In GOP war on Social Security, only Trump gets it

MySanAntonio ^ | Aug 18 2015 | Paul Krugman

[kabar]

See my post #159. I agree that many on this thread don't understand how the entitlement programs work and why they are unsustainable. It has nothing to do with the USG stealing the money. They don't work actuarially. We have an aging population and fewer workers to support the benefits, which are not linked to revenue. The entitlement programs will consume the entire federal budget if they are not reformed.

Like any Ponzi scheme, those at the top are getting far more out of the system than they contributed. It is very difficult to reduce benefits for people who believe that they earned the right to the benefits and don't consider them to be taxpayer provided subsidies.

[GOPJ]

Still upping the ante here, Cut all payments to illegals, all foreign aid, cancel all funding for "scientific" global warming research, and return all education responsibilities to the states.

Throw in telling Japan, Germany, and Europe they can start paying for their defense or they can defend themselves works too... I'm tired of doing freebies for people who compete with us.

That said, I really like your list BAW...

[Lazamataz]

I read as far as “Paul Krugman”. At that point, I abandoned the article as pure nonsense.

[RFEngineer]

“I’m against all of these programs, but no generation is going to die. The rules will just change.”

I think that state and local governments should be planning for the demise of medicare and social security, so that the suffering is minimized. I think that when it fails, that it is certain that needed care will be denied to whichever generation in which the system fails.

The failure of systemic federal socialism is in the cards.

[kabar]

Roughly 50% of Medicaid expenditures come from the federal government with the states picking up the other half. The Feds pick up 100% of expanded Medicaid under Obamacare for the first three years and then it is reduced to 90%. 22% of the average state budget is spent on Medicaid now.

[RFEngineer]

” It is very difficult to reduce benefits for people who believe that they earned the right to the benefits and don’t consider them to be taxpayer provided subsidies.”

It has been in the past, and will continue to be (for this election cycle and the foreseeable future) politically impossible.

The winning political position is to say “it can be saved in it’s present form” - it matters not that this cannot be true for the reasons you point out.

SS Reform (reduction in benefits as you posit) will only come when the choice is between “something” and “nothing” after there is some fundamental financial disconnect that cannot be ignored.

Until then, actual SS Reform is political self-immolation to anyone who proposes it.

[entropy12]

Under Trump’s plan most retirees will be in 1% bracket.

[Henry Hnyellar]

Like it or not, it is a very popular program. Yes, it's popular because people are either ignorant or stupid. Show them the difference in what they will get from SS and what they would get if they put 6-7% of their income into an IRA for the same period of time. The popularity would plummet.

[Tau Food]

I think that state and local governments should be planning for the demise of medicare and social security, so that the suffering is minimized. I think that when it fails, that it is certain that needed care will be denied to whichever generation in which the system fails.

The failure of systemic federal socialism is in the cards.

I disagree. I believe that your prognosis is based upon the assumption that the rules cannot be changed.

But, the rules can be changed. And, whenever necessary, the rules will be changed. If necessary, taxes will be increased or money will be printed. One way or another, the people who vote will continue to receive what they demand. And, old people vote.

Let me give you one example. When I was young, there were many, many politicians who opposed both Social Security and Medicare. See if you can name one presidential candidate of either major party who is today advocating the repeal of either Social Security or Medicare. When it comes to senior benefits, every one of them is now a socialist - every one of them. Those who talk about reductions in those programs talk about reductions that they cannot make, changes that begin in 10 or 15 or 20 years. They know (and they know that the voters know) that they cannot make laws to govern people 10 or 15 or 20 years from now. Those decisions will be made by people living then.

Every society faces the issue of caring for old people. What you are seeing now is the way we are deciding to deal with that issue now. How people in the future will deal with that issue will be decided by the people living then. We cannot decide that issue for them.

All this talk about the future (20 or 30 years from now) is baloney. If we decide to run up huge debts, that does not mean that future generations are going to pay that debt in the way you imagine. They might, for example, change the rules by raising taxes. They might, for example, change the rules by paying the debt with dollars that have less value. They might, for example, change the rules by refusing to pay the debt at all. People should consider these realities when they lend the U.S.money.

In 20 or 30 years, this country will be producing goods and services. It will undoubtedly be producing many more goods and services than we produce today. The people living then will decide how to distribute those goods and services. It is a mistake to assume that we can bind them to rules we devise today. Believe it or not, they may decide against using all that they produce to pay bills that we run up today. No generation is going to commit suicide.

[cynwoody]

I am going by memory, but I am pretty sure it was 2% of SS tax paid. At the time I thought it was such a minuscule amount for the left to be going apoplectic over.

According to this article from 2005, it was 33.3% of the SS tax paid, with a cap of $1000. The cap was to rise 10% a year.

In 2005, the tax was 12.4% of the first $90k in wages, or $11,160. A third of that is $3720. So, you would have been able to divert $1000 to an investment account. Mice nuts, as you say.

[BobL]

“Yes, it’s popular because people are either ignorant or stupid. Show them the difference in what they will get from SS and what they would get if they put 6-7% of their income into an IRA for the same period of time. The popularity would plummet.”

True...but it is on fumes now, paying out money based on incoming revenue. The time to reform it should have been 30 years ago, for the short time it was actually solvent, after the huge tax increases and increase in the retirement age that Reagan signed into law.

But that didn’t happen and now the program will likely never be solvent again, but rather will slowly morph into just another welfare program...and untouchable at that.

[kabar]

Yes, it's popular because people are either ignorant or stupid. Show them the difference in what they will get from SS and what they would get if they put 6-7% of their income into an IRA for the same period of time. The popularity would plummet.

For one third of today's retirees, SS is the only retirement income they have. For two-thirds, it comprises more than 50% of their retirement income.

A survey released by Bankrate.com, a financial research firm, shows 26 percent of those who are age 50 to 64 have saved nothing for retirement.

When you look at the millennials, especially those saddled with huge student debt, it is getting harder to save money for retirement. And there is the growing wealth gap. We are seeing the destruction of the middle class and the creation of a growing permanent underclass. We are taking on the profile of a Third World country.

The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of American families. But even as the economic recovery has begun to mend asset prices, not all households have benefited alike, and wealth inequality has widened along racial and ethnic lines.

The wealth of white households was 13 times the median wealth of black households in 2013, compared with eight times the wealth in 2010, according to a new Pew Research Center analysis of data from the Federal Reserve’s Survey of Consumer Finances. Likewise, the wealth of white households is now more than 10 times the wealth of Hispanic households, compared with nine times the wealth in 2010.

[9YearLurker]

And just how do you expect to make the system survive, paying people almost as many years in benefits as years worked?

A roofer or waitress can get another job, if they don’t want to do their old work anymore.

[kabar]

But, the rules can be changed. And, whenever necessary, the rules will be changed. If necessary, taxes will be increased or money will be printed. One way or another, the people who vote will continue to receive what they demand. And, old people vote.

We have seen a huge transfer of wealth from the young to the old. Future generations will have a lower standard of living. The question is when will the young wake up and see what is happening to their future. Yes, many have parents who are benefiting from the current system, but the parents see how the future of their progeny is becoming more bleak.

We will need to reach a national consensus on what needs to be done, but there is no doubt that social security and medicare need to be reformed. The only question is how the pain will be distributed. Medicare Parts B and D have already introduced some means testing in the allocation of premiums. The current formula for determining SS benefits is weighted slightly towards those who contributed less based on their salaries.

They know (and they know that the voters know) that they cannot make laws to govern people 10 or 15 or 20 years from now. Those decisions will be made by people living then.

We are seeing reform proposals that only go back 10 years to age 55. It is interesting to see how Germany handled its cuts to its social programs. I can recall my mother-law having her benefits cut while in her 80s. The Germans were able to get a national consensus to cut benefits for seniors currently collecting benefits. I doubt we could get such a consensus.

Every society faces the issue of caring for old people. What you are seeing now is the way we are deciding to deal with that issue now. How people in the future will deal with that issue will be decided by the people living then. We cannot decide that issue for them.

LOL. Of course we are taking actions now that will give our children and grandchildren fewer choices and they will be more painful as they figure out how to deal with $60 to $100 trillion in unfunded liabilities and a national debt over $25 trillion. The choices we make now determine what options the people in the future have. What we are doing now is generational theft.

All this talk about the future (20 or 30 years from now) is baloney. If we decide to run up huge debts, that does not mean that future generations are going to pay that debt in the way you imagine. They might, for example, change the rules by raising taxes.

By 2030 there will be just two workers for every retiree. In 1950 there were 16 workers for every retiree. We are already running up huge deficits to keep the welfare state going.

They might, for example, change the rules by paying the debt with dollars that have less value. They might, for example, change the rules by refusing to pay the debt at all. People should consider these realities when they lend the U.S.money.

If that happens, then the USD will no longer be the world's reserve currency. These are terrible choices for future generations. That will be our legacy to them.

In 20 or 30 years, this country will be producing goods and services. It will undoubtedly be producing many more goods and services than we produce today. The people living then will decide how to distribute those goods and services. It is a mistake to assume that we can bind them to rules we devise today. Believe it or not, they may decide against using all that they produce to pay bills that we run up today. No generation is going to commit suicide.

We are leaving them no choice. Huge national debt and massive unfunded liabilities will result in a grim future. It used to be that the current generation left a better future for their children than they had. Now we are ensuring that future generations will inherit a much worse future than we had. Unless we are willing to sacrifice for future generations, the America we once knew will no longer exist.

[kabar]

The time to reform it should have been 30 years ago,

SS was reformed in 1983, 32 years ago, with a deal between Tip O'Neill and Ronald Reagan. Benefits were reduced, including raising the age for full benefits from 65 to 67, and increasing taxes. The solution was supposed to make SS secure for the next 75 years. It didn't work.

But that didn’t happen and now the program will likely never be solvent again, but rather will slowly morph into just another welfare program...and untouchable at that.

It really is a welfare program now. It is a Ponzi scheme.

[BobL]

What they hadn’t factored in was the drastic reduction in smoking in this country - it allowed people to live a lot longer, and SS is paying that price.

[RFEngineer]

“The people living then will decide how to distribute those goods and services.”

If we’re bird-dogging here, consider this:

“Then” could well become “now” (or soon).

If our government loses control of interest rates (not certain but possible nearish term) and responds by printing money (a certain response), or deep recession or many other eventualities that could elicit the same response....”Then” would become “now” in such a situation.

[kabar]

Smoking is only a small part. Medical advances, improved food supplies, healthier lifestyles, etc. have enabled us to live longer.

[BobL]

...but the others were expected...smoking may not be the majority of the changes but it was plenty enough to tip the scales.

[Tau Food]

Of course, it's wrong to run up huge debts. Of course, it's wrong to spend more and tax less. But, it is natural for people to want more and to pay less. That is why you cannot find even one candidate for president of either party who is willing to advocate reducing current senior benefits. There isn't one. There may be a very few who are willing to advocate raising some taxes, but there isn't even one who is willing to advocate reducing current benefits.

As I said, each generation in each society decides for itself how to distribute the goods and services that it produces. If we wish, we can pretend that we can make those decisions for people who will be living 50 years from now, but the reality is that we cannot. Any politician who tells you that he has a plan that won't become effective for 10 or 15 years is playing you for a sucker. He knows that those decisions will be made in 10 or 15 years and cannot be made now. In fact, it is because such a promise is meaningless that a gutless politician will make such a promise.

It is possible that the dollar will not be the world's reserve currency in 20 years. It is possible that no currency will occupy that role in 20 years. You can be pretty sure that the world is going to be a much different place in 20 years.

But, then as now, people will probably be pretty much the same. They will want more benefits and they will want to pay less.

I want you to begin with a very reasonable assumption - no generation is going destroy itself to pay for the mistakes of prior generations. That isn't going to happen. Future generations will decide what to do with what they produce. It may not be as easy to borrow money. They may decide to borrow less. They may decide against sending troops all over the world. They may decide to pay old debts with cheaper dollars. They may decide not to pay old debts. They may decide to pay more taxes. Who knows what they will decide? But, they will decide and we can't decide for them.

As for our generation, you can see the choices being made. Go ahead and advocate that we cut senior benefits next year. Go ahead and advocate that we raise taxes next year. Do you really think you can get elected talking like that?

Look what the generation living in the 1860's did to this country? They utterly destroyed nearly everything of value and hundreds of thousands of our most capable citizens. The generations that followed put things back together as best they could.

The politicians are telling you what is possible right now. Right now, you are allowed to advocate changes that will supposedly begin in 15 or 20 years so long as you make it clear it won't affect anyone who is voting today. Like it or not, those are the limits, that is the reality and it is the reality on all sides of the political spectrum.