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February 29, 2004 THREE CARD MONTE WITH ALAN GREENSPAN....Alan Greenspan's comments a few days ago about the necessity of cutting Social Security benefits struck me as disingenuous, but I didn't realize quite how disingenuous until a couple of things came through my inbox today:
I hadn't remembered that Greenspan was part
of the 1983 Social Security commission that raised payroll taxes.
(It's one of several Ronald Reagan tax increases that his fans
conveniently forget about when they're extolling the virtues of supply
side economics.) Here's the Greenspan timeline:
So: raise payroll taxes on the middle class to create a surplus, then cut taxes on the rich to wipe out the surplus and create a deficit, and then sorrowfully announce that the resulting deficits mean that the Social Security benefits already paid for by the middle class need to be cut. A normal person would at least be embarrassed by all this. But Alan Greenspan has never been a mere mortal, has he? POSTSCRIPT: Billmon has a Lou Dobbs interview with David Cay Johnston that spells out the whole shell game in illuminating detail. Posted by Kevin Drum at February 29, 2004 04:50 PM | TrackBackComments
See how the threat of an anthrax letter effects your opinions? Posted by: Doray at February 29, 2004 04:54 PM | PERMALINKOff Topic: For some reason I watched lou dobbs on friday. steve forbes and 2 other like minded gents where part of a round table. lou asked steve forbes some question (i forget what of) but steve responed with some "tax cuts will cure cancer" bull-shit answer and the COLD stare that lou gave him as well the remark was pretty priceless.... Posted by: me at February 29, 2004 04:57 PM | PERMALINKThe Lou Dobbs post is absolutely necessary reading - I can't figure out what Kool Aid Lou is drinking, but he can certainly changed his tune. I guess all that talk about the "social security lockbox" in 2000 wasn't bullshit. Posted by: peBird at February 29, 2004 05:01 PM | PERMALINKEven true believers have to be getting a little nervous about the idea that tax cuts are a panacea. There's never really been much evidence for it anyway, but the past few years have really put the last few nails in the coffin. Posted by: Kevin Drum at February 29, 2004 05:05 PM | PERMALINKI actually was going to tie it in but left it out. It seems what we are seeing here (and by here i mean lou dobbs and fiscally consv. republicans) is the 2004 equivilant of bush Senior's problems with the religious right. Seems to me the fact that he can not expect wall st. republicans to
fall in line is yet another sign of a one term and he's gone syndrome. can someone explain to me something.. there is a surplus running now .. and Bush administration is using surplus to help close the deficit is this money just being dumped into the general revenue never to be paid back ? i thought this surplus was buying t bill(lower interest t bills) ..
so at some point isn~'t the federal government going to have to pay back
these t bills so basically the revers e will happen the general fund
will be paying back social security fund. quote from CNN not-on-message-programming JOHNSTON: Well, we can choose in America, if you want, to have a system in which the middle class and the upper middle class, people making $30,000 to $500,000 a year subsidize people who make millions of dollars. And if Americans want to vote for that they should do it. I just don't think, Lou, that Americans would have gone for this if
they had known what is happening. And since it was Mr. Greenspan who
said pay your tax in advance and now he says, no, we're not going to
give you the benefits, but we can't raise taxes on the rich. That seems
to me morally troubling. I did'nt know greeny was such a traitor.I had held him in high esteem in the 90's when I refinanced and again when I bought a new house last year.I've been hoping to refinance next year but the way these morons have been screwing the economy it may not happen.Its no wonder consumer confidence is slipping.I wonder how many media outlets have ben running these stats on lil greeny. I guess he caught the neo-buzz generated by the zealots in the whitehouse.Wish I was close enough to smoke some of that too.I guess we will continue to suffer the rich for a little while longer.....LIKE FOREVER! Posted by: smalfish at February 29, 2004 05:20 PM | PERMALINKKevin: don't let's forget that Greenspan is reputed to be a fan of Ayn Rand. If true, he would be philosophically opposed to the whole concept of Social Security and in favor of tax cuts, all of which seems to line up rather neatly with both his words and his actions. Gotta give the guy credit for consistency ... smartone: as I understand it, you're correct both in practice and in theory, and so yes, the "Social Security Trust Fund," which is nothing more than an accounting device, has claim on many many billions of future US government tax revenue dollars. That in turn will indeed require that the general fund run not just a surplus, but a surplus vastly exceeding what today we consider a "surplus," since Social Security revenues are today counted along with other revenues in calculating the total Federal budget balance. Of course, as many observers -- Kevin included -- have observed, a few tweaks (e.g., lifting the $87K cap on SS-taxable income, gradually lifting the full-benefit age by a year or two) would take care of the problem, but this would seem to be beyond the capabilities our current political leadership. Posted by: bleh at February 29, 2004 05:27 PM | PERMALINKsmartone: From the National Center for Policy Analysis (http://www.ncpa.org/pub/ba/ba366/): “Doesn’t the Trust Fund Hold Government Bonds? Yes and no. Technically, the trust fund holds bonds that represent
the cumulative surplus (payroll tax collections minus benefit payments).
But these bonds are only important for accounting purposes. They have
no financial significance. They are like bookkeeping entries, without
any market value. The annual reports of the Social Security trustees
list the yields and maturity dates of the special-issue bonds in the
Social Security trust fund. But these special-issue bonds are not the
same as the bonds held by the public. They are not part of the official
outstanding debt of the U.S. government. They cannot be sold on Wall
Street or to any foreign investors. And they cannot be used to pay
benefits.” "and then sorrowfully announce that the resulting deficits mean that the Social Security benefits already paid for by the middle class need to be cut" How do you figure the benefits have been paid for? Somebody making, 80,000 a year for 20 years will pay about $112,000 into SS (7%). How quickly does he get that out after he retires? Social Security has never been run as a trust fund. The money collected from people working goes right out to pay benefits; if people just got their own money back plus interest it wouldn't last but a few years. Posted by: Mark Zimmerman at February 29, 2004 05:30 PM | PERMALINKGreenspan was associated with Ms. Rand for a while. A judicious Googling should turn up the photo I've seen of a younger Greenspan with the mad Objectivist Russian Dame. Posted by: Dark Avenger at February 29, 2004 05:43 PM | PERMALINKIf memory serves, Reagan insisted that the 1983 tax raise was the biggest mistake of his carrier. Stockman, his budget director, insisted it was necessary to keep the federal government even minimally solvent. A couple of years later Stockman resigned. He probably still has nightmares about deficits. Posted by: Haukr at February 29, 2004 05:46 PM | PERMALINKThis tax thing has gotten so out of hand as to be absurd.Why is it that the right is SO behind this administration.It is'nt like all those on the right are rich too.What is the motivation here are they so caught up in the religious movement of government that they have forgotten just what it is that drives this country? When we have half the population for making the rich richer there has to be someone whos doing the brainwashing.Greenspan has been seen by many as a savior to this economy that he can do no wrong.I believe that the bought out media has to be what the problem is in so much of whats wrong.The question is tho is How do make a turn around of this seemingly unsurmountable problem.Even when this pResident gets tarred an feathered the media will still be there along with alot of those responsible for the economic woes of the country. The election really means little in the way we are running deficits and the way social insecurity is doled out.AND we still have those that like the way we fund the rich and want to continue it. The more I think and learn whats been happening while watching nightly news the more pissed off I get.And theres just nothing to be done.Where is this all headed? Posted by: smalfish at February 29, 2004 05:46 PM | PERMALINKFrom It's Your Money by William F. Hixson, COMER Publications, 1997, p. 83: The most notorious S & L scandal involved Charles Keating. Between 1985 and 1988 the Keating family took $34 million out of his S & L in salaries. As early as 1985 Keating's S & L carried $99.40 in debt for every $1 of tangible net worth. That was the year that Alan Greenspoon, later to become head of the Fed, accepted $40,000 from Keating for writing a letter saying that Keating's S & L did not pose a loss-risk for the FSLIC [Federal Savings and Loan Insurance Corporation] "for the forseeable future". Posted by: glenstonecottage at February 29, 2004 05:49 PM | PERMALINKMark Zimmerman: again with the usual disclaimers, I think you're correct in general, but not in this specific case. In general, Social Security is an "unfunded" pension plan, which indeed means that present revenues (from current workers) go to pay present benefits (to current retirees). Those current workers' (future) benefits likewise are supposed to be paid by workers in the future, and hence those benefits are not "funded," i,e., no money is currently being deposited which will pay for them. This distinguishes Social Security from some private funds, in which a retiree's benefits are paid from the proceeds of money s/he deposited when s/he was a worker, and thus those benefits are "funded." BUT, in the case of the so-called "Social Security Trust Fund" (again, actually just an accounting device), a plan was devised by Greenspan and others to deal with the fact that Baby Boomers are working in huge numbers now but will retire in huge numbers later. That plan was to put some of the gigantic current surplus (i.e., Boomer SS tax deposits minus current retiree withdrawals) into a "trust fund" -- sort of a savings account -- to be drawn upon when the situation was reversed (i.e., future worker SS tax deposits minus Boomer retiree withdrawals). In this way, the gigantic current surplus would offset the gigantic future deficits, and so those future payments would be, in a sense, funded. Boomers really are, in that way, paying for their future benefits, ASSUMING the deal continues to hold. Posted by: bleh at February 29, 2004 05:51 PM | PERMALINKDavid Cay Johnston had a piece in today's Times here: http://www.nytimes.com/2004/02/29/weekinreview/29john.html Greenspan is a hack. When Clinton was potus, it was all about slahing deficits. When chimpco is president, he's all for creating them. http://slate.msn.com/?id=2074429 Posted by: jdw at February 29, 2004 06:01 PM | PERMALINKForgive me Kevin, but I'm going to repost a bit I offered in an earlier thread: Good old Greenspan. I first became aware of this guy when he was arguing on behalf of the Recording Industry Association of America that record companies were entitled to damages equal to the profits they would have made if every use of copyrighted songs were added to gross receipts. In this case, he has done us a signal service - to point to the political necessity to make a choice. So what's it going to be folks? Tax cuts for Leona Helmsley or shelter and healthcare for Grandma? For the new thread I'll add this, which is what I thought of him when he was shilling for the RIAA: Greenspan is an economics hitman. He'd hit us up for whistling in the shower, if he could. He has so far enjoyed a long string of hits. He's looking to go mithril-platinum. Posted by: coz at February 29, 2004 06:05 PM | PERMALINKsmartone: you are essentially correct and so is peBird. The thing to understand about social security is that the statute establishing the SS tax rate and the statute establishing the SS benefits package are essentially indepenent. There is no automatic linkage between the tax rate and benefits. Right now annual SS tax revenues exceed total annual benefit payments and so SS taxes are funding Bush's war and farm subsidies and everything else. At some point in the future annual SS revenues will be less than the total annual benefits. You can believe in the fiction that there is a SS "surplus" that will be drawn on at this point if you like. In that case it will be many more years until the "surplus" is depleted and SS is "broke". I believe that 2040 is the current estimate of when the so-called "surplus" will be exausted. HOWEVER, the concept that SS will be "broke" is simply a fiction created by conservatives who are looking for excuses to restructure the program. In 2040 SS will be no more "broke" than any other goverment program such as defense is "broke." Remember, the SS tax rates and benefits packages are essentially independent. Even if we do nothing is no reason to think that when we reach 2040 SS taxes will need to increase or SS benefits will need to be cut. The SS deficit could easily be filled through other revenue sources or deficit spending. There's no particular reason whey we can't make up the future SS "deficit" by increasing corporate income taxes or increasing capital gains taxes or any hunded other ways. Posted by: Kent at February 29, 2004 06:08 PM | PERMALINKLet us not forget Greenspan's partners in crime during the '83 payroll tax hike debate. Bob Dole and Pat Moynihan got the legislation passed. To his credit, Moynihan actually proposed scaling back the payroll tax increase on lower-income workers; it came to naught, of course. Posted by: TT at February 29, 2004 06:10 PM | PERMALINKC'mon, Kevin -- You've been saying (lying?) before SS is not broken. Privatize and let the rich (in the world, over $30 k/year) get out
what they put in. General pay as you go taxes for the poor. And it's naive, if not deliberately stupid, to really think any gov't will make the rich pay more than they get. Posted by: Tom Grey at February 29, 2004 06:18 PM | PERMALINKHe's a real embarrassment to himself -- an outstanding specimen of a weasel. I say we go back to the tax structure of that great Republican, Dwight David Eisenhower. Scorpio Mark Zimmerman said,
I deliberately left out the employer's contribution, as I was responding to Kevin's idea that Bush's tax cuts have 'wiped out benefits already paid for by the middle class' The 7% is what the employee pays. This from the NY TImes today: "Only twice, in 1999 and 2000, did Congress balance the federal budget without borrowing from the surplus. Both parties have treated the surplus Social Security taxes as "cash flow to the government," which has been allowable since the Johnson administration started counting Social Security as part of the federal budget, not as a separate budget, said C. Eugene Steuerle, a tax policy advisor to President Reagan" The extra money left over after paying current benefits has never been saved to pay for future benefits. When you give politicians money, they blow it. Posted by: mark zimmerman at February 29, 2004 06:33 PM | PERMALINKEither: 1) Social Security is a retirement account, i.e. you take out what you put in. This is basically only true in a virtual sense. As pointed out in the previous posts, todays payments come out of todays revenues. And ultimately, it is the rationale for SS being the largest regressive tax we have. In other words, it is the rationale for the richest people paying the smallest percentage of their incomes towards it. or: 2) We must cut SS payments because SS is just part of the general fund (i.e today's revenues pay for todays benefits), and the general fund is coming up short. Greenspan's agenda is to eliminate Social Security. He argues to cut SS revenues by claiming it is a trust fund that the rich should not pay into because they don't need it or use it(i.e. don't repeal the Bush tax cuts). The same man argues to cut SS benefits by saying it is part of the general fund and we can't afford it. He shouldn't be able to have it both ways. I think the real solution to Social Security is to make it a progressive tax. Then, I would no longer be paying a higher tax-rate than Warren Buffet. Posted by: Henry at February 29, 2004 06:44 PM | PERMALINKCLAAAAAAAASS WAAAAAAARRR !! In the 2000 Presidential election, Al Gore wanted to put the Social Security surplus in a "lockbox," everyone laughed. Their not laughing now. Posted by: Smick at February 29, 2004 06:57 PM | PERMALINKI have been saying this since the 2001 tax cut when it became blatantly obvious this was the kind of game that was going on. Now suddenly the press is picking it up, and a meager few of them at that? Where have the press been and when are they going to start reporting reality en masse? I'm not going to hold my breath, but Lou Dobb's is a start. We need reality based news media and we need it now. Posted by: RJ at February 29, 2004 07:14 PM | PERMALINKA previous calculation that "deliberately left out the employer's contribution" doesn't understand the conservative viewpoint on taxes. According to the conservative viewpoint (and the liberal viewpoint) the employer's share of SS taxes is actually part of the employee's total compensation. Leaving out the employer's contribution out of any SS calculation is contrary to how this money is treated by the employer, the employee, and the government. The correct amount for calculations should be about 14% of income with an additional time value increase. Posted by: fiscal sanity at February 29, 2004 07:47 PM | PERMALINKAgood primer on SS for those still befudled http://www.cbpp.org/3-17-03socsec2.htm Posted by: postit at February 29, 2004 07:55 PM | PERMALINKBoy, it's just a crying shame that this didn't come up during an election year, when a Democratic candidate could take it to the country and force them to face the blatant con job the Republicans have inflicted on them. Oh, wait a minute . . . Posted by: Swopa at February 29, 2004 08:28 PM | PERMALINK"Since payroll taxes are capped (at $87,000 currently), this was, by definition, an increase that primarily hit the poor and middle class." Kevin Drum (like almost every commentator on this topic) misses the fact that the amount you pay in to Social Security determines what you get back. Calling them payroll "taxes" is therefore somewhat disingenuous - and the idea of a "hit" taken by the poor and middle class is also somewhat disingenuous, since there is a fair amount of progressivity built into the system (especially in recent years, I think, with the changes in tax liability on retirees' incomes). "Greenspan's agenda is to eliminate Social Security." Well, my memory could be playing tricks on me, but I have no idea why anyone would ascribe this idea to Greenspan. Greenspan has in the past come out against privatizing and welfarizing Social Security, and not because he thought these things would ultimately strengthen the program. Posted by: Joe Mealyus at February 29, 2004 09:16 PM | PERMALINKIn other words, Mr. Zimmerman starts with dishonesty and expects to be taken seriously. But of course, as one of those trying to eliminate one of the nation's most successful anti-poverty programs, it is incumbent on him to pretend that the system is something that it isn't in order to get people to vote against their own best interests. Those who claim that there is a problem with Social Security are
dishonest. The problem is merely that there is a huge amount of money
that has been taken from the Social Security system in order to fund tax
cuts for the wealthy (those making $300k+, not $30k as some have
suggested). That the general fund will be required to pay back the
money taken from the working class is only bad in the sense that it
never should have had access to that money in the first place. The payroll tax should never have been increased. It's an open secret that the "trust fund" doesn't exist. The surplus that SS runs every year is just used to conceal the true size of the federal government's operating deficit every year. The surplus is actually spent on U.S. bonds. So that so-called "trust fund" is nothing but a stack of IOU's that can't be paid back, when the system starts running a deficit, without raising the payroll tax even more! Bottom line: they raised a regressive tax on working people, and made it even more regressive, in order to underwrite corporate welfare. Capitalism has always been built on robbery and force, not on the free market. It started with the State's abrogation of the peasantry's customary rights in the land in the seventeenth century, and their transformation into a propertyless proletariat. The looting of SS and the raiding of pension funds as a source of investment capital ranks right up there with the primitive accumulation of 400 years ago as robbery by the rich. Posted by: Kevin Carson at February 29, 2004 09:45 PM | PERMALINKSeveral questions: 1. We've been spending the SS surplus which was created by a separate SS tax specifically to accumulate money for the aging boomers. The total SS rate is now roughly 14%, when benefits are more than receivables, what would the rate need to be? 2. Without the SS "trust" fund making up the difference, what is the real deficit this year and next? 3. When does Greenspan finally get shown the door? In late '00, he stopped the economy cold with his rate hikes because of a "threat" of inflation, though not in time to really help the GOP nominee (Bush). Now's he's advocating SS "adjustments" and deficit spending to save those atrocious tax cuts. Posted by: Sauce at March 1, 2004 12:02 AM | PERMALINKWith regards to questions number one and two I suggest downloading a
copy of the 2003 Trustees' Report and reading at least the summary (pgs
1-17). Short answer: given the dismal predictions of the Intermediate Cost model an immediate increase of 1.92 percentage points closes the gap. If nothing is done and the economy continues to flatline at the 1.6% productivity rate predicted by that model (Table V.B.1 - pg 93) we are looking at an increase in 2042 to 16.94% from the current 12.4%. But exactly nobody is predicting the growth figures put forth in the Social Security Trustees' Report. 1.9% productivity in the out years is the high end? What genius thought in 2002 to make the intermedidate prediction for 2003 growth to be 1.9%? and 2.3% in 2004? and 2.1% in 2005? (pg 93 again). Read the papers, 2003 growth was about 4% and most people predict 2004 growth to be about the same, which given that numbers in the early years have outsized influence in the out years, means that the exhaustion date for the Trust Fund is going to be pushed way beyond the current 2042 date. The 2004 report is due out on March 30, and absent some serious book cooking will show the Trust Fund to be fully funded. Posted by: Bruce Webb at March 1, 2004 01:32 AM | PERMALINKGot carried away and only attempted to answer question one. Question two: for 2003 the Social Security Trust Fund was predicted to run about $150 billion in the black, which means that in addition to the reported $550 billion deficit, and $50 billion for Iraq not yet requested, we are only spending $750,000,000,000 in general funds more than we are taking in. Hmm, time for a tax cut. Posted by: Bruce Webb at March 1, 2004 01:48 AM | PERMALINKOne correction: "raise payroll taxes on the middle class" should read "raise payroll taxes on the working poor and the middle class." Remember that while the working poor pay little in the way of federal income tax because the standard deduction plus child exemptions greatly reduces their income subject to the tax, the poor pay payroll taxes on every dollar of income, and they pay at the highest rate, as the payroll tax rate is not graduated. The payroll tax is a crushing burden on the working poor. Posted by: Nancy Irving at March 1, 2004 01:59 AM | PERMALINKGood thing Halliburton is chipping in: The rate of Social Security taxation is 11.7% (using 2003 figures) up to the cap of $87,000. That's over $10K per year -- enough to fund, with any decent return, far more than is paid back by this so-called "insurance" program. Where the 11.7% figure comes from is explained at UnDelay. Posted by: undelay at March 1, 2004 04:39 AM | PERMALINKGreenspan has NEVER been the friend of progressives; he is a faux-elegant ideological lout who tenure any sane Democratic candidate should promise to end, ASAP. Posted by: Squarefish at March 1, 2004 05:11 AM | PERMALINKYou can always tell that someone is a wingnut when they start saying things like "there is no Social Security Trust Fund." The only difference between the Notes held by the SSTF and those held "privately" is that most of the notes held by the Trust are just like UNITED STATES SAVINGS BONDS---they are not transferrable. Under current law, the SS Trustees could chose to invest the surplus in either those "special" notes, or the "private" notes. So there is a very simple solution to the "Social Security solvency crisis"---transfer all of the SS surplus to the same kind of "privately held" notes held by the public at large. This would "level the playing field", putting fat cats on the same ground as low income seniors when it comes to getting what is owed to them---at least for the next 42 years. The reality is that once the surplus is gone, there will not be a need for an increase in taxes---an increase of 2% in combined "worker" and "employer" contributions to the Social Security System will be needed, but because general revenue would no longer be needed to pay off trust fund bonds, income (and other) tax rates could be decreased by 2%. The real question is how the government will generate sufficient general revenues to pay off the SS held debt. That will require a hefty income tax increase large to not only pay off the SS debt, but also to account for the fact that general revenues are no longer being subsidized by a "Social Security surplus." Posted by: paul lukasiak at March 1, 2004 05:13 AM | PERMALINKThere's more. Greenspan was initially and publicly opposed to the 2003 tax cuts, on the grounds the economy was already being strongly stimulated and would recover on its own. Posted by: Bob H at March 1, 2004 05:19 AM | PERMALINKGreenspan is a conniving political hack doing repukelican's bidding: a) rob from the poor to give to the rich; Greenspan essentially caused the recession in early 2001 by running up interest rates, without cause, in the spring and summer of 2000 in his blatant effort to influence the presidential election by taking some of the luster off the Clinton-Gore miracle economy. He is one of the worst political hacks. He should be tried for crimes against the American people, along with most of the Republican "leadership". But alas, justice is not to be had. Defeating Bush in '04 and setting up the means to remove Greenspan is all that can be done; no remedy other than to ensure the truth for the ages - that Greenspan is just one more miscreant abusing his privilege to enrich himself and his ilk. Posted by: gak at March 1, 2004 05:23 AM | PERMALINKFunny, ain't it that when aWol was handin' out tax cuts he forgot to re-install the income tax write-offs for credit card interest that the Gipper took away? Notice after AG dropped the hammer last week that aWol didn't waste any time in assuring the Greatest Generation that THEIR benefits weren't gonna be cut? The benefits that were gonna be cut were those of the slacker Boomers and Gen Xers. What's gonna be LOL funny is watchin' the expression on the GG's faces if aWol's re-elected and aWol pulls the rug out from under them after they vote for his worthless ass. Posted by: Dr. Fill's Passion at March 1, 2004 06:21 AM | PERMALINKWhy isn't David Cay Johnston's book "Purely Legal" getting a much bigger splash in the media? Lou Dobbs is the only one who seems to be paying attention to what Johnston is saying! Hell, even bloggers are largely overlooking the tax inequity that Johnston has written about. Posted by: Michael at March 1, 2004 06:28 AM | PERMALINKMy own view is that the Republicans are shooting themselves in the foot. There's no way in hell Social Security benefits can be cut. Too many older people are expecting these benefits, and, hell, they vote. My partial solution is to remove the $87,000 limit, and get rid of benefits to millionares. If you have $20M in the bank at 70, you sure as hell don't need to collect a Social Security check. Just my two cents. Posted by: Tony Shifflett at March 1, 2004 06:31 AM | PERMALINKLike it or don't, but this this "so-called 'insurance' program" is what half of all Americans are counting on to fund their retirements. New to those ranks, of course, are folks like those who lost their entire pensions to the Enron, etc., swindles. Clearly, any cap on taxed earnings needs to go. That would help immensely. Better yet would be to graduate the rate to remove at least some of the regressiveness of this tax. "Private property ... is a Creature of Society, Recall how they pissed all over Howard Dean when he said that Greenspan had to go? Cutting him loose in 2006 will be a top priority for president Kerry. Posted by: Bob H at March 1, 2004 07:02 AM | PERMALINKBottom line: 1) working people got higher taxes and lost Social Security 2) rich people got trillions of dollars in tax cuts Republicans are thieves and con artists. There is no other possible conclusion. Posted by: The Fool at March 1, 2004 07:55 AM | PERMALINKThe Social Security taxes paid by most of us (and our employers) consist of two parts: one to provide Social Security benefits (including retirement, disability, and survivor benefits), and the second to provide Medicare benefits. The tax structure for Social Security benefits should produce adequate amounts to pay retirement benefits, but the Medicare portion of the tax has not kept pace with the tremendous escalation in health care costs over the past 20 years. However, the vast majority of Americans rely upon Medicare as their primary source of medical benefits in retirement. The health care savings accounts proposed by the Bush Administration are a bandaid for a serious problem. While the debate is often phrased in terms of Social Security, I think Medicare is the more serious problem. Posted by: Badger Ellen at March 1, 2004 08:13 AM | PERMALINKI hadn't remembered that Greenspan was part of the 1983 Social Security commission that raised payroll taxes. (It's one of several Ronald Reagan tax increases that his fans conveniently forget about when they're extolling the virtues of supply side economics.) But ... but ... payroll taxes aren't real taxes! Only income taxes matter! [/wingnut] Posted by: Silence Dogood at March 1, 2004 08:14 AM | PERMALINKBreak out the tumbrills. Anything less is just appeasement. Posted by: MikeK at March 1, 2004 08:30 AM | PERMALINKwe got a primary tomorrow. any candidate calling for greenspan's head? Posted by: flatulus at March 1, 2004 08:43 AM | PERMALINKKucinich. http://goerie.com/apps/pbcs.dll/article?AID=/20040226/NEWS07/102260386 Posted by: coz at March 1, 2004 08:59 AM | PERMALINKpaul lukasiak: "You can always tell that someone is a wingnut when they start saying things like "there is no Social Security Trust Fund."" That's a matter of definition; the trust (indeed) "fund" contains only IOUs. But the point is not whether people question the existence of the fund. I would not read this literally, but when people say there is no trust fund, they probably mean that the money is not "saved", but spent towards current government expenses. It's essentially another debt creation device, only I suspect this debt is not on the books. As you correctly point out, the trust fund will at some time attempt
to redeem the IOUs for goods and services (via government cash levied as
taxes on the creation of those goods and services, and paid out to
beneficiaries). The question is, will there be enough goods and services
to go around? You can tax all you like, but taxation does not create
additional products. And if the trust notes are on nominal terms, 3%
inflation will reduce them to approx. 1/2 of their value in 25 years (2%
in 35 years). And I'd say 2-3% is a pretty conservative inflation
estimate. Greenspan is most political savvy player in D.C. He did not have to bring up issue of social security at this point. it was a deliberate decision on his part to make the comments that put it on the table in the middle of an election campaign. So why did he do this. Is he scared? Sometimes the simple answer is the best answer. Posted by: spencer at March 1, 2004 09:50 AM | PERMALINKI think spencer may have something. Greenspan's ultimate loyalty is to bond holders. They have got to be getting nervous with the numbers coming out of the Bush Administration, and petrified with the more believable CBO #s. I think the big stick that Saudi Arabia has over the administration (besides the shady dealings of the Bush clan going back generations) is the threat of shifting to the euro. If that happens, American bonds start to look like Confederate money. I could go on to give my theory of how this explains the Afghan and Iraq wars, too, but that would be off thread. Posted by: coz at March 1, 2004 10:01 AM | PERMALINK"1983: Recommended raising payroll taxes far above the amount required to fund Social Security. Since payroll taxes are capped (at $87,000 currently), this was, by definition, an increase that primarily hit the poor and middle class." The benefits are also capped. Are you in favor of allowing increased benefits that correlate with increased contributions beyond $87,000 ? "Kevin Drum (like almost every commentator on this topic) misses the fact that the amount you pay in to Social Security determines what you get back. Calling them payroll "taxes" is therefore somewhat disingenuous - and the idea of a "hit" taken by the poor and middle class is also somewhat disingenuous, since there is a fair amount of progressivity built into the system (especially in recent years, I think, with the changes in tax liability on retirees' incomes)." Here is a nice summary of the situation. "Capitalism has always been built on robbery and force, not on the free market. It started with the State's abrogation of the peasantry's customary rights in the land in the seventeenth century, and their transformation into a propertyless proletariat. The looting of SS and the raiding of pension funds as a source of investment capital ranks right up there with the primitive accumulation of 400 years ago as robbery by the rich." Here is a nice summary of why Democrats have a problem being taken seriously by moderates when fiscal issues are being debated. The problem with Social Security would be solved if we could stop Congress from buying votes, andn that applies to both parties.
For those who advocate raising the retirement age, please keep in mind that for people 41 and under, the retirement age is already 67. And if you look at the average life span of minorities such as African-Americans and Native-Americans, many, if not the majority of these groups (at least the male members)will not be receiving any benefits. Posted by: maryc. at March 1, 2004 10:32 AM | PERMALINKcm wrote, As you correctly point out, the trust fund will at some time attempt to redeem the IOUs for goods and services (via government cash levied as taxes on the creation of those goods and services, and paid out to beneficiaries). The question is, will there be enough goods and services to go around? You can tax all you like, but taxation does not create additional products. That's true, but the payroll taxes sent to the Treasury now themselves represent savings, IIRC. And the claim is that net national savings leads to growth in the long run. Not that it's necessarily that simple. Posted by: liberal at March 1, 2004 10:47 AM | PERMALINKpeBird wrote, From the National Center for Policy Analysis... begin{ad hominem fallacy} fiscal sanity wrote, Leaving out the employer's contribution out of any SS calculation is contrary to how this money is treated by the employer, the employee, and the government. It's not that simple. Legally the employer is responsible for the other half. The claim that the employee actually pays both halves is an economics claim, based on (reasonable) assumptions on the tax incidence involved. Posted by: liberal at March 1, 2004 10:55 AM | PERMALINKI'm assuming that, at the very least, Greenspan's proposal of cutting future Social Security benefits is simply DOA. My question is how will Greenspan be treated when he's up for reconfirmation this summer? He's used to being coddled by an adoring Congress when he gives his regular dose of Delphic wisdom. After all, unpleasant questions tend to give Wall Street the willies. But shitcanning the retirement of a large chunk of the middle class is something even the most complacent of Congresses can't ignore. So, will he receive enough tough questioning that he'll decide to pack it in? Then what? Could Bush be reasonably expected to nominate someone acceptable to the Democrats? Posted by: Dan at March 1, 2004 04:31 PM | PERMALINKThat's a matter of definition; the trust (indeed) "fund" contains only IOUs. But the point is not whether people question the existence of the fund. they are "IOUs" backed by the "Full Faith and Credit of the United States of America"---the exact same backing that privately held treasury notes get. Its the same backing that your FDIC insured bank deposits get. In other words, the USA goes bankrupt before it doesn't pay off those IOU's when they come due. and, in fact, convincing (current and future)recipients of the myth that "there are no assets in the Social Security Trust Fund" is key to getting them to accept the idea of lower benefits. It is because we are running massive deficits right now that Social Security BENEFITS are threatened---if we were running surpluses and paying off the privately held debt right now, rather than giving fat cats massive tax cuts, the system would be in good shape.
first off, the longest term note held in the trust (as of then end of 2002) is 15 years. And the notes earn interest...an average of about 6.5% right now (range of 5.25 to 9.25%) on longer term notes, with short term "certificates of indebtedness" maturing in 2003 getting 4.5% Secondly, it is because taxation does not create additional products that taxes should be higher now... Posted by: paul lukasiak at March 1, 2004 04:37 PM | PERMALINKliberal said Its not that simple. Legally the employer is responsible for the other half. Legally, the employer is responsible for both halves. The claim that the employee actually pays both halves is an economics claim, based on (reasonable) assumptions on the tax incidence involved. Both halves are paid by the employer. And, both halves are a cost to the employer of employing the employee, like the employee's wages, etc. We could argue that worker's don't pay any taxes since it all comes from the employer. But no one would believe that, so we have this fiction about "employer's share" to hide and mislead from workers how much they really pay in taxes. The other thing we do is cap this tax, but then point out that the "benefit is capped" so that is only fair. Regressive tax. About twice the rate of what most people think it is. High earners pay a smaller percentage than low earners. And, no benefit is ever guaranteed -- the proceeds of this regressive tax could be used to fund tax-cuts for the super wealthy. Oh, wait. They already are. Posted by: undelay at March 1, 2004 04:50 PM | PERMALINKKevin, You nailed the story again...and, now, Paul Krugman is backing you up. http://www.nytimes.com/2004/03/02/opinion/02KRUG.html Greenspan is not stupid. Why would he go out of his way to expose this plan 9 months before the election? Frankly I don't understand his motivation. Is this some super political jujitsu cooked up by Carl Rove? Nah, no way, too risky in this election year. 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