AGENDA-SETTING

CNN ran the ten-thousandth story about how Social Security will "run dry," this time "by 2034." The headline is misleading, as the story goes on to explain that beyond that date Social Security benefits would be reduced, not eliminated, but that's only the second-most dishonest thing going on here. The full text includes the following gem of Beltway consensus "Guarantee victory for the status quo by defining the options" agenda-setting:

To make all of Social Security solvent for the next 75 years would require the equivalent of any of the following: immediately raising the Social Security payroll tax rate to 14.98% from 12.4% on the first $118,500 of wages; cutting benefits by 16%; or some combination of the two.

In The Semi-Sovereign People, E.E. Schattschneider asserted that "the definition of the alternatives is the supreme instrument of power" (1960/1975, 66). We may never find a better example than this one. Here are your options, America: raise taxes or cut benefits. Or, you know, we could lift the earnings cap ("on the first $118,500 of wages") that serves as little more than a tax break for people making six figures and then fund the system for the next century without a second thought. Congress could do that at any time, and it happens to be the simplest and best solution to the problem. Too bad it's not an option. There are only two of those: raise payroll taxes or cut benefits. Any questions?

If you get a stain on your shirt, according to CNN I guess your only two options would be to continue wearing the stained garment or throw it away. Getting it cleaned to remove the stain is just crazy talk.

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24 Responses to “AGENDA-SETTING”

  1. jon Says:

    http://socialsecuritygame.actuary.org/

    You can play at home!

  2. SeaTea Says:

    It's a perfect way to push your agenda through because it works best with low-information voters, and we're making more of those every day thanks, in part, to "news" outlets like CNN.

    It's kinda like a security company having a side-business robbing houses.

  3. Andrew Laurence Says:

    Actually, since the benefits are capped, there is some logic to capping the amount which is subject to tax. That said, I'd still be in favor of removing the cap. Actually, I'd be in favor of eliminating Social Security tax entirely and paying benefits through higher general taxation, but that's a political non-starter.

  4. jtnRN Says:

    Benefits are based on what is paid in – raising the cap would require raising benefits unless you want to turn SS into a welfare program, which it is not now. So I would prefer not to raise the cap – I don't think it helps.

    However, a tax increase of the amount mentioned would mean paying about $28/week more for those making the full amount ( equal amount of increase for employers). Not so bad. The tax increase could be phased in over time, and perhaps reduced in the future as the economy improves. Or we could focus on improving the wages of those in the working and lower middle classes, which would also increase SS revenue.

  5. Tim Says:

    There is yet another, even simpler alternative: the government can simply issue the dollars to pay the benefits, irrespective of whether enough tax "revenues" are coming in to cover them. This can be done independently of raising the taxes or lifting the cap. No, it would not cause hyperinflation like Weimar Germany or Zimbabwe, or even inflation. Maybe a little bit of inflation, but probably not even that. How inflationary can the modest needs of most retirees be in the greater scheme of things?

  6. Amateur Socialist Says:

    There are some serious SS wonks who blog over at angrybearblog.com. They usually provide a lot of detailed commentary on each year's report and I expect their analysis will be forthcoming soon.

    In general they support the same approach jtnRN mentions above – modest tax increases phased in over time that can be managed carefully depending on how the economy (basically employment) changes. They also reject a raise or elimination of the cap for the same reason cited above. SS is not currently a welfare for seniors program and it's probably good to prevent it becoming one.

    I have been wondering for awhile now how a significant increase in the minimum wage would affect the trust fund. I realize (mostly from asking over there) that "it's complicated", mostly because the increased wages ultimately would result in higher benefits. In any event, it's not hard to see how a modest raise in SS taxes would be easier for people making $15 an hour to handle.

    On the other side of the ledger I have been curious about long term actuarial trends including the recent disclosure that longevity is decreasing in the USA. Especially for the lowest income workers who need the Security part of SS the most. If you believe the CDC we are headed for significant increases in diabetes and heart disease mortality as the boomers retire.

  7. Kevin Dowd Says:

    The most important thing that needs to be done is to allow SS to run some negative cash flow. The fund is still increasing because interest plus FICA is still greater than the outlays. We need to stick to the plan and cash in the trust fund.

    We need to present about $2.2 trillion for redemption over the next 20 years and THEN start talking about fixes it increases.

  8. Skepticalist Says:

    Aww…

    What ever happened to the idea of letting it wither on the vine?

    Didn't work when Gingrich said that it would be the way to kill Medicare.

  9. Beleck Says:

    anything that doesn't fit into the "Social Security is a welfare scam" that is used to steal the money away from those of us who pay taxes and those who receive our earned benefits. dare say lifting the tax limit wouldn't solve all the problems, but that is not allowed.

    Truth be spoke, the grifter are more determined than ever to steal our investments in the System. Neoliberalism at its' most obscene and "finest grifting prize."

    the sheep must be told taxes are always bad. finding a way to stop the SS system from working as intended. tweaking when necessary is not an option. my way or the highway sales job/con.

  10. Lless Says:

    The simple reality is that we will print money because a stark majority could never retire if we didn't. When the uncertainty of inflation costs the well off more than increased taxes, some component of taxation will be increased.

  11. R E G Says:

    People pay into Social Security. The benefits are proportional to the contributions. I don't understand why anyone gets away with treating it as if it is gift from the government.

    Yes it may need to be tweaked. Any investment/retirement plan should be updated as needed.

    However, the idea that it can just be dissolved because hedge fund managers want to get their greedy paws on it is just bizarre. There should be riots in the streets any time that idea is floated. It would be an unspeakable breach of contract with nearly the entire population.

  12. Robert Says:

    My personal proposal is means testing. If you would have an effective income of over XUS$, reduced benefits. Over YUS$, no benefits.

    As a Federal Civil Service retiree living on SSDI benefits, I hereby swear and affirm that if I win the lottery I will instruct SocSec to discontinue my benefits.

    I have already received more in payments than I ever paid in, so that seems entirely fair to me.

  13. jharp Says:

    "Or, you know, we could lift the earnings cap ("on the first $118,500 of wages")"

    Long been preaching on this.

    A schmuck like me paying the same in social security taxes as Lebron James does not seem to make much sense seeing how he makes more in one day than I make in one year.

  14. Schmitt trigger Says:

    The dirty shirt analogy: priceless

  15. Benny Lava Says:

    But social security is welfare. It is a gift from the government. All those people who collect "disability " pull from the social security trust fund. Come on people get it together.

  16. mothra Says:

    Hi Benny: Stupid much?

    And to the rest of you, go play the Social Security Game that jon linked to. I solved 100% of the Social Security "problem" by increasing the cap and lowering benefits for the richest 40%. Whee….that was fun!

  17. JustRuss Says:

    @mothra: Yes, it's amazing how easy some problems are to solve when you don't have to adhere to stupid fucking dogma that demands that they not be solved.

  18. Blake Says:

    That the government is capable of saving money with t bills seems absurd to me, like writing an IOU to yourself. Paying the t bills requires taxing, borrowing or printing, exactly as if they didn't exist. It seems like an accounting gimmick more than a useful thing to do.

  19. Knight of Nothing Says:

    I love the SS game, but even it overlooks options – like remove cap, *cut* payroll tax, and add SS tax to non-wage (capital gains) income. FIFY.

  20. Benny Lava Says:

    Well mothra you are certainly stupid if you think social security is not welfare. If you think social security is some savings plan like an IRA then you are the stupid one and there isn't anything I can do to help you.

    And to the people saying it should be means tested. Well there is a certain place in hell for you.

  21. bobbyp Says:

    1. If the economy grows at anything near the rate it did in the 50's and 60's, there will be no shortfall, and no problem.
    2. If the economy grows, but fitfully as it has done lately, then some minor tweaks are in order.
    3. If the economy tanks, we have much bigger problems than social security.

    Eyes on the ball, kiddies.

    If you raise the cap and raise a bit of benefits for those at the higher end of the income scale…what's the loss? The program is essentially unchanged, but has a sounder financial footing. There are not that many rich, and they will have to pay income tax on the benefit at any rate.

    If you raise the SS wage tax a little bit…no big loss. We've done this before, folks.

    Social Security is social insurance, not welfare. Disability benefits are social insurance, not welfare.

    If you means test Social Security, you turn it into a welfare program. Politically, that would be beyond stupid.

  22. Bruce Webb Says:

    "We need to present about $2.2 trillion for redemption over the next 20 years and THEN start talking about fixes it increases."

    Speaking as one of the Angry Bear SocSec posters referenced by Amateur Socialist above I have to point out that the above claim, while logical and seemingly supportive of Social Security doesn't meet arithmetic tests.

    Social Security currently has $2.8 trillion in assets or over three years of current benefits. But the definition of "solvency" used by Social Security requires a one year reserve as measured by next year cost and over the next few decades the amount needed to meet that will exceed the current balance. That is under the 'Northwest Plan', one that proposes to implement a phased in increase in FICA to close the gap between projected revenue and cost, it turns out that nominal Trust Fund balances NEVER go down, even as they decrease in terms of "Trust Fund Ratio" (that is the measure of reserves to second year cost that meets the definition of "solvency".

    You can explore the numbers but it turns out that 'solvency' as defined means that currrent Trust Fund principal NEVER needs to be redeemed and only about 60% of its interest earnings need to be paid out in actual cash. The rest of the interest and ALL of the principal needing to be retained by the system to meet legal requirements for prudent reserves.

  23. Bruce Webb Says:

    And adding to that:

    "What BobbyP said"

    There is some offset in the form of higher benefits from higher Real Wage and/or from raising the cap while retaining the current benefit formula. But it isn't TOTAL offset. It turns out that unlike Voodoo Economic Supply Side that increasing the wage base overall and increasing the level of that base subject to Social Security tax does in fact raise all retirement boats. This is because of the miracle of "bend points' in the contribution vs benefit formula. Briefly put lower wage earners get a higher replacement rate than higher even as there is never any actual inversion in nominal benefits. Raising the cap does increase benefits for the higher income workers concerned but funds benefits for lower income workers even more.

  24. blacky Says:

    Keeping it social insurance or changing it so that it's part welfare with means testing and raising the cap won't change the politics for the crazy repugs. They will still see it as communism and want to eliminate it. Of course, they see Jesus the same way. That's why they're rewriting the bible.

    I say, modify it so that it helps the most people and takes some of capitalism's sharp edges off. The repugs won't be happy til we turn the poor into soylent green anyway.