Re: [Pen-l] Social security

["Jim Devine" <jdevine03@xxxxxxxxx>]

David B. Shemano wrote:
> ... What is social security?  There are ss taxes, and ss
> expenditures.  For all practical matter, they have nothing to do with each
> other.  SS taxes go into the treasury and are spent how Congress wants to
> spend the money.  For years, ss taxes exceeded ss expenditures, so Congress
> could happily spend the surpluses on unrelated expenditures, while going
> through the fiction that the surplus created an asset/debt between the SSA
> and the US Treasury.

If you want to blame anyone for the OASI surplus, it would be Alan
Greenspan, for pushing for an increase of the regressive tax that pays
for the program (just as the progressive federal income tax has been
cut).[*] But then you'd have to turn around to thank him for
undermining all the scare talk about OASI failing. And Congress can't
spend OASI taxes _any_ way it wants. The beneficiaries have first
dibs.

It's true that Congress _could_ decide to spend the OASI surplus on
yet another war or whatever, but that's true with all revenues. The
key thing is to increase democratic control over the political process
so that they don't do irresponsible things ("Star Wars,"
Reagan/Bush2-type tax cuts for the rich, etc.) with the people's
money. No taxation without representation, right?

> At some point in time, if we continue on our present path, ss expenditures
> will exceed ss taxes.  At this point, general tax revenues are supposed to
> start paying ss expenditures (i.e. pay those T-bills the SSA is supposedly
> holding).  This, tautologically, means that the Congress will have to reduce
> or eliminate non-ss expenditures that would have been funded in the absence
> of the ss obligation, unless Congress is willing to raise non-ss taxes.

The SSA _is_ holding them. It's true that it's a matter of the
government owing money to one of its own organs (the SSA), but that's
true for the Fed and some other government-sponsored organizations,
too.[**]

Actually, it's not a tautology. As real GDP rises over time (with the
labor force and labor productivity), there's something called the
"fiscal dividend" that raises federal tax revenues even without
changing the tax rate. The current (mildly progressive) tax system
does the trick. (The same is true to a lesser extent for the state &
municipal governments, because their tax systems are more regressive.)

Also, in the future when the OASI outlays exceed its revenues,[***]
the US government does not have to cut non-OASI expenditures or raise
taxes. It can also borrow money. As long as the government debt does
not increase faster than GDP for a significant period, most
macroeconomists don't see this as a problem.[****]

The federal government regularly borrows to pay for the Pentagon's
adventures, after all. In fact, rises in the government's deficit are
typically associated with military build-ups. Note that the Pentagon
hasn't  run a surplus for many years, if ever. Its deficit equals the
total amount of its spending. It's not solvent and _never has been_.
Perhaps we should shut it down and replace it with _individual defense
accounts_: give each of us an M-16!  (Strangely, that was part of the
late unlamented Saddam Hussein's defense policy. The NRA would
approve.)

In a separate missive, David writes:
>SS, as presently consituted, is generally neither insurance nor linked to poverty. Insurance implies a pooling of assets to guard against events that will likely not happen and be catastrophic for an individual when it does happen...<

In fact, private insurance mostly works on a "pay as you go" basis:
the fire insurance premium payments made by those whose houses don't
burn pay for other people's fire damage. The insurance companies do
have a lot of assets, but mostly it's the interest or dividend income
that pays for damages. The insurance companies don't cash in their
assets. (The first commandment of the wealthy: thou shalt not dip into
capital.) They do buy re-insurance to help, but for true disasters
(big hurricanes, etc.) they go to the government for help.

OASI _is_ linked to poverty in the sense that it it is mildly
redistributive in the direction of equality of benefits. Also, those
at the lower end of the distribution have the hardest time saving any
of their income; the OASI system is a form of "forced saving" for
them, so that their inability to save during working years does not
lead to poverty -- or extended working -- in their old ages.  If you
compare the era in the US without OASI to the one with it, you see
that the poverty of the elderly has plummeted. That's why it's often
seen as the most successful anti-poverty program in the US.

and:
>As constituted SS is a redistribution from the middle class to the middle class, with the elderly poor benefiting.  I would prefer that we eliminate the redistributuion from the middle to the middle, and simply pay the poor....<

The political impact of this kind of change is well-known: once a
program becomes an "anti-poverty program," GOPsters and self-styled
libertarians will attack it so that its budget will be cut, with its
recipients subject to all sorts of paternalistic and/or draconian
restrictions.

Critics of OASI forget that if that program did not redistribute "from
the middle class to the middle class," there would still be
redistribution from the middle class to the middle class -- but in a
different way. When they become old and feeble, in the better-case
scenario (not involving dog food or death), your parents would  move
into your house or start living off you in some other way. You would
support them, without the burden being widely distributed among all of
the other currently-working people as under OASI's pooling of
resources.

This kind of individualized social security means that the rich folks'
parents would do much much better than the poor folks' parents (as
with what happened before OASI). That result may elate the advocates
of continuing or deepening the 30-year trend of increasing the degree
of inequality of the income and wealth distributions. But it would
also shrink the middle class further, undermine the legitimacy of the
rich class, and encourage class hatred. Hey, David, are you advocating
a Marxist program aimed at intensifying the contradictions and
reviving the socialist, social-democratic, and communist movements??

There's another kind of redistribution to the poorer elders: in Japan,
it's been reported that the number of robberies and similar crimes by
old people has skyrocketed.
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.

[*] I can see why a pragmatic Randite like Greenspan would want to
increase regressive taxation, but why would he wan to save OASI? Maybe
he thought that by raising taxes he could undermine its legitimacy and
popularity among working people?

[**]  The Fed usually makes a big profit -- oops, I mean "surplus" --
from its holdings of Treasury paper and redistributes some of it back
to the government. The present day seems an exception, since the Fed's
gotten into new lines of business.

[***] From the 2008 OASDI Trustees Report at
http://www.ssa.gov/OACT/TR/TR08/IV_LRest.html:
>>Under the low cost assumptions, the projected OASI annual balance is posi­tive for 13 years (through 2020) and then becomes negative, with the annual deficit peaking at 1.82 percent of taxable payroll for 2034. Thereafter, the annual deficit declines. By 2072, the OASI annual balance becomes positive, reaching a surplus of 0.15 percent of payroll in 2082. Under the high cost assumptions, however, the OASI balance is projected to be positive for only 7 years (through 2014) and to be negative thereafter, with a deficit of 1.87 percent for 2020, 5.79 percent for 2050, and 9.84 percent of payroll for 2082.<<

But notice that the Trustees are quite pessimistic about the future of
the US economy.

[****] The reason why most establishmentarian observers see the
current Bush deficits as a problem, despite the government's debt
being a moderate percentage of GDP, is because of future obligations,
i.e., Medicare and Medicaid, continued military expenditure, etc., but
not OASI.
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