May 2004 financial disclosure form. (PDF document)] But he says they are just "paper promises." For some reason, they are good enough for him but not for the rest of us.
If they are worthless paper, then he is a fool to have his own money in them. Otherwise he is trying to fool the rest of us.

Those bonds will be paid when due if the US government and US Constitution still exist!. Anything else is criminal wrong-doing by our political leaders. The 14th Amendment to the Constitution states "Section. 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

Bush himself said in his Press Conference last month that if a person with one of the private accounts he is trying to sell wants a secure investment he could invest in US Treasury Bonds. Why would a reasonable person do that if, as Bush also says, the government wasn't going to pay the money when the bonds are cashed?

Bush can't even keep his lies straight. Are people supposed to switch to private accounts because the government won't pay the bonds it has issued, and then expect the government to pay the bonds we put into our private accounts because we want the security of a -- government bond -- ?

Bush calls those bonds "nothing more than paper promises to pay." So instead of Social Security which has its trust fund in those bonds, Bush wants everyone to save money in private stocks and bonds. But those are ALSO just "paper promises to pay". Those are promises by companies which can - and do - default on their promises as anyone who has put money into Enron, WorldCom, etc. will tell you. The only difference is that the government is a lot less likely to default on its promises.

The clawback

Of course, the money to put into private accounts cannot be taken from the FICA tax and still allow the Social Security System to continue to pay full benefits to the current beneficiaries. That means that the private accounts require massive federal borrowing to pay the CURRENT benefits that otherwise would be paid out of the FICA tax. Estimates of the necessary borrowing range somewhere between $3 trillion and $17 trillion over the next four decades.

Where does the money to pay this debt come from? Either increased taxes [That would solve the problem with Social Security, though, wouldn't it?] or make the people with the private accounts pay it back out of their earnings on the money they supposedly invested and they supposedly own. This is the "Clawback."

If you participate in the private accounts, and your account earns less than about 3% per year, you will have to pay extra just to participate, and your account will not grow. Instead, you wil pay just to participate.

That's not what Bush promises with his "Ownership Society", is it?

The more distant (vaguely possible) Social Security problem

If there is any problem with the Social Security System, it will be when the trust funds are exhausted in four or five decades. While there may be some problem for the government when it has to pay back the money it has borrowed, that is not a problem for the Social Secutity System. It may be a problem for the politicians who give the government's money to their wealthy friends in tax cuts, but it is NOT a problem for Social Security.

Politicians blowing smoke and contriving fear and threats don't want you to think about that. If you are sensible, you will vote them out of office. [That's probably the best solution to all the alleged problems Social Security System currently has.]

Even a lot of otherwise sensible people really believe that "no one, and I mean NO ONE denies that the system will one day collapse, there's just quibbling over the date when it will happen." This is proof of what Joseph Goebbels said. Tell a big enough lie and everyone will believe it. The people who think Social Security will inevitably collapse have been hoodwinked.

Just go look at Robert Ball's proposal (Century Foundation Issue Brief. (pdf)). While you are considering his paper, remember that Bob Ball is probably the most knowledgeable man alive today about the Social Security System.

The projections being used to show there is a problem are based on a number of assumptions. [See SSA's Performance and Accountability Report for Fiscal Year (FY) 2004.] Two assumptions in particular are overly conservative. First, the estimate of American economic productivity increases is about half the historical experience of the last 70 years. The assumptions of The amount of immigration are similarly very probably too low. Higher values on either assumption would produce projections that do not include a shortfall in payments with respect to revenue.

Then there is the likelihood of accuracy of the projection. Any projection of future revenues and benefits becomes less accurate as it reaches further into the future. The current projections will be swamped by reality after about ten years. The 75 year projections are designed to do nothing more than line up the possible future scenarios and identify possible trends in changes as time passes., Long term projections are not to be taken as serious predictions for the future. They have value only for actuaries and theoreticians.

Reasonable solutions if the problem does occur. Let's assume that the conservative assumptions do pan out and Social Security does have a shortfall in revenue. Robert Ball has offered a plan Century Foundation Issue Brief. (pdf) that accepts those assumptions and easily corrects for them, while placing Social Security onto a sustainable path into the infinite future. His are minor tweaks in what is a well-operating system. The plan (see Associated Press) offered by Congressman Robert Wexler (D - FL) the other day also totally solves the problem. It isn't as good as Bob Balls' solution either politically or tax-wise, but it is massively better than private accounts with a $3 to $14 trillion addition to the federal debt to finance the changeover.

Both plans (Bob Ball's and Wexler's) involve minor changes, a great deal less then the ones adopted in 1983, and set the program up for long-term sustainability at the future programmed benefit levels. those benefits are based on replacing a percentage of lost earnings.

But even if the worst assumptions in the projections (not predictions, by the way) come true and if no one does anything about the problems before the trust fund runs out the problem is already solved!

How? Present law requires that the Social Security benefits in any given year will automatically be reduced to match the revenue from taxes if the trust funds can't pay the full benefits.

Even if that were to happen, the benefit reductions are guaranteed to be smaller reductions than those proposed by Bush in last month’s press conference. Those reductions will also not start for four or five decades, if then. Bush wants to cut benefits by even larger amounts beginning now, four decades earlier than needed.

If the pessimistic assumptions end up being correct, that means approximately a 25% reduction (worst case) across the board in all benefits in about 2041 (or 2052 according to the GAO projections). This is the same as the Posner plan Bush just offered, except that the Bush/Posen plan cuts benefits by even larger amounts. He also cuts benefits by even more on high and middle income wage-earners.

What does Bush want?

To add insult to injury, Bush also wants to start the cuts immediately, even though the program still has a surplus of revenue coming. Why? This would make the trust fund even larger than under current plans. Bush would then happily raid it to give more tax cuts to the wealthy. Why should he wait until a shortage in revenue occurs when his real purpose is to destroy Social Security. The Bush plan is to cut benefits now and raid it for more money to give away while waiting for his poison pill plans to kick in and eliminate the program?

So Bush demands that - besides taking actions to reduce benefits and increase the trust fund as slush fund for the wealthy - America should borrow many $ trillions and switch to private accounts that do nothing to help the system and nothing to help America.

A review of the issue

Any reasonable person reading what I have written above and checking my sources will conclude that it is not very likely that there will be a major difficulty with the Social Security. If some difficulty does occur, it will be small and easily dealt with.

The people misreading the projections and predicting doom and gloom in the future is doing a "Chicken Little" impersonation. Why? They want to sell you some form of overpriced insurance that you will never need. They would also be glad to sell you a broken used car while they is at it.

In either case, they are asking you to pay now for a benefit in the far future you will never see. Don't buy it! Go read Robert Ball's Century Foundation Issue Brief. (pdf) to see what should be done in the worst possible case. His plan is a reasonable set of solutions for the minor problems that might (or might not) happen to Social Security in four decades if the Republicans can't destroy the program before then.

Posen tells Bush: Drop privatization

Robert Pozen, the man whose ideas Bush presented at his press conference last month, told the audience at the American heritage institute that "carve-out" private accounts should be dropped from the President's proposals. He also said that the "Ownership Society" was a weak argument for them. Think Progress presents the story.

Saturday, May 14, 2005

Rep Wexler (D - FL) has been bought

Rep. Robert Wexler (D - FL) is prepared to offer a bill to change Social Security. The Republicans are delighted because this means the Democrats have begun to break ranks.

The Associated Press has reported the story. It was posted about 5:00 PM CDT on Saturday. Think someone doesn't want the media to take much notice??

Tuesday, May 10, 2005

The politics of Social Security at present

Richard W. Stevenson of the New York Times wrote May 9th that since Bush made his big Press Conference the Republicans are looking for Democrats to throw out proposals and deal with them. The political risk the Republicans would have to take to pass an all Republican Social Security reform bill has them seriously looking at whether they can survive the next election after they do that.

The Democrats refuse to deal until Bush's private accounts are taken off the table. Bush will not do that, so they face an impasse.

This explains the tone of David Brooks' Sunday editorial. The Republicans have been unable to find any cross-over Democrats to give them cover as they destroy Social Security, so the Republican mouthpieces like David Brooks are now in full cry with their childish taunts that are slightly more grown up versions of "Nyah Nyah Nyah. Cowardly little Democrats won't come out to play."

So that's pretty much where the Social Security issue stands now.

In my opinion, the Democrats are doing this properly because the Republicans cannot be trusted to live up to any deal they compromise with the Democrats to get their cooperation.

Any compromise clearly has to be in the Senate. The Republicans have the House locked up and they know it. The House is going to pass as bad a bill as they want, and not be too concerned about it. So the Senate - if they can get Democratic Senators as political cover - will pass a different bill representing the compromises the Democrats forced the Republicans in the Senate to accept.

Then the two bills go to a joint House - Senate committee to be put together. What the Republican leadership in both houses has been doing is choosing only the most pliable Democrats, then deciding among the Republicans how to craft the joint bill. That bill comes out and each house must vote it up or down without amendment.

What the Republicans will do is strip out the compromise portions from the Senate and beef up the privatization aspects. When the Democrats complain, they will be told "You were part of the process." and the Republicans will tout the final product as a joint Democratic - Republican bill. But it won't be any such thing.

So am I saying that I don't trust the Republicans to deal honestly with the Democrats?

Of course I am. The Republican Senators and Congressmen right now are about as trustworthy as rabid river rats. They have the leadership of both Houses, the Presidency and the Supreme Court behind them. They don't HAVE to be trustworthy. They are in POWER.

David Brooks & some responses

In the Sunday (May 8) New York Times David Brooks tried to make the argument that Bush's recent proposals to "means-test" Social Security so that the benefits went only to the poorest beneficiaries was a "progressive" policy recommendation. As such, it was calling the Democrat's bluff to show that they would not accept anything he offered, even a good, solid progressive suggestion.

This is how Brooks characterizes the Democrats because of their somewhat less than enthusiastic response to Bush's proposals: "They're faking it. They don't care about virtue, or you or the common good. They're just taking opportunistic potshots under the guise of sermonizing. They're just a bunch of hypocrites."

Needless to say, I did not accept Bush's proposals as either reasonable policy or being offered in good faith, but that's just me.

Today (May 10) the New York Times letters published some letters they received in response to Brooks' column. Brooks' views didn't go over very well with the letter writers, either.

I can't help wondering if Brooks really believes the stuff he writes. Sometimes I think he does, and sometimes I suspect it is all just a con game to him to write such outrageous stuff. At the moment I am a bit more in the second camp.

Sunday, May 08, 2005

Christian Science Monitor on the Social Security issue

Peter Grier of the Christian Science Monitor writes a pedestrian 'Common Wisdom of the Media' summary of where the Social Security issue is after Bush's Social Security Press Conference.

Read it. Then go look at the simple solutions offered by Robert Ball at my comment on his paper. Be sure to click through to the paper if you haven't read it already.

Saturday, May 07, 2005

What is Social Security solvency?

And why is Bush trying to do Social Engineering?

Josh Marshall, on his honeymoon, sneaks away from his bride long enough to post this really illuminating question:

"In the context of Social Security, what exactly is ‘solvency’? And just what are we looking for when we say we want to find it? I pose these questions because the president's new ‘plan' has placed them in a much higher relief for the following reason. According the Social Security Trustees' rather pessimistic estimates, in 2041 or 2042, the Trust Fund will run out and benefits will have to be cut by just over 25%. President Bush calls that ‘bankruptcy’. On the other hand, President Bush's 'plan' cuts benefits by about the same amount. And he calls that ‘solvency’.

"Same cuts: one is a looming disaster, the other is an act of statesmanship. Go figure."

Marshall goes on to point out "If the issue is simply making sure that benefits remain equal to payroll tax revenues, that's easy. Indeed, we've already got that since the way the Social Security system is set up, benefits are automatically cut to the level of revenue coming into Social Security from payroll taxes and the Trust Fund. Just leave the damn thing on auto-pilot and it will remain 'solvent', automatically, from now until the end of time."

That eliminates all of Bush's arguments for changing Social Security! Nothing remains of Bush's arguments on the problem with Social Security. What remains is Bush's proposals to change America from something close to financial equality in which people are rewarded for the work they do to an America in which there are a few financial winners and a lot of financial losers, and most financial rewards will be based on inheritance rather than on contributions to society.

I recall Conservatives like Goldwater and Bill Buckley complaining about liberals who were attempting "Social Engineering." What was the "crime" they were accusing Liberals of?

The Liberals were trying to eliminate centuries of legal barriers designed to prevent non-white people from achieving honest financial rewards for the work they did, and which prevented non-whites from associating with the white races on a basis of equality. The liberals mostly won, and America is much better for their win.

Now we get a President who is attempting his own warped version of "Social Engineering" to create a two-tier society, one wealthy based largely on inheritance and exemption from most taxes, and another lower tier consisting of most of us who do the real work and pay the taxes to keep society working.

In Bush's newly engineered society the financial rewards will go mostly to wealth, not to work. That is what his "Social Security" campaign is all about. As shown above, his efforts have nothing at all to do with "Saving" Social Security.

More repercussions from Bush's Press Conference

From the Dallas Morning News.

"In holding a prime-time news conference for the first time in his second term, President Bush had one goal: to counter the growing impression that his Social Security proposals are dead by stressing his efforts to ease the system's long-term financial problems.

"The decision a day later by his faithful House Republican allies to schedule consideration of the issue represents progress, since Senate divisions make agreement there impossible at this time.

"But the revised Bush approach still has two potentially fatal flaws.

"First, Mr. Bush still insists that any plan include the diversion of some Social Security payroll taxes into personal accounts for younger voters. "It's got to be a part of a comprehensive package," he said, launching a lengthy defense of the concept he has tried with minimal success to sell in recent weeks.

"That firm statement confirmed the view of people on both sides of the issue that his main goal remains creating a private alternative to the Social Security system, something he has favored since his failed U.S. House bid 27 years ago.

"But it's already clear that a majority of the Senate opposes any effort to divert payroll taxes into private accounts. That's one reason Sen. Charles Grassley, R-Iowa, is having such trouble writing a bill in his Senate Finance Committee.

"Second, the specific plan that Mr. Bush touted to ease the system's long-term fiscal problems would fall far more heavily on middle-class Americans than other solutions, which would put the burden mainly on the wealthy.

"That could pose a real political problem for lawmakers, even those who favor dealing with Social Security now."

This was published May 5, 2005 by Carl Leubsdorf, Washington Bureau Chief for the Dallas Morning News.

Knowing Bush's dislike for holding Press Conferences in the first place, I felt that the fact that he did hold one indicated that his Social Security initiatives were in deep trouble and he was somewhat desperate to try to turn them around.

I felt that he was also unusually well prepared for the Press Conference, which again indicated to me a rather high level of perceived need to change the responses he has been getting.

This article indicates that he got no real change for his efforts.

I was unaware of his difficulties in the Senate, but I am delighted to hear about them. While the House Republicans clearly place the Republican Party and its power above the good of the American Nation, apparently there are still some Republican Senators who are not yet ready to sell America down the river - at least not yet.

Bush really is the very worst President the United States has ever suffered through.

Friday, May 06, 2005

Elaine Chao as Used Car Salesperson

The following is a speech by Elaine Chao attempting to sell us on Bush’s Social Security ideas. It seems to have been written by a door-to-door or used car salesman. This is from the Dallas Morning News, an extremely conservative Texas Newspaper.

I offer you the article (her speech) with my explanations of what she is really saying. I underlined some items to highlight them.

Elaine L. Chao: A real cure for Social Security

Program is on an unsustainable path; Bush has the solution in a 3-part plan
12:07 AM CDT on Wednesday, May 4, 2005

Over the last 60 days, I have joined the president and other Cabinet members in traveling across the country to talk with citizens and community leaders about strengthening Social Security. We have heard very personal concerns expressed about the challenges of America's aging population and a keen awareness of how important Social Security is to our seniors. As this phase of our national dialogue comes to a close, the president has laid out his vision for moving forward with bipartisan Social Security reform.

The demographic trend of there being fewer workers in proportion to retirees is, in the coming decades, going to make the current Social Security system unsustainable.

[See also below where she makes the same statement but in more detail. She discusses 16 people paying for each beneficiary. That is a highly misleading statement because it is based on the period when Social Security was being phased in, compared to the time after it was fully functioning.]

Social Security is a "pay-as-you-go" system (i.e., today's workers are taxed to support today's retirees). Some people think there is a Social Security trust fund in which the government is holding their money in an account with their name on it. But as the president has explained, it just doesn't work that way.
Social Security taxes that aren't being spent on today's retirees are being spent on other government programs.

[But the money is invested in Federal Treasury Bonds. It isn't GIVEN to the government, it is legally LOANED. The law requires that it be repaid!

So we can't trust US Government Bonds to be repaid?? US federal debt is the safest single investment in the world! When economists need to use the default-free interest rate for calculations, they use the interest rate paid by US Federal Treasury Bonds, which is what the Social Security Trust Fund is invested in.

The 14th Amendment to the Constitution states "Section. 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Bush himself said in his Press Conference that if a person with a private account wanted a secure investment he could invest in US Treasury Bonds. Why would they do that if the government wasn't going to pay the money when the bonds are cashed?

Besides, most of Bush's wealth is currently invested in those same Government Bonds he claims are just pieces of paper. See Talking Points Memo and Bush's May 2004 financial disclosure form.]

In 1950, there were 16 workers paying taxes for every retiree. Today, there are three workers paying taxes for every retiree. In 2040, there will be only two workers paying taxes to support each Social Security recipient. Because people are living longer in retirement, the declining ratio of workers-to-recipients will become a crushing financial burden.

[The statement "When Social Security started there were 16 people paying in for every one receiving, now it is only 3.3 paying in for each recipient." is a totally misleading statement. When there were 16 people paying in to 1 receiving, the program was only starting and few people were qualified to receive benefits.

The program reached 3.3 people paying for each one receiving in 1975 when all the eligible elderly were receiving, and the ratio has stayed at 3.3 for the last 30 years. That was the planned situation. It is not a problem. See The Easy fix to Social Securities' minor problems - by Robert Ball .]

America is far from alone in facing these challenges. At a recent summit of labor ministers of the world's most developed nations, it was evident that aging populations and retirement security are among the top challenges facing developed nations.

[Really? Note here and below that you cannot track back the items she claims. No references. This is pure politician-speak.]

Declining birthrates have left most developed countries without enough younger workers to pay into the system that supports the retirement of older workers. As a result, retirees in France, Germany, Italy, Japan and Russia are facing the prospect of substantial benefit cuts. Workers in these countries are facing the prospect of retiring later and making substantially larger pension contributions. Their dilemma is a cautionary tale of what will happen to us if we don't face up to the solvency problems of Social Security now – before there is a crisis and while modest adjustments can still solve the problem.

[None of this is documented here, and if there is a problem in some other country it is not likely to be comparable to that of the U.S.]

The president outlined three goals at his recent prime-time news conference to help guide Congress as it begins work on legislation to solve this problem: ensure that future generations receive benefits equal to or greater than today's seniors; protect those who depend on Social Security the most; and replace the empty promises being made to younger workers with real money.

[Nice words. Politicians' promises are worth what on the market today?? Especially promises by George "WMDs in Iraq" Bush?]

As the president noted, most of the future under-funding problem can be solved by holding the growth in benefits for wealthier seniors at the rate of inflation, while allowing benefits to grow faster than inflation for low-income workers. That way, everyone would be assured of getting at least what today's retirees are receiving, and lower-income seniors in the future would receive even more than under the current system.

[Right. Convert the system to a welfare system for low income retirees, and let future Congresses cut the benefits when money gets tight. Since the Middle Class will already have been screwed out of their benefits, they are not going to fight for it. If the middle class don't get full anticipated benefits, the Social Security System is dead, and the only issue is when it occurs.]

In order to make the system a better deal for younger workers, the president has proposed "Voluntary Personal Retirement Accounts." They would empower young people by allowing them to invest a small portion of their Social Security taxes in a conservative mix of bonds and stocks or a risk-free Treasury Bond account. Workers would own these accounts and could leave them to their children.

[Of course neither Bush nor Chao mention the fact that this will require massive federal borrowing, on top of the current free-spending, wild-borrowing administration finances, and it will be paid back with the "Clawback" that is likely to take away more than many beneficiaries will ever receive. Molly Ivins weighs in on Bush & Social Security .]

It's worth repeating that for seniors at or near retirement, there would be absolutely no change in Social Security.

[Right. These are the people who vote regularly, so they try to set them outside the changes they are proposing in order to leave the more promising voters. But these people have children and grandchildren Elaine Chao and G. W. Bush are trying to shaft. Again, like other promises made by Bush, this one only lasts until January 20, 2009. That's at best.]

America honors and respects its senior citizens in many ways. None is more meaningful than strengthening Social Security. This administration is committed to ensuring that it will be there not only for today's retirees, but for their children and their grandchildren – providing the safety and dignity in retirement that they deserve and have earned.

[More political-speak. There is nothing here that could be construed as a promise Ms. Chao would have to live up to. ]

U.S. Secretary of Labor Elaine L. Chao is a member of the president's economic team, which recently finished a two-month tour traveling around the country to talk about the president's plan to strengthen Social Security. She met with The Dallas Morning News' editorial board. Her e-mail address is

This is a sales pitch with as little verifiable fact as possible. High emotion (fear) and very low factual content. Go see The Easy fix to Social Securities' minor problems - by Robert Ball
for a discussion of the severely overstated threat the administration is trying to push, the relatively minor probability that it actually does exist (or might not - if the conservative assumptions are overly pessimistic there is no problem and if it does exist, the simple, low cost and far from difficult set of solutions that can easily be implemented. With those simple, minor solutions Social Security will be sustainable into infinity.

Bush's proposed solutions are extremely expensive, as well as totally unnecessary. Don't let him waste any more of your money on unnecessary Social Security 'fixes'. We are already going to be stuck for a long time paying for his unnecessary war in Iraq.

Thursday, May 05, 2005

Private Accounts won't pay Disability

This is an interesting article from the Boston Globe. The money quote: "One-third of the people who become disabled in their 50s were injured because of the work they do."

A major drawback in any plan for private accounts is that it will have to account for payments of disability benefits.

As in retirement, the solution is to increase revenue or reduce benefits. If Social Security is replaces by private accounts, people who would begin working after a privatization plan started there will have to be some form of additional disability insurance. In the public discussion going on now, this is a hidden cost.

Molly Ivins weighs in on Bush & Social Security

Go read Molly Ivins.

She's always good, and usually correct. This time she is both. But especially, read her description of the "Clawback."

If you ever felt like the promises of the private accounts that "you own and can leave to your children" are too good to be true - they are. And the reason is the "Clawback."

Just remember. If Bush is going to let you place a third of your FICA taxes into a private account, that money has to come from somewhere. Either it will be borrowed (in which cans it has to be paid back - hence the "Clawback") or taxes have to be raised immediately by one-third to cover the additional expense.

There is no free lunch. You (and I) WILL pay for Bush's extravagances. Let's not let his destruction of the Social Security System add $ trillions to the bill.

U.S. warns union not to use union money to defeat Bush's Social Security ideas

From the NYTimes

Guess What. The same U.S. government which has been spending millions of dollars to finance Bush's 60-day, 60-stops campaign to eliminate Social Security is warning the AFL-CIO that they may be breaking the law if they use member's money to "advocate a particular result in the current Social Security debate."

In addition, "The Labor Department also warned the federation that pension plans could be violating their fiduciary responsibilities by suggesting that they might take their investment business away from Wall Street firms that support Mr. Bush's plans."

A.F.L.-C.I.O. officials organized a broad campaign this year against Wall Street firms that appeared to support Mr. Bush's plan.

The campaign included public protests in 70 cities, and it focused on four big companies that had joined a business-backed group called the Alliance for Worker Retirement Security, which is lobbying for the private Social Security accounts.

Two of the firms that were spotlighted, Edward Jones and Waddell & Reed, dropped out of the lobbying group.

Sounds like the Bush administration is feeling the heat and looking for ways to avoid the stove. Think they'll refund the share of our taxes they have spent pushing the SS phase out program?

Nah, I didn't think so either.

Poll - High Income not willing to give up benefits for low income.

A recent AP-Ipsos poll reported by the New York Times states that while roughly 70 percent of people believe President Bush's warning that Social Security is running out of money, they are not willing to take large cuts in their Social Security benefits so that the poor will be saved from having their payments cut.

They also report that they don't like the way the President is handling the Social Security issue.

Galveston - 25 years without Social Security

Brazoria County (Galveston), Texas withdrew from Social Security 25 years ago and replaced it with individual accounts in private investments.

Here is the story as reported by the Christian Science Monitor.

As you read it, remember that the reporter is no expert on the benefits provided by either system, so comparisons are not very good. Here is a quote from the story: "Eric Kingson, a professor of social work and public administration at New York's Syracuse University. "Social Security is built on the premise that we have some responsibility for each other," he says. "If you weren't worried about those basic protections you could use a private system, and the Galveston plan is a good example of how that system would work."

He studied the county's plan and testified on it before the House Committee on Ways and Means in 1999. "What it does is create huge winners and huge losers," he says.

Another study came to a similar conclusion. A federal General Accounting Office report in 1999 found that lower-wage workers would receive more under Social Security than under the Texas county plans, while higher-wage workers and those without children tended to do better under the alternate plans."

The GAO probably did a pretty good job of investigating the differences and comparisons, but the reporter does not provide the assumptions and background that would allow us to understand what was being compared.

But then there is this: ""That's just not true," says Brazoria County Judge John Willy. "In almost every case, county workers make double what they would make with Social Security.""

Remember, in Texas the County judge is the elected Chief Officer of the county (not a judicial officer) and is no expert in anything except getting elected. His comment is based on anecdotal evidence and cannot be trusted. He does not have any idea what he is comparing unless he has done a careful study, and if he had time to do that he should have lost his job. I am reasonably sure he thinks he knows what he is talking about. It is just that it is very unlikely that he does.

Brazoria County must have dropped out of Social Security just before the changes to the law in 1983. State and local governments have not been able to do that since then.

The real key as far as I am concerned is the underlined items above. "Social Security is built on the premise that we have some responsibility for each other,"

Replacing Social Security is another idea based on Republican values in which a person is only worth what they earn or the wealth they control measured in dollars. When those are the social values, then they set up systems which over-reward income and wealth and under-reward the average worker. Please note the utter absence of human values. Everything that matters is dollars.

Wednesday, May 04, 2005

Democrats understand - Don't gamble in a fixed game

G. W. Bush for reasons of his own started an initiative in 2005 to "reform" Social Security by phasing it out and replacing it with private accounts. His "60-Days, 60-stops" tour was mostly an effort to reach his supporters and use the word "Bankruptcy" often enough that his supporters get behind his phase-out effort in solid phalanxes.

It brought a reaction from the Democrats. They won't touch the whole effort except to explain how his ideas are incomplete, misleading, and don't hold water. The unity among Democratic politicians on this has been amazing to everyone, but especially to Bush. He has kept telling the Democrats to present a plan, and the Democrats kept asking "Why? You haven't presented a plan yet." The result has been a sharp drop in Bush's political polls.

In response to this failure, last week G. W. Bush offered some more definitive ideas for Social Security phase-out. Not a plan, but some ideas, especially the Posner Plan that "saves" Social Security by eliminating higher benefits for higher-paying taxpayers.

This was a non-starter, but it was immediately followed over the weekend by pundits who claim that since Bush has placed his ideas on the table, now it is time for the Democrats to come to the table and begin negotiating. A good example is shown in my previous blog about this Washington Post Editorial where I explain why the Democrats should not at this time attempt negotiations.

Now E. J. Dionne provides further support for the Democrats not attempting to negotiate in his May 3rd editorial. He makes that same point that I do, that there is no single plan on the table from Bush and the Republicans. He then goes on to show that any effort by the Democrats to negotiate are doomed to failure by the way the Republican leadership of the House and Senate have "fixed" the game before anyone starts to play a hand. The process of negotiation of bills between the House and Senate is now designed to eliminate the results of any negotiation with Democrats

"The most basic corruption of the process is the way the Republican congressional leadership has transformed the bargaining that once took place between the House and the Senate.

"In the old days, when each house produced different versions of the same bill, a "conference" committee typically including members of both parties from both houses would thrash out the details and reach a compromise. Now the Republicans will concede whatever is necessary to get a bill out of the Senate, even as the lockstep-Republican House produces a right-wing version of the same proposal. In conferences, Republicans routinely freeze out all but the most pliable Democrats. The supposed "compromise" that emerges is not a compromise at all. Democrats who go along become enablers of a game being played with a stacked deck."

There is also the fact that even before any negotiation begins, Bush has placed his worst policies off the table.

"Bush has refused to put his own tax cuts on the table as part of a Social Security fix. Repealing Bush's tax cuts for those earning more than $350,000 a year could cover all or most of the 75-year Social Security shortfall. Keeping part of the estate tax in place could cover a quarter to half of the shortfall. Some of the hole could be filled in by a modest surtax on dividends or capital gains.

"But Bush is resolute about protecting the interests of the truly rich by making sure that any taxes on wealth are ruled out of the game from the beginning. The Social Security cuts he is proposing for the wealthy are a pittance compared with the benefits they get from his tax cuts. The president is keeping his eye on what really matters to him.

"The real costs of progressive indexing as currently conceived would be paid by middle-income earners -- those with incomes in the range of $35,000 to $60,000 a year."

In short, the Democrats properly read the situation and refuse to be drawn into false negotiations. Senators Lieberman and Biden do not seem to have fully recognized that they can't free-lance anymore, but Senator Reid seems to have gotten them on board. Senator Reid recognizes that the Republicans have removed negotiations from the table before they begin, even as the berate the Democrats for failing to attempt negotiations.

The Easy fix to Social Securities' minor problems - by Robert Ball

Robert Ball is the single most authoritative person in the US on the Social security System. He has written a superb Century Foundation Issue Brief. In it he first explains that although the retiring baby boomers may cause a minor problem with Social Security financing after the year 2041, the current administration is playing games with numbers. The statements from the Bush administration are designed to scare, not inform.

Mr Ball then provides a clear, informative explanation of what the problem is, how the administration is trying to scare us into destroying Social Security, and then he offers a simple, relatively painless plan for making Social Security safely fully financed forever.

I - The Scare Numbers

First: The statement "When Social Security started there were 16 people paying in for every one receiving, now it is only 3.3 paying in for each recipient." is a totally misleading statement. When there were 16 people paying in to 1 receiving, the program was only starting and few people were qualified to receive benefits.

The program reached 3.3 people paying for each one receiving in 1975 when all the eligible elderly were receiving, and the ratio has stayed at 3.3 for the last 30 years. That was the planned situation. It is not a problem.

With the baby boom reaching retirement age the ratio is expected to drop for the long run to 2.0 or 1.9 workers to retiree ratio. That is a small problem, nothing more.

Second: The Social Security Administration projects revenue and payments over 75 years because any time further than that is literally unknowable, and anything beyond 20 years or so is unlikely to be very accurate. But the Bush administration is using estimates of what will happen to the program over an infinite future if nothing is done to correct the problems of the baby boom generation and those problem never get solved. That leads to the totally spurious figure of a deficit of $11.1 trillion.

Actually, the shortfall over seventy-five years is a mere 1.92 percent of payroll. Any combination of small income increases (taxes - see solutions) or small benefit reductions can easily cover that deficit. For example, a 1 percent increase in the contribution rate for employees and employers each would totally eliminate the problem. But Bob Ball has a better plan.

Third: The Bush administration keeps saying that if nothing is done "Right Now!" the program will run out of the bonds in the Trust fund in 2041 and the program will be [This is the word Bush uses all the time - it is a lie] Bankrupt!

In fact, the system would be able to continue paying out higher benefits than it pays today, even after inflation is considered. Let's say that again. After all the bonds in the trust fund are cashed in, the FICA tax revenues will still support payment of greater real benefits than are being paid out today, and Social Security can pay this forever.

So what's the problem? Wages will have increased more than inflation, and those higher benefits will only replace a smaller percentage of wages than we plan to replace today. That's not bankrupt. That simply means the plans may need to be changed a little.

II - The simple, painless solution

The following is a quick summary of Bob Ball's suggested solutions taken from his chart. The reader should go to the paper and read the details. The solutions are simple and the writing is clear and easily understood. But here is a brief summary.

Starting point: The seventy-five-year deficit as projected by the trustees’ 2004 middle-range estimate: (+ 1.89)

1. Increase the earnings base; gradually restore the maximum taxable earnings base to 90 percent, the level set by Congress in 1983 - (0.61)

2. Dedicate the residual estate tax to Social Security effective in 2010, with the rate set, as provided for in 2009 under present law, to tax only estates of more than $3.5 million, ($7 million couples) at a rate of 45 percent (- 0.51)

3. Invest assets of the trust funds in stocks, reaching 1 percent of assets at the end of 2006, 2 percent at the end of 2007—up to 20 percent for 2025 and later, but limit assets to 15 percent of the total market value of all domestic stocks (- 0.37)

4. Improve the accuracy of the cost of living adjustment (COLA); in computing the annual COLA, use the Bureau of Labor Statistics’ most recently developed and most accurate Consumer Price Index (CPI), the “chained” index (- 0.35)

5. Make the program universal; cover all state and local government employees hired after 2009 (- 0.19)

6. Increase contribution rate on employees and employers by 0.5 percent each in 2023, when otherwise the ratio of the trust funds at the beginning of a year to the benefits in the following year starts to decline (+ 0.60)

Program kept in balance for many decades beyond the traditional seventy-five years (+ 0.65)

III - So Why the Fuss?

So what's all the fuss about? Simple. George W. Bush wants to privatize Social Security and eliminate the total program. A rational discussion won't get that, so he is wandering the country using the word "Bankrupt" every second sentence and hoping that he can stampede the nation into destroying Social Security just as he stampeded the nation into invading Iraq. Since we know how well his Iraq adventure is working, why should we expect his Social Security adventure to be run any better?

The solutions offered by Mr. Ball assume that the conservative projections used by the Social Security Actuaries are accurate. But if the conservative assumptions on either immigration or worker productivity exceed the numbers used in the projections, there will not be a problem paying even the planned higher benefits in four decades.

Tuesday, May 03, 2005

Wall Street Journal on record as eliminating Social Security

Matthew Yglesias writing at Talking Points Memo reports a Wall Street Journal editorial in which they clearly state that they want to use private accounts to do away with Social Security.

Monday, May 02, 2005

Follow Bush's advice - lose money

Matthew Yglesias explains another extremely misleading statement from Bush's recent Press Conference.

George Bush last week pointed out that if you take the private accounts, but don't trust the market, you can buy treasury bonds and still make money. Matthew explains why this is a guaranteed money loser.

Sunday, May 01, 2005

NY Times rejects Bush's Social Security proposal

Here is what the New York Times had to say about Bush's Social Security proposals:

Under Mr. Bush's approach of "progressive indexation," a typical low-income worker who earns about $16,000 a year today would be entitled to retirement benefits equal to about 49 percent of his or her wages, the same amount that is promised today.

But those earning an average income, about $36,500 in today's dollars, would see big changes. Instead of replacing 36 percent of that person's working pay, as promised under today's system, benefits would cover only 26 percent of pay by 2075. And people who earn $90,000 a year in today's dollars would continue to pay as much as ever in taxes but would receive benefits equal to only 12 percent of their pay.

That essentially guts Social Security as a guaranteed source of retirement for the middle class. If you make $90,000 per year and your retirement funds are tied up in your business that goes bad or in the Enron of the future, you have nothing left except $900.00 per month.

From the beginning, Mr. Bush has adamantly opposed alternative plans that would restore Social Security's solvency by raising taxes. While Mr. Bush has not ruled out an increase in the ceiling on income that is subject to payroll taxes, now $90,000, the idea is anathema to him and most Republicans.

"I know some rich people, and if you ask them whether they would rather have a tax increase or their benefits cut, they'll immediately say, 'Cut the benefits,' " said Representative Bill Thomas of California, chairman of the House Ways and Means Committee.

I don't consider $36,500 per year as rich. In fact, I don't consider $90,000 as rich, although they are beginning to look well-to-do.

If this is the best the Republicans have to offer, then we need to sit on our hands and wait until a Democratic President comes in and makes some sense on the issue.

Growth in Productivity improves Social Security finances

At Last! An Article about Social Security mechanics rather than the current political storm!

For the wonks among us, Brad Delong applies his economic skills to explain why growth in economic productivity improves social security finances over time.

He is responding to the carping of a National Review complaint, so his title doesn't give any clue to what he is going to say. But he then provides a pretty good explanation of the situation.

Today's Washington Post Editorial

Today the Washington Post presented an editorial that started out:

Sunday, May 1, 2005; Page B06

FOR THE past three months Democrats have declined to engage in a debate over Social Security. President Bush proposed a way of giving workers the option, but not the obligation, of saving some of their Social Security money in personal accounts. While he was crisscrossing the country in an attempt to prepare voters for unsettling change, Democrats offered no proposals of their own, saying that Mr. Bush should first come forward with a plan to plug Social Security's long-term deficit. In his news conference on Thursday, Mr. Bush took a first step toward offering such a plan. It is time for Democrats to reciprocate.

[Underlining mine - RB]

I disagree. This is not a debate. This is George W. Bush's initiative, and he hasn't made his case that there is a crisis that has to be dealt with at this moment.

Having not made his case that a major overhaul of Social Security is immediately necessary, his radical and excessively expensive "solutions" to the non-crisis do not need to be debated. His refusal to accept any plan that does not include his unnecessary, expensive and federal-deficit-increasing private accounts clearly demonstrates his lack of seriousness on the Social Security issue.

The Democrats do not need to reciprocate. Bush's poll ratings are all the reciprocation that is presently needed. The man needs to stop his silliness and get on to resolving the problems that are really important such as Healthcare costs and payment systems, the federal deficit, the trade deficit, the energy problem and get Iraq finished up and us out of there.

Bush has more than enough work on his plate that is important right now. He needs to quit fooling around with his Social Security silliness and get to doing real work. Unless it is "too hard" for him, of course.

Poll results just before Bush's Press Conference

Ruy Teixeira provided the results of a Hart Research Poll on Bush's efforts to overhaul Social Security.

Keep in mind, these are the results of a poll before he told the US he was going to cut benefits for the middle and upper classes. Somehow I don't expect his poll results to go up anytime soon.