Category Archive for: Social Security [Return to Main]

Thursday, March 31, 2011

Will They Feel Betrayed?

I wonder what will happen politically when, after having a huge fight over Social Security and finally "saving" the program through some ill-advised bipartisan compromise, people realize that they've given up quite a bit, but the budget picture has hardly changed at all.

Sunday, March 13, 2011

"Cockroach Ideas"

Paul Krugman is frustrated by cockroaches:

Way back, when I spent a year in the government, an old hand told me that fighting bad ideas is like flushing cockroaches down the toilet; they just come right back. I’m having that feeling a lot lately

What are his frustrations?:

One is ... “the Social Security trust fund doesn’t exist” thing. I’ll just repeat what I said back when Bush was trying to push through privatization:

Social Security is a government program supported by a dedicated tax, like highway maintenance. Now you can say that assigning a particular tax to a particular program is merely a fiction, but in fact such assignments have both legal and political force. ...

The date at which the trust fund will run out, according to Social Security Administration projections, has receded steadily into the future: 10 years ago it was 2029, now it’s 2042. As Kevin Drum, Brad DeLong, and others have pointed out, the SSA estimates are very conservative, and quite moderate projections of economic growth push the exhaustion date into the indefinite future.

But the privatizers won’t take yes for an answer when it comes to the sustainability of Social Security. Their answer to the pretty good numbers is to say that the trust fund is meaningless because ... the whole notion of a separate budget for Social Security is a fiction. And if that’s true, the idea that one part of the government can have a positive trust fund while the government as a whole is in debt does become strange.

But there are two problems with their position.

The lesser problem is that if you say that there is no link between the payroll tax and future Social Security benefits – which is what denying the reality of the trust fund amounts to – then Greenspan and company pulled a fast one back in the 1980s: they sold a regressive tax switch, raising taxes on workers while cutting them on the wealthy, on false pretenses. More broadly, we’re breaking a major promise if we now, after 20 years of high payroll taxes to pay for Social Security’s future, declare that it was all a little joke on the public.

The bigger problem for those who want to see a crisis in Social Security’s future is this: if Social Security is just part of the federal budget, with no budget or trust fund of its own, then, well, it’s just part of the federal budget: there can’t be a Social Security crisis. All you can have is a general budget crisis. Rising Social Security benefit payments might be one reason for that crisis, but it’s hard to make the case that it will be central.

But those who insist that we face a Social Security crisis want to have it both ways. Having invoked the concept of a unified budget to reject the existence of a trust fund, they refuse to accept the implications of that unified budget going forward. Instead, having changed the rules to make the trust fund meaningless, they want to change the rules back around 15 years from now: today, when the payroll tax takes in more revenue than SS benefits, they say that’s meaningless, but when – in 2018 or later – benefits start to exceed the payroll tax, why, that’s a crisis. Huh?

I don’t know why this contradiction is so hard to understand, except to echo Upton Sinclair: it’s hard to get a man to understand something when his salary (or, in the current situation, his membership in the political club) depends on his not understanding it. But let me try this one more time, by asking the following: What happens in 2018 or whenever, when benefits payments exceed payroll tax revenues?

The answer, very clearly, is nothing.

The Social Security system won’t be in trouble: it will, in fact, still have a growing trust fund, because of the interest that the trust earns on its accumulated surplus. The only way Social Security gets in trouble is if Congress votes not to honor U.S. government bonds held by Social Security. That’s not going to happen. So legally, mechanically, 2018 has no meaning.

Now it’s true that rising benefit costs will be a drag on the federal budget. So will rising Medicare costs. So will the ongoing drain from tax cuts. So will whatever wars we get into. I can’t find a story under which Social Security payments, as opposed to other things, become a crucial budgetary problem in 2018.

What we really have is a looming crisis in the General Fund. Social Security, with its own dedicated tax, has been run responsibly; the rest of the government has not. So why are we talking about a Social Security crisis?

Oh well. I guess we just have to keep fighting these fights, over and over.

One cockroach I thought had been wiped out by "facticide" is that tax cuts pay for themselves. But that turned out to be wrong. Prior to the recent Congressional elections this claim was still made by many politicians on the right, and it was largely unchallenged by the press (making me think I should have called the insecticide used to battle bad ideas "facts aside" instead of "facticide"). It wasn't claimed as widely as in the past, so that is progress I guess, but even those who know better began making artful statements that made it sound like tax cuts would still bring more revenue to the Treasury (e.g. statements like tax cuts increase growth, and more growth means more revenue for the government -- essentially, the cockroach mutated in a way that neutralized the attempt to kill it off).

How do you kill a zombie cockroach?

Tuesday, March 08, 2011

Pre-Payment for Services and Social Security

I keep seeing the argument that the way Social Security is funded -- the young provide the funds needed for the retirement of the elderly -- and the fact that tax collections can be viewed as one big pot of money imply that the government is not providing a service (insurance in this case) as you might see in the private sector:

The confounding problem is that many people believe the payroll taxes they pay go to fund the benefits they will receive, which is completely untrue. The payroll taxes go to pay current expenses of the US government. They are just a tax on labor. The government is spending every penny of those payroll taxes to pay for current expenditures. ... the [government] is free to use your premia to buy fighter jets and space shuttles!!

Some go so far as to argue this means it must be welfare. I disagree.

Consider (and apologies for the example) a firm that provides funeral services. This firm sells burial plots to the young, those still working, and it issues a promise. When the time comes, you have a place to be buried, and your payment will cover the following services (which are listed explicitly).

However, the firm does not take your money and put it into savings for the next however many years. Instead, it uses the money to cover the expenses of current funerals. Your money is used to pay for the services of the old, those who have passed away.

So, the  money of the young is used to provide services for the old, just like Social Security. Does this mean that the people whose funerals were paid for when they were younger received welfare? Of course not. Does it mean they received no services from the firm? Again, no. It's even possible that when your turn comes (and hopefully it's far away), the funeral will cost more than you paid in advance -- the firm may have not anticipated future costs correctly. In that case, there will be an income transfer from the young to the old (the young will be charged higher prices to reserve a plot in the future), but that still doesn't mean it is welfare. Fundamentally, this is an advance purchase of a service.

Just because the payment for retirement insurance, i.e. Social Security, comes in advance of the consumption of the services does not mean that it is welfare. It doesn't matter if your money is used "to buy fighter jets and space shuttles!!" anymore than it matters if the firm providing the burial services uses some of your prepayment to pay for electricity of security guards (and which particular tax dollar is used to make the payments doesn't matter either since these monies are fungible). What matters is the promise of future services, and that the promise is honored. The payroll tax comes with a promise of future insurance services, it is no different than advance payment for services in the private sector, and people expect those services to be delivered (if you don't think people believe the promise is there, try telling them they won't get anything from Social Security when their turn comes).

I am not arguing that there is not transfer component to the Social Security program, there is. But, as I kept saying here, it is "mainly" an insurance program, not welfare (just like the transfers in the example above do not change that it is fundamentally a payment for a future service). When you pay the government each month, it comes in return for the promise of future services. When the government makes good on that promise and delivers the services you paid for, there is no welfare involved. It's not welfare when you consume private sector services that have been paid for in advance, and the government is no different.

Monday, March 07, 2011

Social Security is *Not* Welfare

Robert Samuelson is making the same wrong argument about Social Security being welfare that he's been making for years:

Why Social Security is welfare, by Robert J. Samuelson: ...Here is how I define a welfare program: First, it taxes one group to support another group, meaning it's pay-as-you-go and not a contributory scheme where people's own savings pay their later benefits. And second, Congress can constantly alter benefits, reflecting changing needs, economic conditions and politics. Social Security qualifies on both counts.

Since he is rolling out the same old column (and apparently getting paid for it), I'll just roll out the same old response. This is from March, 2005, just a few weeks after I started this blog:

Fire Insurance is not Welfare and Neither is Social Security: Robert Samuelson, and many others, appear to believe that any time there is a transfer of income between individuals or groups it is welfare. This is wrong. According to Samuelson:

Welfare is a governmental transfer from one group to another for the benefit of those receiving. The transfer involves cash or services (health care, education). We have welfare for the poor, the old, the disabled, farmers and corporations. Social Security is mainly welfare...

Not it isn’t. Social Security is mainly a means of insuring against economic risk. It is fundamentally an insurance program, not a saving program, and as such it is not "mainly welfare."

Just because an economic activity transfers income from one person or group to another does not make it welfare. Fire insurance transfers income. Some people pay premiums for their whole lives and collect nothing. Others, the unlucky few who suffer a fire, collect far more than they contribute. Does that make it welfare? Of course not.

Social Security is no different, it is an insurance program against economic risk as I explain in this Op-Ed piece. Some people will live long lives and collect more than they contribute in premiums, some will die young and collect less. Some children will lose their parents and collect more than their parents paid into the system, others will not. But this does not make it welfare.

Is gambling welfare? Gambling transfers income from one person to another. Does that make it welfare? Loaning money transfers income when the loan is paid back with interest. Are people who receive interest income on welfare?

There is an important distinction between needing insurance ex-ante and needing it ex-post. Insurance does redistribute income ex-post, but that doesn't imply that it was a bad deal ex-ante (i.e., when people start their work lives). ...

Angry Bear agrees with me on this and the two of us have been independently saying the same thing (in fact, I first encountered AB in a Google search on Social Security, insurance, and risk). As AB said (the full text is well worth reading):

What does all of this have to do with Social Security? Those who are hard-working, fortunate, and not too profligate will have a large nest egg at retirement and Social Security will account for only a small portion of their retirement portfolio. This is tantamount to paying for insurance and then not needing it. This happens all the time -- every year someone fails to get sick or injured and, while surely happy in their good health, would have been better off not buying insurance. That's the nature of insurance: if you don't need it, then you'll always wish you hadn't purchased it. Only in the context of retirement insurance is this considered a crisis.

On the other hand, those with bad luck or insufficient income will not have a nest egg at retirement. Because of Social Security, instead of facing the risk of zero income at retirement, they are guaranteed income sufficient to subsist.

This is precisely like the insurance example I worked through above: people with good outcomes will wish they hadn't paid into the insurance fund; those with bad outcomes will be glad they did. Ex-ante, everyone benefits from the insurance. Overall, society is better off because risk is reduced; because people are risk-averse, the gains are quite large.

When I think of welfare, I think of pure money transfers from one group to another without any economic basis for the transfer. In such cases, one person’s gain arises from another’s loss. But economic activity that results in the exchange of goods and services is different. It is not a zero sum game. One person’s gain does not come at the expense of someone else.

The main feature of Social Security is not welfare as Samuelson asserts. The main feature is insurance against economic risks and as such it makes us collectively better off. Calling it welfare when it isn’t is misleading and causes unnecessary class distinctions and resentments from the losers ex-post. More importantly, it ignores and obscures the important role Social Security plays in society as insurance against the economic risks we all face.

If you think you are so rich and powerful that you don’t need such insurance, consider this. The stock market collapse of 1929 at the onset of the Great Depression wiped out substantial quantities of wealth. The typical stock was worth only one sixth its pre-crash value once the bottom was reached. Whatever insurance existed in the stock market evaporated as the crash unfolded.

It wasn’t the poor jumping out of windows on Wall street. If you think it can’t happen to you, think again.

Friday, February 18, 2011

Paul Krugman: Willie Sutton Wept

Paul Krugman says this much better than I did:

Willie Sutton Wept, by Paul Krugman, Commentary, NY Times: There are three things you need to know about the current budget debate. First, it’s essentially fraudulent. Second, most people posing as deficit hawks are faking it. Third, while President Obama hasn’t fully avoided the fraudulence,... he deserves much more credit for fiscal responsibility than he’s getting.
About the fraudulence: Last month, Howard Gleckman of the Tax Policy Center described the president as the “anti-Willie Sutton” ... because ... Mr. Obama has lately been going where the money isn’t, making a big deal out of a freeze on nonsecurity discretionary spending, which accounts for only 12 percent of the budget.
But that’s what everyone does. House Republicans ... focus solely on that same small budget sliver. ...
The whole budget debate, then, is a sham. House Republicans, in particular, are literally stealing food from the mouths of babes — nutritional aid to pregnant women and very young children is one of the items on their cutting block — so they can pose, falsely, as deficit hawks.
What would a serious approach to our fiscal problems involve? I can summarize it in seven words: health care, health care, health care, revenue.
Notice that I said “health care,” not “entitlements.” People in Washington often talk as if there were a program called Socialsecuritymedicareandmedicaid, then focus on things like raising the retirement age. But that’s more anti-Willie Suttonism. Long-run projections suggest that spending ... will rise sharply over the decades ahead, but the great bulk of that rise will come from the health insurance programs, not Social Security. So anyone who is really serious about the budget should be focusing mainly on health care. ...
What would real action on health look like? Well, it might include things like giving an independent commission the power to ensure that Medicare only pays for procedures with real medical value; rewarding health care providers for delivering quality care rather than simply paying a fixed sum for every procedure; limiting the tax deductibility of private insurance plans; and so on.
And what do these things have in common? They’re all in last year’s health reform bill.
That’s why I say that Mr. Obama gets too little credit. He has done more to rein in long-run deficits than any previous president. And if his opponents were serious about those deficits, they’d be backing his actions and calling for more; instead, they’ve been screaming about death panels.
Now, even if we manage to rein in health costs, we’ll still have a long-run deficit problem... So what should be done?
This brings me to the seventh word of my summary of the real fiscal issues: if you’re serious about the deficit, you should be willing to consider ... higher taxes. True, higher taxes aren’t popular, but neither are cuts in government programs. So we should add to the roster of fundamentally unserious people anyone who talks about the deficit — as most of our prominent deficit scolds do — as if it were purely a spending issue.
The bottom line, then, is that while the budget is all over the news, we’re not having a real debate; it’s all sound, fury, and posturing... And we shouldn’t indulge ... politicians by pretending otherwise.

Thursday, February 17, 2011

Social Security and Longevity

Those who want to cut Social Security benefits because people are living longer, e.g. through raising the retirement age, assume longevity is independent of the Social Security system. That assumption may be false:

Study links social security improvements to longer life span, EurekAlert: ...According to a new study published in the Journal of Public Health Policy, Americans over the age of 65 experienced steep declines in the rate of mortality in the periods that followed the founding of and subsequent improvements to Social Security. The authors urge that as Congress and the President discuss changes to Social Security they consider the benefit of reduced mortality and improved health among older Americans. ...
Peter Arno, Ph.D., the study's lead author and professor and director of the doctoral program in the Department of Health Policy and Management of the School of Health Sciences and Practice at New York Medical College ... and his colleagues analyzed the effect of Social Security on mortality over the course of the 20th century. After controlling for factors such as changes in the economy, access to medical care, and Medicare, they found that although mortality rates for all adults fell during the 20th century, rates of decline for those 65 and older changed more than 50 percent in the decades following the introduction of Social Security in 1940. Rates of decline for the younger age groups remained virtually the same during this period. The trend was particularly pronounced following marked improvements in Social Security benefits between the mid-1960s and the early 1970s.
This finding supports earlier studies that have demonstrated that beneficiaries with higher lifetime earnings experienced lower mortality rates, and that higher supplemental security income benefit levels reduced mortality and disability for those recipients. Improved health status among elders could have other fiscal impacts, including lower Medicare costs.
Many policy-makers are proposing cuts to Social Security benefits as a way of addressing long-term federal budget deficits. "If policy-makers are going to have a well-informed discussion on Social Security, it is critical that they fully appreciate the program's role in improving the health and well-being of our nation's elderly," says Arno. "By not considering the benefits of reduced mortality and poverty reduction, policy-makers are grossly underestimating Social Security's benefits to society."

Cutting the lifespans of people who depend upon Social Security is one way to move the system back toward balance.

"Why Social Security Isn’t a Problem"

This is my preferred method of bringing the Social Security system back into balance:

Why Social Security Isn’t a Problem for 26 Years, and the Best Way to Fix It Permanently, by Robert Reich: ...Back in 1983, Alan Greenspan’s Social Security commission was supposed to have fixed the system for good – by gradually increasing payroll taxes and raising the retirement age. (Early boomers like me can start collecting full benefits at age 66; late boomers born after 1960 will have to wait until they’re 67.)
Greenspan’s commission must have failed to predict something. But what? It fairly accurately predicted how quickly the boomers would age. It had a pretty good idea of how fast the US economy would grow. ... So what did Greenspan’s commission fail to see coming? Inequality.
Remember, the Social Security payroll tax applies only to earnings up to a certain ceiling. (That ceiling is now $106,800.) The ceiling rises every year according to a formula roughly matching inflation.
Back in 1983, the ceiling was set so the Social Security payroll tax would hit 90 percent of all wages covered by Social Security. That ... Greenspan Commission’s fixes ... assumed that ... the Social Security payroll tax would continue to hit 90 percent of total income.
Today, though, the Social Security payroll tax hits only about 84 percent of total income. It went from 90 percent to 84 percent because a larger and larger portion of total income has gone to the top. ...
If we want to go back to 90 percent, the ceiling on income subject to the Social Security tax would need to be raised to $180,000. Presto. Social Security’s long-term ... problem would be solved.
So there’s no reason even to consider reducing Social Security benefits or raising the age of eligibility. The logical response to the increasing concentration of income at the top is simply to raise the ceiling.
Not incidentally, several months ago the White House considered proposing that the ceiling be lifted to $180,000. Somehow, though, that proposal didn’t make it into the President’s budget.

Even though "Social Security isn’t responsible for the federal deficit," the centrist hawkish types in Congress that will make a difference in votes on the budget seem determined to either cut benefits or raise the retirement age to show they are serious about the deficit. They've convinced the public that Social Security is a big part of the budget problem, even though it isn't, and now they're going to show how serious they are by creating real pain.

Why not raise the ceiling? Why doesn't that ever seem to be part of the discussion? For some, it's ideological. Anything that reduces the size of the Social Security program is agreeable. Cutting benefits or raising the retirement age scales things back while raising the ceiling maintains the current size of the program. For others, "fix Social Security" means quit making me (or my kids) pay for other people's benefits. Raising the payroll cap doesn't solve the problem this group has with the Social Security system. In fact, it makes it worse. Finally, it's probably no accident that the solutions being considered fall on the politically less powerful while raising the cap hits the politically well-connected.

But getting reelected is the primary reason politicians shy away from this solution. Obama is thinking ahead to the election in 2012, as are members of Congress. Raising the cap is a tax increase, and they are afraid of the politics associated with tax increases -- the courage to take on the political heat is missing. So even though raising the ceiling is the best way to go, it's just not going to happen.

Wednesday, February 16, 2011

Barking Up the Wrong Tree: Social Security is *Not* the Problem

[Source: CBO]

Though there seems to be a concerted effort to get people to believe otherwise, Social Security has very little to do with our long-run budget problem.

Monday, January 24, 2011

SOTU: Obama Won't Endorse Raising Retirement Age or Reducing Social Security Benefits

Some news on the State of the Union address:

Obama won't endorse raising retirement age or reducing Social Security benefits, by Lori Montgomery, Washington Post: President Obama has decided not to endorse his deficit commission's recommendation to raise the retirement age, and otherwise reduce Social Security benefits, in Tuesday's State of the Union address, cheering liberals and drawing a stark line between the White House and key Republicans in Congress. ...
Administration officials said Obama is unlikely to specifically endorse any of the deficit commission's recommendations in the speech, but cautioned that he is unlikely to rule them off the table, either. On Social Security, for example, he is likely to urge lawmakers to work together to make the program solvent, without going into details, according to congressional sources. ...

That Obama won't be endorsing these suggestions from the deficit commission is good news, but now the question is whether he'll steadfastly oppose these changes if they are part of the deal that arises when "lawmakers to work together to make the program solvent." The caution that nothing is off the table is not very reassuring. It sounds like he has no desire to lead the charge, but may jump aboard if he can say the other side gave him no other choice. I hope I'm wrong about that.

Monday, December 20, 2010

Cutting Social Security to Prevent Cuts in Social Security?

There is a report that Obama is considering featuring Social Security reform, including benefit cuts, in his State of the Union address:

... The tax deal negotiated by President Barack Obama and Senate Republican leader Mitch McConnell of Kentucky is just the first part of a multistage drama that is likely to further divide and weaken Democrats.
The second part, now being teed up by the White House and key Senate Democrats, is a scheme for the president to embrace much of the Bowles-Simpson plan — including cuts in Social Security. This is to be unveiled, according to well-placed sources, in the president’s State of the Union address.
The idea is to pre-empt an even more draconian set of budget cuts likely to be proposed by the incoming House Budget Committee chairman, Rep. Paul Ryan (R-Wis.), as a condition of extending the debt ceiling. This is expected to hit in April.
White House strategists believe this can also give Obama “credit” for getting serious about deficit reduction — now more urgent with the nearly $900 billion increase in the deficit via the tax cut deal. ...

Bad idea. Dean Baker suggests another route:

...supporters of Social Security and Medicare have to ... push President Obama to announce in advance that he will never sign a debt ceiling bill that includes cuts to Social Security and Medicare, the countries two most important social programs.
These programs are crucial to the financial security and health of tens of millions of people. If there are to be changes in these programs then they should occur after a full public debate in the light of day, not as the result of Republican trickery and parliamentary game playing.
This would be a hugely popular position since not only Democrats, but also independents and even Tea Party Republicans overwhelming support Social Security and Medicare. ...

Why not propose raising the ceiling on payroll taxes instead? The rich and powerful are used to getting their way, the recent tax cuts are an example of this, so they see no downside to pushing for deficit reduction and reductions in social programs they don't need. They believe they have no reason to fear a tax incrase of any kind, an increase in the ceiling on payroll taxes included, and the recent tax deal lends support to that notion. But if it's clear that they will be asked to shoulder a large chunk of the costs of deficit reduction (I can dream), the powerful interests pushing for cuts may suddenly find that Social Security is in much better shape than they realized.

Update: Brad DeLong:

When people in the White House ask me whether I think Obama's SOTU address should be about tax reform or Social Security reform (i.e., 2/3 Social Security benefit cuts, 1/3 tax increases offered by the administration--and God alone knows what happens after that), I want to say: Why not make the SOTU address about jobs and economic recovery?

"I want to say..." Wonder why he doesn't actually say it? The "people in the White House" asking him about this sure need to hear it.

Update: Tyler Cowen:

Here is a related Paul Krugman post.  In my view, Obama may propose slowing the rate of benefit increase, but he won't propose an actual cut in Social Security benefits.  Use of the word "cuts" is thus likely to prove misleading.  I've already argued it is better to cut Medicare than Social Security (in-kind vs. cash), but it shouldn't come as a shock if reindexing benefits is part of a bipartisan budget deal.  It's an easier policy "to do" than fixing Medicare, though again I prefer the latter. ...

Monday, December 06, 2010

Deal Reached to Extend All the Bush Tax Cuts

Here are the details of the agreement on the Bush tax cuts:

1) The Bush tax cuts get extended for two years -- with one ugly surprise: For the next two years, estates up to $5,000,000 will be protected from the estate tax, and the tax rate for the few estates that are taxed will be 35 percent. ... The difference in expected revenue between the 2009 levels and the compromise levels is $10 billion or so.

2) The refundable tax credits are extended: The Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax Credit were all pumped up in the stimulus, but set to expire this year. All of them will be extended. Price tag? $40 billion or so.

3) Unemployment insurance gets extended for 13 months: ... In perhaps the most important part of the deal, there's going to be a 13-month extension at a cost of $56 billion.

4) A 2 percent cut in the payroll taxes paid by employees: This is perhaps the most unexpected part of the compromise. Rather than extending the administration's Making Work Pay tax credit for two years, which would've been worth about $60 billion a year, they've agreed to a one-year cut in the payroll taxes paid by employees, which'll raise $120 billion in 2011. ...

5) Business expensing: Remember back in September, when the White House announced a proposal to give businesses two years in which they could deduct 100 percent of the cost of new investments? That's in the deal, too. The cost of this is a bit complicated -- it's $30 billion over 10 years, but it works by offering huge tax cuts in the next two years and then paying that back over the next eight. ...

On net, the package probably adds around $200 billion in new stimulus for the economy, maybe a bit more. Notice, however, that it is entirely tax cuts.

The estate tax and the extension of high end tax cuts are causing the most heated reactions, and the payroll tax cut is generally being applauded. But I see the payroll tax reduction as potentially troublesome as well. Though the revenue the Social Security system loses due to the tax cut will be backfilled from general revenues, the worry is that the tax cut will not expire as scheduled -- temporary tax cuts have a way of turning permanent. That's especially true in this case since labor markets are very unlikely to recover within the next year and it will be easy to argue against the scheduled "tax increase" for workers. In fact, it will never be a good time to increase taxes on workers and if the tax cut is extended once, as it's likely to be, it will be hard to ever increase it back to where it was. That endangers Social Security funding -- relying on general revenue transfers sets the system up for cuts down the road -- and for that reason I would have preferred that this be enacted in a way that produces the same outcome, but has different political optics. That is, leave the payroll tax at 6% on the books and keep sending the money to Social Security, and fund a 2% tax "rebate" out of general revenues. The rebate would come, technically, as a payment from general revenues rather than through a cut in the payroll tax, but in the end the effect would be identical. But the technicality is important since it preserves the existing funding mechanism for Social Security even if the taxes are permanently extended.

Sunday, November 28, 2010

"Workers Must Work Longer for Less Because the Rich are Living Longer"

It's nice to see the local paper highlighting this side of the Social Security debate:

Washington elites making their move on Social Security, by Nancy Altman and Eric Kingson, Commentary, Register Guard: Alan Simpson and Erskine Bowles, the co-chairs of President Obama’s deficit commission ... released their proposal to reduce the federal deficit... In releasing their plan, the co-chairs went out of their way to make clear that they were proposing changes to Social Security “for its own sake, not for deficit reduction.” ... Simpson and Bowles just couldn’t keep their hands off the program.
One thing they propose is increasing Social Security’s retirement age to 69. ... Increasing the age to 69 would cut benefits by one-quarter from a decade ago, when the retirement age was 65. The co-chairs also want to increase the early retirement age to 64. ... As a new General Accountability Office report concluded,... Raising the early retirement age will shut out workers who are disproportionately low income and minority,... potentially forcing them to seek disability benefits or welfare. ...
Over the last quarter-century, life expectancy of lower-income men increased by one year, compared to five for upper-income men. And lower-income women have experienced declines in longevity. ... In effect, the Bowles-Simpson plan says to America’s workers that they must work longer for less because the rich are living longer.
In addition to raising the retirement age, the Bowles-Simpson plan would reduce benefits to ... future recipients ... by as much as 36 percent... Bowles and Simpson ... also propose cutting the cost-of-living adjustment for those now receiving Social Security. ...
For all the talk of polarization, the American people are clear... A recent poll ... found that 67 percent ... opposed cuts in benefits; 69 percent opposed raising the Social Security retirement age to 69. ... Some 66 percent ... favored doing away with the current cap on payroll taxes to fund Social Security. Currently, taxpayers are taxed only on their first $106,800... Simply requiring ... taxpayers to pay the tax on all their income would bring in enough revenue to allow benefits to be raised across the board and still have the program in balance for at least the next 75 years. ...
 Despite the clear view of the American people, the elites in Washington seem to think it would be better to reduce benefits than to require the wealthy to pay the same percentage of their salaries into Social Security as everyone else does.
If politicians choose to cut Social Security benefits, when they could simply scrap the cap, we predict that this midterm will seem like a walk in the park compared to what awaits them in 2012.

[It's not even clear that all of the proposed changes are for Social Security's "own sake" rather than deficit reduction. The Government Accountability Office report referenced above indicates that increasing the early retirement age will actually have a negative impact on Social Security solvency.]

Saturday, November 20, 2010

"Raise Retirement Age and More Become Disabled"

Raising the retirement age also raises disability applications, so this won't save as much money as many people think, and could even make things worse if the early retirement age is changed (the early retirement age is currently 62):

Raise Retirement Age and More Become Disabled, by Merrill Goozner: Most people are working and living longer, so it seems like a no-brainer to raise the retirement age to help close the long-term Social Security funding gap. But the move could backfire and not save as much as predicted. Why? Not all groups are able to work longer, a new report from the Government Accountability Office says.
“Raising the retirement ages would likely increase the number of workers applying for and receiving disability insurance benefits,” which also comes out of Social Security, said the report...
The report presented a sobering view of the health status of near-retirement age population. About a quarter of Americans aged 60-61 have a work-limiting health conditions, according to the report, and about two-thirds the ones who are still on the job report working in occupations that are “physically demanding.” Raising either the early or full retirement ages above where they are now would incentivize many more of those workers to seek disability coverage...
The report took a snapshot of those on the cusp of retirement, and found those reporting good or excellent health were twice as likely to have some college education, twice as likely to be working full-time, had twice the income and four times the wealth of those reporting poor or fair health. In other words, people who are the most dependent on Social Security for retirement income are the ones most likely to go on disability if denied early retirement benefits.
While raising the full retirement age would still save the system money, “raising the early retirement age would have a negative impact on (Social Security) solvency because disability costs would rise and expected total lifetime retirement benefits would not change,” the report concluded.

I'd prefer that we raise or eliminate the cap on Social Security taxes.

Friday, November 19, 2010

"Questioning a Payroll Tax Holiday"

Bruce Bartlett says a payroll tax holiday is a bad idea:

Questioning a Payroll Tax Holiday, by Bruce Bartlett: Pete Domenici and Alice Rivlin have proposed a one-year payroll tax holiday to stimulate the economy. I have previously explained why I think monkeying around with the payroll tax is a dreadful idea and won't repeat my argument here. Today, I just want to ask one question: What are the odds that Republicans will ever allow this one-year tax holiday to expire? They wrote the Bush tax cuts with explicit expiration dates and then when it came time for the law they wrote to take effect exactly as they wrote it, they said any failure to extend them permanently would constitute the biggest tax increase in history. Sadly, Obama allowed himself to fall into the Republican trap, but that's another story. My point is that if allowing the Bush tax cuts to expire is the biggest tax increase in history, one that Republicans claim would decimate a still-fragile economy, then surely expiration of a payroll tax holiday would also constitute a massive tax increase on the working people of America. And what are the odds that the economy won't still be fragile a year from now? Zero, I would say.
I respect Pete and Alice and know they are just trying, as are we all, to find something that will stimulate the economy that the Republicans will allow to take effect. But a payroll tax holiday is Pandora's Box and best left unopened. Republicans would prefer to destroy Social Security's finances or permanently fund it with general revenues than allow a once-suspended payroll tax to be reimposed. Arch Social Security hater Peter Ferrara once told me that funding it with general revenues was part of his plan to destroy it by converting Social Security into a welfare program, rather than an earned benefit. He was right.
In conclusion, the payroll tax holiday is misguided. The potential benefits are uncertain, but the dangers are not.

I agree with the worries about Social Security financing -- for those who want to scale back or eliminate Social Security, this would be seen as an opportunity to starve Social Security of finances, create a crisis, then argue for cutbacks. But there are ways to do this that don't involve cutting the payroll tax per se, so the political optics are different, yet amount to the same thing. For example, continue collecting Social Security taxes as before, but give workers a temporary rebate that is clearly designated as independent of Social Security taxes. I'm sure there are better ways to do it, but the point is that we can help workers without putting Social Security at risk.

Sunday, September 05, 2010

Making Social Security Less Generous Isn't the Answer

Ezra Klein:

Making Social Security less generous isn't the answer, by Ezra Klein, Commentary, Washington Post: ...Raising the Social Security retirement age has become as close to a consensus position as exists in American politics. ... And for a while, I agreed... People live longer today, and so they should work later into life. But as I've looked at the issue, I've decided that I was wrong. ... We should leave the retirement age alone. In fact, we should leave Social Security alone...
Start with the basic rationale for raising the retirement age. As Rep. Paul D. Ryan (R-Wis.) has argued, when Social Security was signed into law, the retirement age was 65 and life expectancy was 63. "The numbers added up pretty well back then," he said on Fox News. But that's misleading. That figure was driven by high infant mortality. ...
Moreover,... averages conceal a lot of inequality. In 1972, a 60-year-old male worker who made less than the median income had a life expectancy of 78 years. By 2001, he had a life expectancy of 80 years. Meanwhile, workers in the top half of the income distribution shot to 85 years from 79. ...
Lurking beneath this conversation is an unquestioned assumption: We live longer, so we should work longer. That's pretty intuitive to members of Congress, who seem to like their jobs and don't seem to like the idea of retiring. It's also pretty intuitive to blogger/columnists, who spend their time in air-conditioned rooms opining about pension programs. But most people don't work in Congress or in the media. They work on their feet. They strain their backs. They're bored silly at the end of the day. By the time they're in their 60s, they want to retire.
You see that reflected in Social Security. Age 66 is when you get full benefits. But most people begin taking Social Security at age 62. They get less, but they can retire earlier. To them, the trade-off is worth it. ...
An August survey ... tested reactions to a variety of Social Security fixes. One of the options was raising the retirement age to 70. Two-thirds of respondents opposed it. Another option was eliminating the cap on payroll taxes so that well-off workers pay the tax on their full income, just as middle-income workers do now. A solid 61 percent supported it.
That's almost the reverse of the conversation in Washington, where affluent people who like their jobs propose cutting benefits for the poor (which is, after all, what raising the retirement age would do) rather than lowering benefits or increasing the payroll tax on, well, themselves. ...
The universally unpleasant options for reform are a testament to Social Security's efficiency. It's a simple transfer program, with administrative costs that amount to less than 0.9 percent of total spending. There's not much fat to cut.
That can't be said for much else in American public policy. Our health-care system costs twice as much as the German system and doesn't deliver better results. Our defense sector is wasteful and bloated. Our tax code could raise more money and do less to harm growth if we cleaned it out. Our home prices are driven upward by the mortgage interest tax deduction. Our health insurance premiums are goosed by the exclusion of employer-sponsored insurance from taxable income.
Reforming any of those sectors ... would be politically difficult, but would mean better policy. Reforming Social Security will be politically difficult and result in worse policy. ...

Here's what I argued in May of 2005:

1. An increase in life expectancy does not necessarily imply that people are healthier at age 65 or 70 than before. Suppose, for example, that medical advances are discovered that extend the end of life by several years, but have no effect on health prior to the last few years of life. In such a case there would be an increase in life expectancy, but no increase in the health of workers at the age of retirement. If people aren’t healthier, then increasing the retirement age imposes a hardship over and above that faced by current retirees.

2. It’s already difficult for elderly workers to find employment, and when they do they are often underemployed relative to their skill levels. Raising the retirement age will make this worse.

3. What about workers employed in physically demanding occupations? Is it reasonable to ask them to work until, say, age 72? If not, how equitable is it to have some workers work until 72, and others allowed to retire at a younger age depending on their occupation?

4. Will this distort occupational choice decisions? ... How will we decide when a worker is unable to work due to reasons associated with age?

5. The life expectancy of some groups of workers is lower than for others. If poorer workers die younger than richer workers on average, then raising the retirement age will have a larger impact on low income workers and thus, in essence, be regressive.

Saturday, September 04, 2010

How Illegal Immigrants are Helping Social Security

Illegal immigrants are helping to finance your retirement:

The contributions by unauthorized immigrants to Social Security ... are much larger than previously known... Stephen C. Goss, the chief actuary of the Social Security Administration and someone who enjoys bipartisan support for his straightforwardness, said that by 2007, the Social Security trust fund had received a net benefit of somewhere between $120 billion and $240 billion from unauthorized immigrants.  The cumulative contribution is surely higher now. Unauthorized immigrants paid a net contribution of $12 billion in 2007 alone... Somebody ought to say thank you.

Monday, August 16, 2010

Paul Krugman: Attacking Social Security

The unnecessary and misguided war over Social Security is heating up once again:

Attacking Social Security, by Paul Krugman, Commentary, NY Times: Social Security turned 75 last week. It should have been a joyous occasion, a time to celebrate a program that has brought dignity and decency to the lives of older Americans.
But the program is under attack, with some Democrats as well as nearly all Republicans joining the assault. Rumor has it that President Obama’s deficit commission may call for deep benefit cuts, in particular a sharp rise in the retirement age.
Social Security’s attackers claim that they’re concerned about the program’s financial future. But their math doesn’t add up, and their hostility isn’t really about dollars and cents. Instead, it’s about ideology and posturing. And underneath it all is ignorance of or indifference to the realities of life for many Americans.
About that math: ...The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come.
Meanwhile, an aging population will eventually (over the ... next 20 years) cause the cost of paying Social Security benefits to rise from its current 4.8 percent of G.D.P. to about 6 percent of G.D.P. To give you some perspective, that’s a significantly smaller increase than the rise in defense spending since 2001, which Washington certainly didn’t consider a crisis, or even a reason to rethink some of the Bush tax cuts.
So where do claims of crisis come from? To a large extent they ... rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.
It would be easy to dismiss this..., except ... many influential people — including Alan Simpson, co-chairman of the president’s deficit commission — are peddling this nonsense.
And having invented a crisis,... Social Security’s attackers ... don’t propose cutting benefits to current retirees; invariably the plan is, instead, to cut benefits many years in the future. ... In order to avoid the possibility of future benefit cuts, we must cut future benefits. O.K.
What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution. But they receive crucial support from Washington insiders, for whom a declared willingness to cut Social Security has long served as a badge of fiscal seriousness, never mind the arithmetic.
And neither wing of the anti-Social-Security coalition seems to know or care about the hardship its favorite proposals would cause.
The currently fashionable idea of raising the retirement age even more... — it has already gone from 65 to 66, it’s scheduled to rise to 67, but now some are proposing that it go to 70 — is usually justified with assertions that life expectancy has risen... But that’s only true for affluent...— the people who need Social Security least. ...
America is becoming an increasingly unequal society — and the growing disparities extend to matters of life and death. Life expectancy at age 65 has risen a lot at the top of the income distribution, but much less for lower-income workers. And remember, the retirement age is already scheduled to rise under current law.
So let’s beat back this unnecessary, unfair and — let’s not mince words — cruel attack on working Americans. Big cuts in Social Security should not be on the table.

Sunday, August 08, 2010

"The Myth of the Social Security Shortfall"

This is from Michael Hiltzik at the LA Times:

The myth of the Social Security system's financial shortfall, by Michael Hiltzik, Commentary, LA Times: The annual report of the Social Security Trustees ... has become an occasion for hand-wringing and crocodile tears over the (supposedly) parlous state of the system's finances. ... Within minutes of its release, some analysts were claiming that it projected a "shortfall" for Social Security this year of $41 billion.
Before we get to the bogus math behind that statement ... let's look at the encouraging findings... The trustees indicated that the program has made it through the worst economic downturn in its life span essentially unscathed. In fact, by at least one measure it's fiscally stronger than a year ago...
That brings us back to this supposed $41-billion "shortfall," which exists only if you decide not to count interest due of about $118 billion. And that, in turn, leads us to the convoluted subject of the trust fund, which for some two decades has been the prime target of the crowd trying to bamboozle Americans into thinking Social Security is insolvent, bankrupt, broke — pick any term you wish, because they're all wrong. ... Despite what Social Security's enemies love to claim, the trust fund is not a myth... It's real money, and it represents the savings of every worker paying into the system today. So I'm going to train a microscope on it. ...
The truth is that there are two separate tax programs at work here — the payroll tax and the income tax... The first pays for Social Security and the second for the rest of the federal budget. Most Americans pay more payroll tax than income tax. Not until you pull in $200,000 or more ... are you likely to pay more in income tax than payroll tax. ...
Since 1983, the money from all payroll taxpayers has been building up the Social Security surplus, swelling the trust fund. What's happened to the money? It's been borrowed by the federal government and spent on federal programs — housing, stimulus, war and a big income tax cut for the richest Americans, enacted under President George W. Bush in 2001. In other words, money from the taxpayers at the lower end of the income scale has been spent to help out those at the higher end. That transfer — that loan, to characterize it accurately — is represented by the Treasury bonds held by the trust fund.
The interest on those bonds, and the eventual redemption of the principal, should have to be paid for by income taxpayers, who reaped the direct benefits from borrowing the money. So all the whining you hear about how redeeming the trust fund will require a tax hike we can't afford is simply the sound of wealthy taxpayers trying to skip out on a bill about to come due. The next time someone tells you the trust fund is full of worthless IOUs, try to guess what tax bracket he's in. ...
The trust fund may not last forever, but reports of its demise are certainly premature. The trustees say it will be drawn down to zero in 2037, at which point the program will only have enough money coming in from taxes to pay 78% of the benefits... So sometime in the next quarter-century — but by no means right now — does anything have to be fixed...?
That 2037 deadline ... is a moving target. It's based on long-term projections, which become more uncertain the further out you look. ... It has held steady at 2037 for two years despite the downturn, but that's still better than the projection in 1998, which was for exhaustion in 2032.
In short, if the new trustees report gets examined wisely and responsibly, it should put an end to all the current talk about raising the retirement age or cutting benefits. Social Security doesn't contribute a dime to the federal deficit, and in these days of market stagnation and cutbacks in pensions, it has never been more important to millions of Americans. The Pete Petersons of the world should find themselves a different target.

Monday, June 28, 2010

DeLong: Listening to Arsonists

Brad DeLong seems pessimistic about our political system:

Listening to Arsonists, by J. Bradford DeLong, Commentary, Project Syndicate: I had always thought that Barack Obama made a significant mistake in naming the Republican ex-senator Alan Simpson to co-chair the president’s deficit-reduction commission. Simpson was a noted budget arsonist when he was in the Senate. Indeed, he never met a budget-busting, deficit-increasing initiative from a Republican president that he would not lead the charge to pass. Nor did he ever meet a sober deficit-reducing initiative from a Democratic president that he did not oppose with every fiber of his being.
You don’t pick an arsonist to head the fire department... But perhaps I am ungenerous. Perhaps Simpson has had a change of heart. ... Even in that case, however, naming those who misbehave to important positions of high trust and acclaiming them as bipartisan statesmen gives the next generation really lousy incentives. And it’s not as though Congressional Republicans think they owe enough to Simpson for him to swing a single vote in either chamber of the legislature.
Obama officials assured me that Simpson had, indeed, had a change of heart; that he was a smart man with a sophisticated understanding of the issues; that he could sway reporters and get them to describe the commission’s advice as “bipartisan” (even though he could not sway actual legislators); and that he would be a genuine asset to the substantive work of the commission.
John Berry recently wrote in the online journal The Fiscal Times that not even that is true. Simpson is “condescending and derisive – and wildly wrong about important parts of the Social Security system's past.” ...
Four centuries ago, the consensus, in Western Europe at least, was that good and even adequate government in this fallen world was inevitably a rarity. Democracy always degenerated into mob rule, monarchy into tyranny, and aristocracy into oligarchy. Even when well run, democracy took little interest in the distant future, aristocracy took little interest in the well-being of those whom Simpson calls the “little people,” and monarchy took little interest in anything other than legitimate succession.
Then, at the end of the eighteenth century, the founders of the United States of America and their intellectual successors claimed that this pessimism about government was unwarranted. “The science of most other sciences,” claimed Alexander Hamilton, “has received great improvement....The regular distribution of power into distinct departments...legislative balances and checks...judges holding their offices during good behavior; the representation of the people in the legislature by deputies of their own election...are means, and powerful means, by which the excellences of republican government may be retained and its imperfections lessened or avoided...”
Perhaps Hamilton was too much the optimist. When I look at Barack Obama’s deficit commission – indeed, look at governance worldwide – I see many imperfections, but few or no examples of excellence.

I get pessimistic too, especially when I see Simpson types put in charge of things they have no business overseeing. But when I step back and look at the U.S., I see progress over time on important economic and social issues. The progress is not linear, or even always positive, it's excruciatingly slow, and that can be pretty frustrating when you are fighting the battle of the moment. But things are better now than they once were, and we continue to make progress on important social issues (though, again, it is frustratingly slow). Don't get me wrong, we are far from the end of the process, there is much, much more to do before our job is complete, but if you are a anything but a wealthy white male, things are relatively better now than they once were.

Will things continue to get better? I think so, but the system must continue to evolve over time so it can match the rise of economic and political power with institutions and mechanisms that will blunt their influence and reassert core principles. People with power will find a way to capture the system for themselves, and as their economic and political power increases as a result of their efforts, they will be increasingly successful at this task. I believe that we have allowed far too much capture of government by the powerful in recent decades -- the current state of campaign finance is one reflection of this -- and that this is the biggest danger we face going forward.

Political power is derived in large part from economic power, and a good place to start would be to begin asking harder questions about the costs and benefits of having businesses as big and influential as they are presently. If the economic efficiencies from size do not justify the costs from having such large and powerful firms, and I suspect in most cases they will not, then we need to reduce the power that these firms have (by breaking them if that is the best way to accomplish this). And even when size is justified by efficiency considerations, we need to do a much better job of regulating these firms so that they cannot exert undue influence on politics and the economy. If we don't, if we continue to allow the biggest among us to have the most say as has happened more and more in recent decades, if being big means you will mostly get your way, then we should worry about the future of our political system. I've been optimistic that we'll see the light, but that optimism has been shaken a bit by the outcome of legislation to reform the financial system. This legislation did very little to blunt the power that large firms can exert on our political system. That must change.

Monday, June 21, 2010

"How to Impress the Bond Markets"

Dean Baker says there's more than one way to reassure bond markets, and cutting benefits for retirees in need of the money is one of the worst options available:

How to impress the bond markets, by Dean Baker, Commentary, CIF: The deficit hawks have been pushing the line in recent months that we have to make cuts in social security, along with some revenue increases, in order to reassure the bond markets about the creditworthiness of the US government. According to this argument, by taking tough steps (i.e. cutting social security benefits) we will have shown the bond markets that we are prepared to do what is necessary to keep our budget deficits within manageable levels.
There is some reason to question the merits of this argument. First off, the deficit hawks don't have an especially good track record in the insight category. Not one person among the leading crusaders was able to see the $8tn housing bubble that wrecked the economy. ...
Furthermore, the fixation on social security is peculiar. The Congressional Budget Office shows the program can pay all future benefits through the year 2044 with no changes whatsoever. Even after that date the shortfalls are relatively minor. ...
Furthermore, cutting benefits for near-retirees (workers in their late 40s and 50s) seems cruel and unwarranted. These people paid for their benefits through decades of work. Also, this cohort has seen most of the wealth that they did manage to accumulate destroyed with the collapse of the housing bubble and the plunge in the stock market. The bulk of this cohort will therefore be relying on social security for the overwhelming majority of their retirement income.
For these reasons, the determination to cut social security has the feeling of the class bullies telling the rest of us that we have beat up the weakest kid in the class in order to be admitted to the club. That may be the way things work in Washington, but this doesn't mean it is right.
If the issue is assuaging the bond markets by convincing them that we are prepared to take tough choices to limit long-term deficits, let's put a few other items on the table. For item number 1: how about a financial speculation tax? Wouldn't the bond markets be impressed by seeing Congress crack down on the Wall Street hot shots whose recklessness helped fueled the housing bubble? That one would show real courage given the power of Goldman Sachs-Citigroup gang.
As a second item, Congress could go after the pharmaceutical industry. By 2020 we are projected to be spending almost $500bn a year on prescription drugs. We pay close to twice as much for our drugs as people in other wealthy countries and about 10 times as much as the drugs would cost if they could be sold in competitive market without government patent monopolies.
Suppose Congress decided to pay for the clinical testing of drugs directly and then allowed all new drugs to be sold as generics. This could save taxpayers hundreds of billions of dollars a year. Wouldn't the bond markets be impressed by seeing Congress stand up to the pharmaceutical industry?
As a third item, suppose Congress revisited plans for a public insurance option. The Congressional Budget Office projected that this would save over $100bn by 2020 and certainly much more in future decades. Wouldn't the bond markets be impressed if Congress stood up to the insurance industry?
These are three clear ways in which Congress can take big steps towards reducing long-term budget deficits by standing up to powerful interest groups. In each case Congress would be reducing the deficit in ways that would likely make most people better off, not worse off. If bringing the long-term deficit into line is the issue, all three of these measures should be at the top of everyone's list.

Remarkably, the leading budget hawks never discuss these measures when they push their deficit-cutting agenda. Somehow we are supposed to believe that cutting social security will do the trick with the markets, even though this will hurt tens of millions of people who actually need the money. ...[W]e should just view them as people who want to cut social security and are putting out some nonsense to rationalize beating up on retirees.

The good news is that Alan Simpson appears to have neutered the Deficit Commission:

It must have sounded like a good idea (although not to me): establish a bipartisan commission of Serious People to develop plans to bring the federal budget under control. But the commission is already dead — and zombies did it.

OK, the immediate problem is the statements of Alan Simpson, the commission’s co-chairman. And what got reporters’ attention was the combination of incredible insensitivity – the “lesser people”??? — and flat errors of fact.

But it’s actually much worse than that. On Social Security, Simpson is repeating a zombie lie — that is, one of those misstatements that keeps being debunked, but keeps coming back.

Specifically, Simpson has resurrected the old nonsense about how Social Security will be bankrupt as soon as payroll tax revenues fall short of benefit payments, never mind the quarter century of surpluses that came first.

We went through all this at length back in 2005, but let me do this yet again.

Social Security is a government program funded by a dedicated tax. There are two ways to look at this. First, you can simply view the program as part of the general federal budget, with the the dedicated tax bit just a formality. And there’s a lot to be said for that point of view; if you take it, benefits are a federal cost, payroll taxes a source of revenue, and they don’t really have anything to do with each other.

Alternatively, you can look at Social Security on its own. And as a practical matter, this has considerable significance too; as long as Social Security still has funds in its trust fund, it doesn’t need new legislation to keep paying promised benefits.

OK, so two views, both of some use. But here’s what you can’t do: you can’t have it both ways. You can’t say that for the last 25 years, when Social Security ran surpluses, well, that didn’t mean anything, because it’s just part of the federal government — but when payroll taxes fall short of benefits, even though there’s lots of money in the trust fund, Social Security is broke.

And bear in mind what happens when payroll receipts fall short of benefits: NOTHING. No new action is required; the checks just keep going out.

So what does it mean that the co-chair of the commission is resurrecting this zombie lie? It means that at even the most basic level of discussion, either (a) he isn’t willing to deal in good faith or (b) the zombies have eaten his brain. And in either case, there’s no point going on with this farce.

Speaking of zombies, on Facebook, John Quiggin, author of the forthcoming Zombie Economics (i.e., dead ideas finding new life), says:

Would have been great to have a section on the revival of balanced budget ideology in the European crisis, but that's bookbiz.

It's not just Europe. But in any case, how the words "Deficit Commission" and "cuts to Social Security" became roughly equivalent is a bit of a mystery since the rising cost of health care not Social Security, is the primary problem. The focus on Social Security does speak to the ability of those with power and influence to affect the public debate on these issues, but the simple truth is that if we fix the health cost problem then almost all of the long-run deficit problem goes away. But as others have pointed out, the deficit hawks block any attempts in this direction with charges like "death panels," and that raises questions about the true agenda behind these efforts.

Tuesday, April 27, 2010

"Deficit Reduction: Argument by Authority"

I don't agree with every word of this argument by Dean Baker, particularly some of the parts about the bias in the CPI, but I do agree with the main thrust:

Deficit reduction: argument by authority, by Dean Baker, CIF: The deficit hawks are going into high gear with their drive to cut social security and Medicare. President Obama's deficit commission is having a big public event on Tuesday in which many of the country's most prominent deficit hawks will tout the need to reduce the budget deficit. The next day, Wall Street investment banker Peter Peterson will be hosting a "summit on fiscal responsibility", which will feature more luminaries touting the need to get deficits under control.
What will be missing from both of these events is any serious debate on the extent of the deficit problem and its causes. These affairs are not about promoting a real exchange of views on issues like the future of social security, Medicare, and public support for education, research and infrastructure, the purpose of these events is to tell the public that everyone agrees, we have to cut the deficit. And, this means cutting social security and Medicare. This is argument by authority.
Many public debates in the United States take this form. The issue is not what is said, but rather who says it. A few years ago all the authorities said that there was no housing bubble. The large body of evidence showing that house prices had hugely diverged from the fundamentals did not matter...
Going further back to the mid-90s, many of this same group of deficit hawk luminaries tried to use argument by authority to cut social security. They came up with the story that the consumer price index (CPI) overstated the true rate of inflation. ... This crew (which included then Senator Alan Simpson, a co-chair of President Obama's commission, and Peter Peterson) argued that social security benefits should lag the CPI by one percentage point a year. In other words, if the CPI shows 3% inflation, then social security benefits will only rise by 2%.

That may seem a small cut, but it adds up over time. A worker retired for 10 years would have their benefits reduced by approximately 10%. A worker retired for 20 years would have their benefits cut by almost 20%.
To push this agenda, they put together a panel of the country's most prominent economists, all of whom blessed the claim that the CPI overstated the true rate of inflation... In addition to this panel, the social security cutters also pulled in other prominent economists, including Martin Feldstein...
The social security cutters were so successful in rounding up the big names that virtually no economists were prepared to publicly stand up and question their claims about the CPI. They had near free rein, running around the country with the "all the experts agree" line.
As events unfolded they were not able to get their cut in social security benefits. (Ted Kennedy and Dick Gephardt deserve big credit on this.) But what is really interesting for the current debate is what happened to the experts' claim on the CPI. There were some changes made to the CPI, but in the view of the expert panel, the major causes of the biases in the CPI were not fixed. They concluded that even after the changes the CPI still overstated the true rate of inflation by 0.8 percentage points annually.

If this claim is really true then it has enormous ramifications for our assessment of the economy. It means, for example, that incomes and wages are rising far more rapidly than the official data show. It means that people in the recent past were far poorer than is indicated by official statistics. If the claim about the CPI being overstated is true, then we would have to re-examine a vast amount of economic research that starts from the premise that the CPI is an accurate measure of inflation.
However, almost no economists have adjusted their research for a CPI's overstatement of inflation. In fact, even the members of the expert panel don't generally use a measure of inflation that adjusts for the alleged bias in the CPI. In other words, when they are not pushing cuts to social security, these economists act as though the CPI is an accurate measure of the rate of inflation. This could lead one to question these experts' integrity.
This history should give the public serious grounds for being suspicious about the latest efforts to cut social security and Medicare. A serious discussion of the deficit will show that in the short-term the deficit is not a problem and that the longer-term deficit problem is really a problem of a broken US healthcare system. The public should not allow the deficit hawks to derail a more serious discussion with their argument by authority.

I suppose I should explain what it is I disagree with. First, the second to last paragraph doesn't make the case Dean Baker claims it makes. If the bias in the CPI is a constant .8 percent, then regressions involving this variable will still have unbiased slope coefficients -- the bias will be picked up by the constant term. (That is, suppose that a thermometer is off by four degrees. It will still tell you how many degrees the temperature has changed, e.g. that the temperature went up by ten degrees, and it will do so accurately, but it won't get the actual temperature right. Since the change in temperature determines the slope coefficient in a regression, and the change in temperature is correct, the slope coefficient will be measured accurately.) Since we are almost always interested in the slope term which is unbiased, and only rarely care about the estimates of the constant, the bias in the slope coefficient is is not generally a problem. The main point is that the use of a biased inflation measure in empirical work does not necessarily lead to questions about the integrity of the researchers. (If the bias varies with the "temperature", then the slope coefficient will also be biased, but the claim is a constant bias of .8%).

Second, on the more general question of whether a bias exists at all, I'll refer you to this post by Brad DeLong, "The Meaning of CPI Bias."

Finally, I am not taking issue with the basic claim that the deficit hawks are trying to take control of the debate and push it in a particular direction, a direction that has social programs in its sights. So let me repeat that "A serious discussion of the deficit will show that in the short-term the deficit is not a problem and that the longer-term deficit problem is really a problem of a broken US healthcare system. The public should not allow the deficit hawks to derail a more serious discussion..."

Thursday, April 15, 2010

"Public Education Worth More than Social Security and Medicare"

Is the older generation exploiting the younger generation when it comes to intergenerational entitlement programs such as Social Security and Medicare?:

For post-boomers, public education worth more than Social Security and Medicare, EurekAlert: It's popular to assume retiring baby boomers will benefit from Social Security and Medicare at the expense of younger generations, as analysts estimate that these government-run programs will pay out more than they collect in payroll taxes by 2017.
But a far-reaching new study from the University of California, Berkeley, concludes that younger Americans – specifically those born between 1972 and 2060 – are actually getting the better deal when the value of public education is factored in as an intergenerational entitlement program on a par with Social Security and Medicare.
"Receiving public education is a really big benefit, and the fact that kids get it at the start of their lives rather than at the end makes it even more valuable," said Ronald Lee, a UC Berkeley demographer and economist who coauthored the study, "Who wins and who loses? Public transfer accounts for U.S. generations born 1850-2090."
On average, Americans pay the taxes that subsidize education 30 years after receiving the benefits, the study noted. By contrast, people start drawing their Social Security and Medicare benefits 30 years or so after paying taxes into these government funds. Thus, each education dollar is worth $10 in retirement benefits, according to the study, which is published in the March issue of the journal Population and Development Review.
The study marks the first time that analysts have treated public education from kindergarten through college as an intergenerational entitlement benefit, which refers to programs funded by taxes paid by generations other than the recipients. The analysts calculated the value of public education relative to the recipients' lifetime earnings.
Contrary to conventional wisdom, "older Americans are not making out like bandits when you factor in the value of public education," Lee said. ...
Using historical data and future projections, Lee and his research team calculated the net value of Social Security, Medicare and public education at all levels – minus taxes – for Americans born from 1850 through 2090. They found that people ages 38 and younger – including those born 20 years from now – will make net gains in earnings of 4 to 6 percent over their lifetimes. By contrast, those now aged 63 to 80 will have paid out more in taxes than they will have received in Social Security, Medicare and public education benefits, losing 1 to 2 percent in net earnings over their lifetimes. ...
While the study found greater benefits for those born after 1972, it projects that tougher times are ahead for generations born 50 years from now. Unless significant changes are made to the Social Security and Medicare programs, those later generations would have to be heavily taxed – 44 percent of their lifetime earnings – and their benefits reduced, to make up for severe shortfalls due to population aging and escalating health care costs...
"The current young and future generations are sometimes viewed as victims of profligate public policy in the United States, whereby the current elderly cohorts live comfortably at their expense," the UC Berkeley study said.
"In fact, however, an elderly person born in 1936 experienced a net loss of about 2 percent of lifetime earnings, while a baby born today is projected to realize a net gain of 5 percent … Evidently, adding education to the mix dramatically changes the generational equity picture," the study concluded.

Saturday, April 10, 2010

Reich: Why More Immigrants Are An Answer to the Coming Boomer Entitlement Mess

I'm guessing that not everyone will agree with this:

Why More Immigrants Are An Answer to the Coming Boomer Entitlement Mess, by Robert Reich I was born in 1946, just when the boomer wave began. ... Sixty years later, we boomers have a lot to be worried about because most of us plan to retire in a few years and Social Security and Medicare are on the way to going bust. I should know because I used to be a trustee of the Social Security and Medicare trust funds. Those of you who are younger than we early boomers have even more to be worried about because if those funds go bust they won’t be there when you’re ready to retire.
It’s already starting to happen. This year Social Security will pay out more in benefits than it receives in payroll taxes. ... And it adds new urgency to reforming Social Security — a task the president’s commission on the nation’s debt is focusing on.
So what’s the answer?
Fed Chair Ben Bernanke this week listed the choices. “To avoid large and unsustainable budget deficits,” he said in a speech on Wednesday, “the nation must choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”
Bernanke ... leaves out one other possible remedy that should be included in that combination: Immigration.
You see, the biggest reason Social Security is in trouble, and Medicare as well, is because America is aging so fast. It’s not just that so many boomers are retiring. It’s also that seniors are living longer. And families are having fewer children.
Add it all up and the number of people who are working relative to the number who are retired keeps shrinking. ...
This is where immigration comes in. Most immigrants are young because the impoverished countries they come from are demographically the opposite of rich countries. Rather than aging populations, their populations are bursting with young people.
Yes, I know: There aren’t enough jobs right now even for Americans who want and need them. But once the American economy recovers, there will be. Take a long-term view and most new immigrants to the U.S. will be working for many decades.
Get it? One logical way to deal with the crisis of funding Social Security and Medicare is to have more workers per retiree, and the simplest way to do that is to allow more immigrants into the United States.
Immigration reform and entitlement reform have a lot to do with one another.

I didn't expect this from Reich - he should know better than to blame the problem on demographics (e.g. see the graph here on the demographic issues, and here for the relative size of the Social Security and health care cost problems, e.g. "The fiscal gap does not arise, as many believe, primarily from the coming retirement of the baby boomers. Rather, the rate at which health-care costs grow will be the primary determinant of the nation's long-term budget picture."). I don't oppose more immigration, but trying to sell it to the public through scare tactics about social security is not the way to make the case.

Sunday, March 28, 2010

"The Long-Term Impact of the Mortgage Crisis"

Richard Green is concerned about the old people of the future. Are they saving enough today?:

The long-term impact of the mortgage crisis--and why it keeps me awake, by Richard Green: My parent's generation behaved differently than mine in all sorts of ways. A paper of mine with Hendershott shows that they spent less, controlling for education, etc., throughout their life cycle than any other generation. One of the reasons for this is that they paid off their mortgages. According to the American Housing Survey, 70 percent of households headed by someone over the age of 65 have no mortgage at all. Loan amortization became a mechanism for forced saving, and as a a result, those born during the depression are in pretty decent shape financially. ...

My generation is different. Even under the most benign circumstances, we refinance in a manner that slows amortization. I refinanced ... twice to take advantage of lower interest rates--this was, of course, the right thing to do financially. But each time, the amortization schedule reset, and so it extended the period at which the mortgage would pay off. Now yes, one can take the money one doesn't put into home equity and put it in other savings vehicles, but it is not clear that everyone does that. Forced saving is slowed.

But this is not the worst of how people have handled their mortgages. A substantial fraction of borrowers pulled equity out of their houses, putting themselves on a lower savings path even in the absence of falling house prices.

I am going to run some American housing survey data on this, but it is hard for me to imagine that 70 percent of my generation will have no mortgage debt when we are elders. My parents' generation has used housing wealth to, among other things, finance long-term care. I hope I am missing something here, but the lack of housing wealth in the future could become yet another challenge as we seek to fund the needs of the elderly.

Friday, October 30, 2009

"Are Those $250 Social Security Checks Just Pandering to Seniors?"

Some pushback against a recent article that questions the value of giving people on Social Security a $250 check to stimulate the economy and denounces President Obama for pandering to the elderly:

Are Those $250 Social Security Checks Just Pandering to Seniors?, by pgl: David Leonhardt tries to make this case... But why did Mr. Leonhardt start his discussion by talking about the depressed economy and who would be most likely to consume any checks that the government may wish to extend?
If you wanted to help the economy and you had $14 billion to bestow on any group of people, which group would you choose: a) Teenagers and young adults, who have an 18 percent unemployment rate. b) All the middle-age long-term jobless who, for various reasons, are not eligible for unemployment benefits. c) The taxpayers of the future (by using the $14 billion to pay down the deficit). d) The group that has survived the Great Recession probably better than any other, with stronger income growth, fewer job cuts and little loss of health insurance. The Obama administration has chosen option d — people in their 60s and beyond.
Let’s think about the macroeconomic impact of a $14 billion one-time transfer payment in terms of a life-cycle model of consumption. This would be equivalent to a one-time increase in household wealth with the impact effect on consumption being equal to the increase in wealth divided by the number of remaining years of life for the individual receiving the check. If a young person were given $250, he would likely save most of it. If the $250 were given to the elderly instead, then more of the transfer payment would be consumed. Mr. Leonhardt seems to be unhappy with the President’s proposal but his reasoning here seems to be very confused.
Dean Baker:
David Leonhardt's Age-Based Politics, by Dean Baker: David Leonhardt is upset that people on Social Security will get a $250 check from the government next year and denounces President Obama for pandering to the elderly. There is a lot of serious confusion in this piece.
First, he argues that the elderly have suffered less from the downturn from other groups be comparing declines in income and employment. This is actually a much tougher question that Leonhardt implies. The elderly have accumulated assets over their working lifetime. These assets plunged in value with the collapse of the housing bubble and the plunge in stock prices. This plunge has hit the elderly far more than other groups... So, if we took a wealth-based measure of impact, we would find that the wealthy were hit hardest by the downturn. ...
Second, in terms of government assistance, the making work pay tax credit is giving money to the vast majority of the under 65 population. The $250 boost to Social Security beneficiaries can be seen as an effort to provide comparable help to those who are no longer working. It's not obvious how this creates an injustice.
The third point is that Leonhardt seems to misunderstand the point of stimulus. We need people to spend money. Given the enormous idle capacity in the economy, we would benefit from handing checks to anyone who will agree to spend it. (Contrary to Leonhadt's assertion, this does not create a burden on children and grandchildren -- if anything the growth created by the stimulus is likely to mean we hand them a wealthier country.) The elderly will spend a high share of their checks, which makes this a good form of stimulus.
In fact, we really need larger deficits at this point to boost the economy, but politically this is not acceptable. We should thank the elderly for making some additional stimulus politically acceptable. ...
Lastly, we get a line about protecting Medicare benefiting the elderly at the expense of our grandchildren. Actually, we could substantially reduce costs for Medicare and fully protect the quality of care. However, this would require attacking the interests of the health care industry. This is an interest group that the politicians (and the media) really pander to.

Tuesday, August 11, 2009

Summers: Social Security Overhaul Likely

Saying that Social Security reform is on the agenda is not the way to get the elderly on your side for health care reform:

Overhauling Social Security on the Agenda, Summers Says, by Edmund L. Andrews: About the same time that President Obama was at a town-hall meeting in New Hampshire, pitching the benefits of a health care overhaul, one of his top economic advisers was fielding questions about what might come next.

Lawrence Summers ... told a conference of economists in Washington on Tuesday that President Obama would probably start addressing the needs of Social Security before the end of his term.

“Over the course of the president’s term, the president will, I am confident, address Social Security,” Mr. Summers said in a response to a question at a conference of the National Bureau of Economic Research.

Mr. Summers said the top priority in overhauling Social Security would be to make sure that people could rely on their benefits. ... Mr. Summers seemed intent on signaling that Mr. Obama’s idea of “reform” would be to strengthen the program rather rather than to partly privatize it.

But Mr. Summers said the big cost problems for the government are in health care. Reducing the growth of Medicare costs by just a few tenths of a percent per year, he said, would over a period of decades save enough money to fill the projected shortfall for Social Security. ...

Why announce this now? Will 'cut health care costs to save Social Security' work as a message?

Wednesday, May 13, 2009

"The Truth Behind the Social Security and Medicare Alarm Bells"

Robert Reich reacts to yesterday's report on Social Security and Medicare finances:

The Truth Behind the Social Security and Medicare Alarm Bells, by Robert Reich: What are we to make of yesterday's report from the trustees of the Social Security and Medicare trust funds that Social Security will run out of assets in 2037, four years sooner than previously forecast, and Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago?

Reports of these two funds' demise are not new. Fifteen years ago, when I was a trustee of the Social Security and the Medicare trust funds ... both funds were supposedly in trouble. But as I learned, the timing and magnitude of the trouble depended a great deal on what assumptions the actuary used in his models. As I recall, he then assumed that the economy would grow by about 2.6 percent a year over the next seventy-five years. But go back into American history all the way to the Civil War -- including the Great Depression and the severe depressions of the late 19th century -- and the economy's average annual growth is closer to 3 percent. Use a 3 percent assumption and Social Security is flush for the next seventy-five years. ...

Even if you assume Social Security is a problem, it's ... a tiny problem, as these things go. Medicare is entirely different. It's a monster. But fixing it has everything to do with slowing the rate of growth of medical costs -- including, let's not forget, having a public option when it comes to choosing insurance plans under the emerging universal health insurance bill. With a public option, the government can use its bargaining power with drug companies and suppliers of medical services to reduce prices. And, as I've noted, keep pressure on private insurers to trim costs yet provide effective medical outcomes.

Don't be confused by these alarms from the Social Security and Medicare trustees. Social Security is a tiny problem. Medicare is a terrible one, but the problem is not really Medicare; it's quickly rising health-care costs. Look more closely and the real problem isn't even health-care costs; it's a system that pushes up costs by rewarding inefficiency, causing unbelievable waste, pushing over-medication, providing inadequate prevention, over-using emergency rooms because many uninsured people can't afford regular doctor checkups, and spending billions on advertising and marketing seeking to enroll healthy people and avoid sick ones.

Wednesday, May 06, 2009

The Social Security Obsession

Something to keep an eye on, the "Very Serious People" inside the beltway are at it again:

Lawmakers Seeking Consensus On Social Security Overhaul, by Lori Montgomery, Washington Post: Key lawmakers from both parties have held tentative talks about overhauling the Social Security system, and Congress could turn its attention to the federal retirement program as soon as this fall if a bipartisan consensus emerges...

So far, Democrats have found a willing partner in the Senate, where Sen. Lindsey O. Graham (R-S.C.) has stated his desire to work with President Obama to make changes to keep Social Security solvent. ... Graham said yesterday that he has spoken to Hoyer and Sen. Richard J. Durbin of Illinois, the second-ranking Senate Democrat, about the issue and that he stands ready "as a Republican to more than meet the president in the middle."

"I know what it takes to get a solution," Graham said. "I think we can get double-digit Republican support for a reasonable compromise. But the key to this, at the end of the day, is presidential leadership."

Graham ... sketched out a plan that would include lower benefits for wealthy Americans, a higher retirement age and additional revenues. With the stock market devastated by the recession, the traditional Republican option of diverting Social Security taxes to new private retirement accounts is, he said, "off the table." ...

Hoyer is expected to sketch out a similar plan in a speech today... According to an advance copy of the speech, Hoyer will suggest that Congress could approve "more revenues," "restrain the growth of benefits, particularly for higher-income workers," "and/or we can raise the retirement age, recognizing that our life expectancy is higher today."

"What is missing here is not ideas -- it is political will," the speech says. ...

"Right now energy and health-care bills are the major focus," Hoyer said. But if those issues are finished by the August break, he said, "we could start focusing on . . . Social Security early this fall." ...

"At the end of the day, most Americans would embrace a balanced solution that did not require Draconian impact. They are ready to make some hard decisions for the benefit of future generations," Graham said. "If there were ever a time to do it, it's now."

Remember that the "Beltway obsession with Social Security reflects ideology and fashion, not the real problems facing America." They may think that they can wait until health care reform is completed before turning to this issue, but if they continue to have these meetings and push this agenda, there's a good chance Social Security will become a bargaining chip during the health care debate. However, trading Social Security against health care is not an outcome I'd like to see. There is no pressing need to modify the Social Security program, fairly minor changes will solve whatever problems the program has, and there are many other possible tradeoffs within the budget that could fund a new health care system (on both the revenue and spending sides). But I'm sure conservatives would love the chance to pit these two porgrams against each other as part of the health care reform process.

Monday, February 23, 2009

Entitlement Reform Morphs into Health Care Reform

Ezra Klein says there's little need for worry about the fiscal responsibility summit today, policymakers are finally getting the message that the true problem is rising health care costs in both the public and private sectors, not entitlements. That's good news, but I still plan to keep my eyes and ears open just in case the urge to compromise in order to move things forward threatens to also compromise important social programs:

How Entitlement Reform Became Health Reform, by Ezra Klein, American Prospect: It's testament to how deeply the idea of an entitlement crisis has embedded itself in Washington that news that Obama planned a "fiscal accountability summit" was immediately taken as proof by The Washington Post that he was readying a frontal assault on Medicare, Medicaid, and Social Security.

It was an understandable leap for the paper to make. Fiscal responsibility has, in this town, long been an anodyne synonym for entitlement reform. The "responsible" part signaled that you were courageous enough to cut treasured social programs in service of the national debt. The left, which never bought into this ruthlessly austere vision of responsibility, reacted with a defensive fury. It had just spent eight years protecting the entitlement programs from sharp-knifed "reformers." Would it have to do so again?

Today's "White House Fiscal Summit" ... will feature speeches from the president and vice president and "breakout" sessions... Notice what's not in there: Entitlement Reform.

Its absence is the product of a quiet but powerful change in thinking that has taken place in the offices of elite Washington and, now, the halls of the White House. Where a decade ago the looming fiscal threat of entitlement spending led economists and budget wonks to wear out their worry beads, today a more subtle understanding of our fiscal future dominates. In this telling, there's no such program as SocialSecurityandMedicareandMedicaid. There's Social Security, which ... needs little, if any, help. And then there's health-care reform. "That," says Henry Aaron, a senior economist at the Brookings Institution, "is the big kahuna."

How this happened depends on whom you talk to. Dean Baker ... points to the 2005 Social Security privatization fight. ... That forced left-of-center wonks who'd not thought much about the crisis to confront the numbers...

Aaron locates his light-bulb moment in a paper written by Richard Kogan, Matt Fiedler, Aviva Aron-Dine, and Jim Horney for the Center on Budget and Policy Priorities. He remembers sitting around a table with ... an array of ... economic luminaries while Kogan and Horney presented their findings. "The long-term fiscal outlook is bleak," they wrote, and "rising health care costs are the single largest cause."

Aaron says that the "meeting was sort of a slap-the-forehead moment. I said 'you guys are saying there is no problem other than a health-care financing problem long-term!' Credit goes to them, in my opinion." ...

What everyone agrees on is that the thinking entered government in the person of Peter Orszag. In 2007, Orszag was named director of the Congressional Budget Office. From that perch, he brought Kogan and Horney's thinking to the halls of Congress. Orszag liked to show a particular slide in his public presentations... Government spending and Social Security, it says, will hold relatively constant in coming years. It's Medicare and Medicaid that chew up federal spending.

This graph, however, could be used as evidence for a simple focus on Medicare and Medicaid. The programs are unsustainable. They need to be slashed. The next slide in Orszag's presentation is titled "misdiagnosing the problem." The fiscal threat, it argues, is not more beneficiaries or ... factors internal to Medicare and Medicaid. It's the cost per beneficiary. Orszag has a graph for this, too...

And since Medicaid and Medicare pay for health services on the private market, this can only be fixed through broader health reform. Orszag ... will lead today's "health care" breakout session. Richard Kogan works for him. So it's no surprise that asked for details on today's fiscal summit, one senior administration official told me that "the most likely outcome at this point is that we focus on health care given that it's the key to our fiscal future." Another explained the focus starkly. "Health is mathematically bigger,"... The rumors originally held that eager entitlement cutter Peter G. Peterson would give the day's keynote. Now Robert Greenstein, director of the very think tank that released Kogan and Horney and Cox's paper, will speak.

Fiscal responsibility, in other words, is no longer a stand-in for entitlement reform. In Obama's Washington, it means health reform.

Friday, February 13, 2009

Social Insecurity

Pension system reforms have exposed individuals to too much risk:

Have social security reforms shifted too much risk to individuals? The financial crisis suggests they might have, by Monika Bütler, Commentary, Vox EU: The financial crisis comes right at a time when major reforms to social security systems around the world are evolving. These reforms were primarily initiated to tackle demographic transitions and resolve resulting fiscal imbalances. Measures taken or planned include strengthening employer-based, fully funded occupational pension schemes and full or partial privatisation of social security, often even including subsistence-level provisions. The reforms include more individual choice and greater individual risk.

In many countries, majorities of the populations are directly affected by the turbulence on the capital markets, even those who do not or did not privately own shares, at least in part due to a shift to more funded schemes. The world's pension funds have lost up to 30% or more of the value of their assets. Of the people in funded plans, the financial crisis hit those insured with individual schemes worst. While the older covered by collectively organised systems (such as those in the Netherlands and Switzerland) will feel little impact – perhaps even too little – many people with individual accounts have considerably less pension capital than they did the year before.

Continue reading "Social Insecurity" »

Thursday, February 12, 2009

"Looting Social Security"

Haven't posted much on Social Security lately, but that may change:

Looting Social Security, by William Greider, The Nation: Governing elites in Washington and Wall Street have devised a fiendishly clever "grand bargain" they want President Obama to embrace in the name of "fiscal responsibility." The government, they argue, having spent billions on bailing out the banks, can recover its costs by looting the Social Security system. They are also targeting Medicare and Medicaid. The pitch sounds preposterous to millions of ordinary working people anxious about their economic security and worried about their retirement years. But an impressive armada is lined up to push the idea--Washington's leading think tanks, the prestige media, tax-exempt foundations, skillful propagandists posing as economic experts and a self-righteous billionaire spending his fortune to save the nation from the elderly. ... This swindle is portrayed as "fiscal reform." In fact, it's the political equivalent of bait-and-switch fraud.

Defending Social Security sounds like yesterday's issue... But the financial establishment has pushed it back on the table, claiming that the current crisis requires "responsible" leaders to take action. Will Obama take the bait? Surely not. ... The program's financing is basically sound, he has explained, and can be assured far into the future by making only modest adjustments.

But Obama is also playing footsie with the conservative advocates of "entitlement reform" (their euphemism for cutting benefits). The president wants the corporate establishment's support on many other important matters, and he recently promised to hold a "fiscal responsibility summit" to examine the long-term costs of entitlements. That forum could set the trap for a "bipartisan compromise" that may become difficult for Obama to resist, given the burgeoning deficit. If he resists, he will be denounced as an old-fashioned free-spending liberal. ...

To understand the mechanics of this attempted swindle, you have to roll back twenty-five years, to the time the game of bait and switch began, under Ronald Reagan.

The Gipper's ... massive tax cuts for corporations and upper-income ranks ... launched the era of swollen federal budget deficits. But their economic impact was offset by the huge tax increase ... imposed on working people in 1983: the payroll tax rate supporting Social Security... A blue-ribbon commission chaired by Alan Greenspan worked out the terms, then both parties signed on. ...

Ever since, working Americans have paid higher taxes on their labor wages--12.4 percent, split between employees and employers. As a result, the Social Security system has accumulated a vast surplus--now around $2.5 trillion and growing. This is the money pot the establishment wants to grab, claiming the government can no longer afford to keep the promise it made to workers twenty-five years ago. ...

Follow the bouncing ball: Washington first cuts taxes on the well-to-do, then offsets the revenue loss by raising taxes on the working class and tells folks it is saving their money for future retirement. But Washington spends the money on other stuff, so when workers need it for their retirement, they are told, Sorry, we can't afford it. ...

The assault sounds outrageous and bound to fail, but the conservative interests may have Obama in a neat trap. Their fog of scary propaganda makes it easier to distort the president's position and blame him for any fiscal disorders driven by the current financial collapse. He will be urged to "do the right thing" for the country and make the hard choices... Obama's fate may depend on informing the public--now, not later...

Quick Note

I will be in Salem, Oregon tonight as part of a discussion of the movie I.O.U.S.A. (details). It's at the Grand Theater, 191 High Street NE at 7:00 p.m.

Saturday, August 23, 2008

Social Security and the Budget

Somebody should reassure this poor woman that there is absolutely nothing for her to worry about:

Answers, not IOUs, for Social Security, by David Lazarus, Consumer Confidential. LA Times: Whatever happened to Social Security?

As the Democrats prepare to convene this week in Denver, and the Republicans gear up for their get-together in St. Paul, Minn...., precious little has been said about an issue that touches virtually every American family and, for a brief spell a few years ago, dominated the political agenda.

West Los Angeles resident Marilyn Taylor, 78, is typical of many seniors in relying on Social Security for a significant portion of her income. She told me she received about $1,100 a month from Uncle Sam, which covered about a third of her expenses.

These days, Taylor wonders whether she'll keep receiving her full Social Security payments. ...

That's a pretty misleading introduction to a Social Security story unless your intention is to create undue fear about the program's solvency. The article cites some scary sounding numbers, but that's because the totals are accumulated over so many years. Here's some perspective (which is missing from the article):

If Congress makes permanent the 2001 and 2003 tax cuts without paying for them, the cost over the next 75 years will be about three times the size of the Social Security shortfall over this period.

It's acceleration in health care costs, not Social Security, that is the biggest budget problem going forward.

Since we're on the topic of Social Security and entitlements more generally, Diane Rogers responds to Glenn Hubbard's recent WSJ editorial criticizing Barack Obama's approach to Social Security:

We Can’t Entitle Our Way Out of Paying Taxes, by economistmom: Thursday’s Wall Street Journal contained an opinion column by Glenn Hubbard, arguing that ”We Can’t Tax Our Way Out of the Entitlement Crisis.” Glenn, whom I worked closely with as his resident tax-policy antagonist at the Council of Economic Advisers for the first 100 days of the Bush Administration (my being a staff holdover from the Clinton Administration CEA), uses the column to criticize what seems to be Senator Obama’s tax-heavy approach to entitlement reform (or at least Social Security reform). ...

Continue reading "Social Security and the Budget" »

Thursday, August 14, 2008

Immigration, Social Security, and Housing Markets

Dean Baker reports:

Census Bureau Trashes Social Security Trustees Immigration Assumptions, Beat the Press: [Census Bureau Trashes Social Security Trustees Immigration Assumptions] could have been the headline of an article reporting on a new set of projections for immigration from the Census Bureau. According to the article, immigration will rise from its current rate of 1.3 million a year to more than 2 million a year by the middle of the century.

By contrast, the Social Security trustees intermediate scenario assumes that immigration will fall from its current rate to just over 1 million a year by the middle of the century. Even the low cost scenario assumes immigration of only 1.3 million a year by the middle of the century.

A more rapid pace of immigration improves the financial situation of Social Security. If the Census projections prove correct, then close to 30 percent of the projected Social Security shortfall would be eliminated. ...

Speaking of immigration:

Greenspan's Greater Foreign Fool Theory, by Paul Kedrosky: While I agree that it makes sense for the U.S. to increase immigration of skilled workers, I laughed out loud at ex-Fed chair Alan Greenspan's other rationale letting more people into the U.S.:

"The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants." The only sustainable way to increase demand for vacant houses is to spur the formation of new households. Admitting more skilled immigrants, who tend to earn enough to buy homes, would accomplish that while paying other dividends to the U.S. economy.

He estimates the number of new households in the U.S. is increasing at an annual rate of about 800,000, of whom about one-third are immigrants. "Perhaps 150,000 of those are loosely classified as skilled," he says. "A double or tripling of this number would markedly accelerate the absorption of unsold housing inventory for sale -- and hence help stabilize prices."

Awesome. Why wait around for sovereign wealth funds to bail the U.S. out when you can simply invite foreigners in and suggest they buy real estate? Alan's soo-oooo clever. [via WSJ]

Tuesday, July 15, 2008

What are McCain's Plans for Social Security?

Mark Kleiman notes the implications of the McCain campaign's recent statements about taxes and Social Security:

McCain says: "Slash Social Security benefits", by Mark Kleiman: No, that's not a headline you can expect to read. But it's the truth.

Carly Fiorina says that McCain might raise taxes on rich folks as part of a Social Security deal.

Grover Norquist, speaking as the Grand Inquisitioner of the anti-taxers, more or less replies: "Bullsh*t! I wear McCain's b*lls on my keyring!"

Then comes the punchline:

A McCain campaign spokesman told ABC News Monday that McCain continues to oppose any tax increase as part of Social Security reform, notwithstanding Fiorina's comments.

"The lesson of history is that too many specifics at this point polarize the debate, that is the argument Carly was trying to make," Taylor Griffin said. "However, John McCain does believe that we can fix Social Security without raising taxes. As president, John McCain will call on Congress to develop a bi-partisan solution to Social Security — and if they won't, he will."

Three points here:

1. "Too many specifics at this point polarize the debate" translates into English as "If we told the retirees how completely we plan to shaft them, they might not vote for us."

2. The McCain camp seems to have invented a new idea: unilateral bipartisanship. If Congress doesn't come up with a bi-partisan plan, McCain will single-handedly come up with his own bi-partisan plan.

3. Since McCain has now committed to "fixing" the Social Security "problem" without raising taxes, and since the only two ways of getting projected revenues to match projected benefits is to increase revenues or reduce benefits, it follows that McCain is committed to cutting Social Security benefits. And that's before he has to reduce them again to accommodate the diversion of new money into private accounts.

So not only does McCain think that Social Security is "an absolute disgrace," he knows what he wants to do about it: he'll reduce pensions but not increase taxes on the wealthy.

This seems to me like Christmas in July.

First, I don't want to leave the impression that Social Security is a big problem - it's not. Some tweaks may be needed to bring revenue and benefits into alignment, but it's nothing that can't be handled relatively easily according to current projections.

But McCain believes there is a problem despite the projections (otherwise why would he be talking about fixing it?), and his plan for dealing with it appears to be to cut benefits (I count increasing the retirement age as a cut in benefits and, since you work and pay taxes for more years than before, an increase in taxes as well, so is he ruling this out?). Whether the problem is real or not, his choice of how to deal with it is telling.

Then here's the question. Why hasn't the Obama campaign opened their Christmas gifts and made use of them? Why haven't they gone after McCain's "disgrace" remark regarding Social Security? Have they said anything at all about that? Why haven't they hammered away at some of his statements and the inconsistencies surrounding them about carve-out privatization plans? Will they do anything with the implication identified above that McCain must be planning to cut benefits? Why so much silence from the Obama campaign on the Social Security issue?

Wednesday, July 09, 2008

A Disgrace?

Dean Baker:

For folks not familiar with Social Security, it is the country's biggest social program. It costs over $600 billion a year (20 percent of the federal budget) and has 50 million beneficiaries.

At a forum on Monday, after wrongly claiming that Social Security won't be there when young workers retire, McCain went on to say:

"Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace. It's an absolute disgrace, and it's got to be fixed." [Transcript available from Congressional Quarterly]

Of course present-day retirees have always been paid their benefits from the taxes paid by current workers. That has been true from Social Security's inception.

Some folks might have thought Senator McCain's description of Social Security as a "disgrace" was worth a mention somewhere in the media, but the NYT, Washington Post, WSJ, and USA Today don't seem to have noticed. It's not like he said "bitter."


I was watching CSPAN yesterday, while I was eating dinner, and who should I see but John McCain. And he said the most extraordinary thing. It's the second paragraph of the excerpt that follows; I've included the rest so that you can see that there was no context that made it seem more reasonable...

Let me repeat the astonishing bit: "Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace. It's an absolute disgrace, and it's got to be fixed."

The fact that we are paying present-day retirees with the taxes paid by workers, young or otherwise, is not a disgrace, or a scandal, or a new development. Social Security has been funded this way since its inception.  ... This is not a disgrace; it's the way the system operates. And it's certainly not a sign that we've mortgaged our children's futures, or that something has to be fixed.

One interpretation of this statement would be that McCain is being deceptive: trying to make a straightforward feature of Social Security seem like a scary new problem, in order to gin up support for his nonexistent plans to fix it. I tend to think that he just doesn't know how Social Security works. (This would explain why he doesn't see the problem with privatizing the system: the need to pay a generation's worth of transition costs.) However, it doesn't really matter which explanation is right: either one ought to be close to disqualifying. ...

More hilzoy:

Just one day after releasing an economic plan (pdf) that said that "John McCain supports supplementing the current Social Security system with personal accounts" (p. 5), McCain repeated his earlier claim that "I want young workers to be able to, if they choose, to take part of their own money, which is their taxes, and put it in an account which has their name on it."

Supplementing Social Security with private accounts is one thing. Allowing workers to divert their FICA taxes into private accounts is another. The first just gives workers more options; the second guts Social Security's funding. These are very, very different proposals. Unfortunately, McCain doesn't seem to understand the difference, perhaps because he doesn't understand how Social Security works.

And there's this:

Now, before you think, "Wow, that must be a slip of the tongue, he can't possibly mean that," please note that McCain said essentially the same thing to John Roberts on CNN this morning. ...

This is not the first time that McCain has hinted that he will follow in Bush's Social-Security-dismantling footsteps. In a Wall Street Journal interview published in March, he made his intentions explicit:

"I'm totally in favor of personal savings accounts," [McCain] says. When reminded that his Web site says something different, he says he will change the Web site. (As of Sunday night, he hadn't.) "As part of Social Security reform, I believe that private savings accounts are a part of it—along the lines that President Bush proposed.

(Months later, McCain still hasn't changed his website.)

Does McCain really think he can get away with having two different Social Security plans? Well, as ThinkProgress has pointed out, McCain was denying his history of supporting private accounts just last month. It seems he just can't make up his mind. But perhaps having two different positions makes political sense—especially if one of them has already failed.

It's becoming clear that McCain simply reads what's on the cards (and not very well), but he really doesn't get the finer details of policy and is thus susceptible to confusion, misdiagnosis, and to bad suggestions from those around him. Haven't we had enough of that over the last seven and a half years?

Update: Paul Krugman on McCain's knowledge of policy, doomsaying about Social Security as a badge of seriousness in Washington, and taking bad advice:

A disgrace, all right

Dean Baker points us to John McCain...

I’d guess that there are three things going on here.

First, McCain has no idea how Social Security works. That may sound hard to believe, but not to anyone who has spent any time in or around the federal government. Politicians, by and large, get where they are mainly by looking and sounding good; this may or may not go along with any actual understanding of governing.

Second, McCain lives in the Washington bubble; and as I wrote a while back,

Inside the Beltway, doomsaying about Social Security — declaring that the program as we know it can’t survive the onslaught of retiring baby boomers — is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are.

Finally, McCain has surrounded himself with people who hate Social Security. They probably tell him that it’s a doomed Ponzi scheme, and he believes them.

Kevin Drum notes McCain also spouted the usual tax cuts are self-financing nonsense. If he doesn't know this claim is false by now, he's not qualified to set economic policy. And if he does know it, and he must, what does it say about his character that he is willing to say it anyway?:

John McCain ... sure seems to think [Social Security's] funding mechanism is a disgrace, and last night he repeated himself... This is nuts. McCain is talking as if he just figured out that this is how Social Security works and he's scandalized by it. ...

But you want something even scarier? In the very same interview, McCain serves up the supply-side full monty to CNN's John Roberts: "You can't get over the fact that historically when you raise people's taxes, revenue goes down," he said. "Every time we cut capital gains taxes, there has been an increase in revenues." The second half of this statement is flat out wrong, and the first half is so wrong that we need a new name for it. This is Jonestown levels of Koolaid drinking.

But maybe we're being unfair. After all, 300 economists signed a letter enthusiastically supporting McCain's economic plan. Or did they? Kevin Drum again:

This is amusing. A couple of Politico reporters called some of the 300 economists who "enthusiastically support" John McCain's "Jobs for America" plan and found that their support was somewhat less enthusiastic than advertised:

In interviews with more than a dozen of the signatories, Politico found that, far from embracing McCain's economic plan, many were unfamiliar with — or downright opposed to — key details. While most of those contacted by Politico had warm feelings about McCain, many did not want to associate themselves too closely with his campaign and its policy prescriptions.

....Constantine Alexandrakis, a professor at the University of Massachusetts-Dartmouth, expressed second thoughts about signing. "I would describe myself as an Obama supporter," he explained. "Maybe I shouldn't have rushed into signing the letter."

Maybe he shouldn't have! As for the others, it turns out that they merely signed on to a brief statement of intent (low taxes, low spending, free trade, etc.), not the 15-page number-free plan that McCain released on Monday. So there's no telling how much of his plan they actually support. ...

Somebody who's not me ought to start dialing up the other 280+ signatories and find out just how much of McCain's plan they really support. Do they think the current Social Security funding mechanism is a disgrace? Are they in favor of a gas tax holiday? Do they think his multi-trillion tax cut will increase revenues? Inquiring minds want to know.

Thursday, June 12, 2008

Is McCain Confused?

Is McCain confused about what he has said in the past, or is he being less than truthful about his previous position on Social Security privatization?:

“Without privatization..." by Cliff Schecter: This is what John McCain said regarding Social Security on November 18, 2004 on C-SPAN's Road To The White House ["...Without privatization, I don't see how you can possibly, over time, make sure that young Americans are able to receive Social Security benefits"]. Why am I telling you this? Because today during a back and forth with an elderly gentleman he said this:

"I am not for privatizing Social Security. I never have been. I never will be."

In other words, here we go again. Honestly, does anyone really believe this guy is a straight-talker anymore? How many more examples of his absolute willingness to say or support anything at any given time do we need?

Ok, you need more? You got it. Here is McCain from March of this year on at least partially privatizing Social Security:

"As part of Social Security reform, I believe that private savings accounts are a part of it – along the lines of what President Bush proposed." [Wall Street Journal, 3/3/2008]

Once again, case closed. McCain has conveniently changed what he believes, because that's just what "straight-talking mavericks" do.

I guess he forgot that he voted for Bush's 2006 Social Security privatization plan.

Here's more "confusion" (this is just two things from today, it's not an exhaustive list by any means). This is part of a discussion of a report from the Tax Policy Center comparing the economic plans of the two candidates. (The report has a graph showing the impact of the plans across the income distribution. Guess which plan is more beneficial to the wealthy, McCain's or Obama's? To the working class?):

Obama And McCain On Taxes, by hilzoy: ...One more interesting note: the Wonk Room points out that this report attributes to McCain some positions that are at odds with his web site and what he's said in the past -- as recently as the day before yesterday, in fact. Most notably, McCain's website says that "John McCain will permanently repeal the Alternative Minimum Tax (AMT) – a tax that will be paid nearly exclusively by 25 million middle class families." The TPC report, by contrast, says: "Senator McCain proposes to extend permanently the AMT "patch" that has prevented most individuals and families with incomes below $200,000 from being affected by the tax."

This is a big difference. ...

The Tax Policy Center consulted with both campaigns before writing this report. If what they say is accurate, then McCain has changed an important part of his tax policy, but neither his website nor (apparently) McCain himself as of two days ago have caught up with this fact. On the other hand, if the TPC is wrong, and McCain does plan to repeal the AMT, then the TPC's estimates of the cost of his tax plans need to be revised as well.

According to the CBPP, the difference between amending the AMT to exclude people with incomes under $200,000 a year and repealing it altogether is over $50 billion dollars a year. Since the CTP estimates the cost of the candidates' tax plans over a ten year period, if they're wrong about what McCain thinks, we'll just have to tack another half a trillion dollars onto their estimate of his plan's cost.

Confusion and reckless profligacy, or no confusion and even more reckless profligacy? We report; you decide.

Maybe it's just an old guy getting confused on a variety of issues, but it's starting to look like more than that. Social Security was and is a huge political issue. The chance that he is confused about or has forgotten positions he has held in the past is just not credible unless age has started to take its toll. He either knows what he said in the past and intentionally said something else to please a voter, or he can no longer remember crucial details about key issues that happened relatively recently. Either way, it raises big questions.

He deserves the same scrutiny from the media that Clinton or Obama (or Kerry) would get if they were doing these things, but that just isn't happening.

Finally, you have to wonder if this is who you want leading you into the digital age:

Sen. McCain, You've Got Be KIDDING Me!, by Maggie Barker: ...I couldn't help but laugh in disbelief at an interview of U.S. Sen McCain admitting that he doesn't know how to use a computer.

When asked by the Politico's Mike Allen whether he uses a Mac or PC, here's what he said:

Neither. I am an illiterate that has to rely on my wife for all the assistance I can get.

I mean, really? How does he not know how to use one of most simple, yet important, technologies in our homes, workplaces, research labs, schools, universities, and enterprises? ... Sen. McCain simply seems out of touch with the modern ways of the world. And he admits it, with no apologies. How can he envision and plan for America's future when he has no interest in or curiousity of current modes of communication, commerce, and education? Sure, Sen. McCain pre-dates the computer age, but how many of us have parents or grandparents who log on every now and then? I respect Sen. McCain immensely for the sacrifices he's made for this country, but times, they are a-changin'. Sen. McCain's already been left behind.

Update: Now McCain is trying to claim that his plan is not a privatization scheme, therefore what he said is not misleading. However, from TPM:

In the post below I noted how John McCain is now going in for the same Social Security 'privatization' bamboozlement that President Bush did, claiming that calling his policy 'privatization' is some sort of lie or spin.

Here's video of McCain using the word himself in 2004 and then claiming it's all a bum rap just this morning...

More from Think Progress.

Jason Furman, Social Security, and Wal-Mart

If you haven't heard, Barack Obama named Jason Furman as his economic policy director. Because of his centrist leanings and his identification with Rubinomics, some have questioned Furman's dedication to progressive causes, and there has been quite a bit written about this, not all of it accurate.

For example, take an article in the LA times on Furman's position on Social Security privatization. This response to the article is from the Economists for Obama web site:

Jason Furman and Social Security, Economists for Obama: As Brad Delong points out, this article in the LA Times completely misrepresents Obama Economic Policy Director Jason Furman's position on Social Security privatization. In fact, Jason is the economist who did the most to supply the intellectual ammunition to gun down Bush's proposal during the great Social Security battle of 2005. Jason, with help from Dean Baker and Brad Delong, was key to victory in that struggle. It's not hyperbole to say that without their efforts (especially Jason's), Bush might have succeeded in his efforts to gut the most important social safety net we have. See this paper for one of Jason's contributions in that battle.

Regarding the broader concerns raised in the article, I think Jared Bernstein has it right:

One economist from the left-leaning Economic Policy Institute, Jared Bernstein, offered praise for Furman, saying he understood why some critics were unhappy, though he thought their fears were misplaced.

"I understand the concerns, given positions he has taken" on some issues, Bernstein said. "But I am 110% certain that it will be Barack Obama -- not Jason Furman or Robert Rubin -- who will be setting the policies for the Obama administration." ...

Brad DeLong emailed the author of the article to ask how the inaccurate representation in the article could have happened given how well-known (and easy to find online) Jason's position on Social Security privatization is:

We Get an Email from Tom Hamburger..., by Brad DeLong: Apropos of the astonishing and false claim in this morning's LA Times that Jason Furman is some sort of a crypto-Bushie with views on Social Security matters "similar" to those Bush proposed in 2005, I write to the reporter involved, Tom Hamburger. And he writes back:

Mr. Hamburger's bottom line appears to be that his leaving a lot of readers with a false view of Jason Furman's position on Social Security is OK because that was "not the point of this story..."

So I write back:

Continue reading "Jason Furman, Social Security, and Wal-Mart" »

Thursday, May 15, 2008

Grandma Needs a Job

If older workers want to retire later, or are forced to do so, will they be able to find jobs?:

Older Staffers Get Uneasy Embrace, by David Wessel, WSJ: Americans are going to have to retire later, we're often told. They live longer than their ancestors. Neither their retirement savings nor the taxes of younger generations can support ever-longer retirements. ... But will employers want more older workers?

"There's a lot of happy talk around that we're going to have slowing in the rate of growth in young workers and, therefore, employers are going to want to hire older workers just at the time that older workers are going to want to work," says Boston College economist Alicia Munnell... "We think it's much less clear than that." ...

A significant minority of employers see this demographic reality, broadcast affection for "mature workers" and win plaudits from AARP, an advocacy group for older people. ...

Bookstore chain Borders Group says it finds "mature workers" appealing because half its customers are over 45 and turnover among older workers is one-sixth that of under-30 workers. About 18% of Borders' 30,000 workers are over 50, double the fraction six years ago, and the company anticipates by 2010 one in four will be.

At the Blue Cross Blue Shield Association in Chicago, 40% of 1,000 mainly professional employees are 50 or older and 25% are 55 or older. ...

For all the heart-warming pictures such efforts produce, they appear to be exceptions. ...

Surveys by Boston College's Center for Retirement Research found that employers expect about a quarter of employees currently in their 50s will want to work two to four years longer than past workers. Then employers were asked if they would accommodate half those who wanted to work later. "On a scale of 1 (unlikely) to 10 (likely), the median response was a lukewarm 6," the researchers say.

While employers are "reasonably comfortable" with the older workers they currently employ, "they are not keen on retaining even half who want to stay on to age 67 or 69," the Boston researchers concluded. They predict "a messy and uncomfortable mismatch with large numbers of older workers wanting to stay on while employers prefer that they do not."

Why? Employers fear older workers "cost too much, lack current skills and don't stick around long," Ms. Munnell and co-author Steven Sass write. Wages tend to rise with seniority. Health costs for older workers are higher. Older workers are viewed, rightly or not, as less supple in dealing with new technologies. And old workers tend to be in older industries and occupations in which employment is growing slowly if at all.

The image of companies loyally retaining scarce, seasoned workers is at odds with reality. Among male workers between 58 and 62, only 44% still work for the outfit that employed them at 50, down from 70% two decades ago. And even if labor shortages emerge, they argue, many employers will hire younger immigrants, shift work overseas or deploy labor-saving technology (like the cashier-less grocery-store checkout) instead of hiring older workers. ... [Video]

Tuesday, April 22, 2008

Applauding Failure

What's the best thing Bush tried to do, but couldn't?

The Best Thing that Didn't Happen During The Bush Administration, by Robert Reich: The best thing to have occurred during the Bush administration is something that did not happen. We did not privatize Social Security.

Had we done so, boomers facing retirement over the next few years would be even worse off than they are today. Now they’re struggling with pension plans worth less than they counted on, and home values that are tanking. At least they can rely on a monthly Social Security check.

But had we privatized, they’d be totally reliant on the stock market. And look what’s happened to the market: Compared to stock values ten years ago, the S&P 500 has risen a little over 1 percent a year, adjusted for inflation. Even Treasury bonds have done better. Go back nine years and there’s been no gain at all. Go back eight years and the market has been off an average of 1.4 percent a year.

Yes, I know, it’s been a rough time. First the tech bubble bursting, then 9/11, then Enron, then the housing bubble bursting, then the credit crunch. But that’s my point. We can’t necessarily rely on the stock market. ...

Sure, the stock market has done well over the past half century. But there have been decades like the 1970s and this one, so far, where it’s been a disaster. That’s why we have Social Security – so that if your timing is bad and you get caught in a downdraft, you still have something to fall back on in retirement.

If we had privatized, you’d have had nothing to fall back on. You’d crash.

I'm pretty happy the whole permanent Republican majority thing didn't work out so well either.

Tuesday, April 08, 2008

"False Budget Comparisons"

In a commentary in the Wall Street Journal ("The Coming Tax Bomb"), John Cogan and Glenn Hubbard argue that we shouldn't let the Bush tax cuts expire. Andrew Samwick isn't much impressed with their arguments:

More False Budget Comparisons, by Andrew Samwick: ...I object to many parts of the op-ed, but two in particular. First, the expiration of tax cuts that were legislated to be temporary is now described as:

This would be the largest increase in personal income taxes since World War II.

How might such a change in taxes have been avoided?  Perhaps by not ramming through such budget-busting tax cuts in the first place. Perhaps by not letting them persist for so long, running up deficits during business cycle peaks in the intervening years. Until Hubbard and Cogan are willing to commit to a responsible budget policy, of which tax policy is one component, it is impossible to take an op-ed like this seriously. ...

Second, picking up on Stan's point about the problems in using historical comparisons, the following statement from the op-ed completely undermines any responsible action on entitlement reform:

By historical standards, federal revenues relative to GDP, at 18.8% last year, are high. In the past 25 years, this level was only exceeded during the five years from 1996 to 2000.

Note that the 18.8% includes the Social Security surplus.  So according to Hubbard and Cogan, that money is available to be spent on current government expenditures, rather than used to repurchase government debt, which would make the Social Security Trust Fund a legitimate savings vehicle. (Yes, this is the same Cogan who laments that Trust Fund accounting doesn't work because the government just spends the money.  I wonder whose op-eds they use to justify their reckless behavior.) 

Returning to Stan's point, we should have a higher tax/GDP ratio today because we should be using the Social Security surplus to prefund a portion of the retirement benefits of the Baby Boom generation. ... [Update: More here.]

Friday, March 28, 2008

Trust in the Fund

This is worth echoing:

About the Social Security trust fund, by Paul Krugman: I see from comments on an earlier post, plus some of the incoming links, that the whole “there is no trust fund, so the system will be in crisis in 2017″ thing is still out there. So I’m just going to reprint what I wrote about this three years ago:

Social Security is a government program supported by a dedicated tax, like highway maintenance. Now you can say that assigning a particular tax to a particular program is merely a fiction, but in fact such assignments have both legal and political force. If Ronald Reagan had said, back in the 1980s, “Let’s increase a regressive tax that falls mainly on the working class, while cutting taxes that fall mainly on much richer people,” he would have faced a political firestorm. But because the increase in the regressive payroll tax was recommended by the Greenspan Commission to support Social Security, it was politically in a different box - you might even call it a lockbox - from Reagan’s tax cuts.

The purpose of that tax increase was to maintain the dedicated tax system into the future, by having Social Security’s assigned tax take in more money than the system paid out while the baby boomers were still working, then use the trust fund built up by those surpluses to pay future bills. Viewed in its own terms, that strategy was highly successful.

The date at which the trust fund will run out, according to Social Security Administration projections, has receded steadily into the future: 10 years ago it was 2029, now it’s 2042. As Kevin Drum, Brad DeLong, and others have pointed out, the SSA estimates are very conservative, and quite moderate projections of economic growth push the exhaustion date into the indefinite future.

But the privatizers won’t take yes for an answer when it comes to the sustainability of Social Security. Their answer to the pretty good numbers is to say that the trust fund is meaningless, because it’s invested in U.S. government bonds. They aren’t really saying that government bonds are worthless; their point is that the whole notion of a separate budget for Social Security is a fiction. And if that’s true, the idea that one part of the government can have a positive trust fund while the government as a whole is in debt does become strange.

But there are two problems with their position.

Continue reading "Trust in the Fund" »

Thursday, March 27, 2008

A "53-Trillion Dollar Asteroid"?

This argues we should leave Social Security benefits alone:

Time to honour America’s debt to the retired, by John Shilling, Commentary, Financial Times: The first American baby boomers have now become eligible to retire and start drawing on Social Security... Many politicians are telling us that the resulting rise in Social Security “entitlement” payments will break the budget, so we have to cut benefits to retired people. But the politicians do not want to mention that the Social Security system has been compiling a huge surplus. Why? Because they have been using that surplus for years to hide the real size of the current federal budget deficit, allowing them to spend more and justify tax cuts for the wealthy. ...

Social Security was initially a pay-as-you-go system – annual payroll taxes of workers covered that year’s payments to retired people. By the early 1980s, however, it was clear that this system was not sustainable. Payments were increasing faster than revenues, and when the baby boomers started retiring and collecting pensions, there would be huge shortfalls. President Ronald Reagan had the prudence to address this problem early enough to make Social Security sustainable. ... Social Security payroll taxes were raised, creating a surplus in the trust fund that would fully cover the future costs of baby-boomer retirement. ...

Baby boomers, and all others who have worked since 1983, paid in more than needed for Social Security retirement payments. They saved and created the trust fund surplus, which now amounts to more than $2,000bn and must be invested in US Treasury bonds. It is projected to reach nearly $3,000bn in 10 years. Then Social Security will stop generating a surplus to subsidise the rest of the budget and will begin redeeming its bonds to help make payments.

Current projections show that the trust fund bonds may be exhausted by about 2041. The trust fund’s full sustainability for at least the next 75 years could be restored easily with minor adjustments...

Politicians understand that, with the Social Security Trust Fund surplus declining, they will no longer be able to borrow from them under the table while announcing fictitiously smaller deficits to justify continued expenditures and tax cuts. And they will have to generate funds from other sources of revenue to redeem the bonds after 2017. Rather than admit too much was borrowed recently, and must now be repaid, they want to reduce Social Security benefits. This puts much of the burden on the middle class, who created most of the surplus that has been used to hide the real size of the deficits.

Fundamentally, the Social Security issue is not one of “entitlements” but of the obligation of our government to honour its debt and not reduce Social Security benefits.

There has been lots written and discussed in the media on Social Security, but not nearly as much on the real problem, rising health care costs.

Maybe one reason people are so confused about about the Social Security funding issue and the degree to which it is a problem is due to imagery like this from supposedly trusted news sources:



The broadcast itself did mention health costs and Medicare, but it would have been difficult to tell from the broadcast, or from Wolf Blitzer's questions and presentation, that the rising cost of health care rather than Social Security is the source of the problems. And the interview with Glenn Beck didn't help at all.

Update: See pgl at Angry Bear who also noticed Beck's claim.

Tuesday, March 25, 2008

"Immigration and Social Security"

From Kevin Drum:

Immigration and Social Security, by Kevin Drum: Paul Krugman points out that in the 2008 report of the Social Security Trustees released today the "actuarial balance" of the system is better than it's been since 1993. ... But how much better? ... [L]ast year the trustees estimated that Social Security had an overall 75-year deficit of 1.95% of taxable payroll. ...This year it's 1.70%. That's a pretty substantial improvement. What caused it? ...

[I]mmigrants. To be specific, better estimates of the taxes and benefits received by illegal immigrants — or, as the trustees refer to them, "other-immigrants":

In previous reports, the other-immigrant population was projected using assumed ... numbers... For this year's report, the ... numbers ... are projected by explicitly modeling other immigrants and other emigrants...

Translation: instead of just pulling a net number out of a hat, the trustees built a model... And guess what?

  • Illegal immigrants tend to skew young. This benefits the system.
  • Young people have more children than older people. This benefits the system.
  • Some illegal immigrants pay taxes for a few years and then leave. This benefits the system.

Bottom line: "This year's report results in [...] a substantial increase in the number of working-age individuals contributing payroll taxes, but a relatively smaller increase in the number of retirement-age individuals receiving benefits in the latter half of the long-range period." Give or take a bit, it turns out that this shores up the Social Security system to the tune of around $13 billion per year. Thanks, illegal immigrants!

Monday, March 17, 2008

"Bush's Market-Liberal Scam"

This is from the Ludwig von Mises Institute. They are pleased Bush wasn't able to get his Social Security plan implemented because it would have undermined free market capitalism:

Bush's Market-Liberal Scam, by Llewellyn H. Rockwell, Jr.: President Bush began his second term with a big push for "Social Security privatization." ... Let's say Bush had actually achieved his goal of creating private accounts..., and a sizable swath of the American public had invested in safe mutual funds spread across many sectors.

What would have been the result? Look at the state of the financial markets. The Bush administration would have holy Hell to pay. The public would have turned against the "market liberals" who gave us this scam. Capitalism would have been denounced as having generated yet another shock-therapy failure. Investment standards would have been ever more regulated. The companies that held most of the "private" funds would be declared too big to fail. The subprime bailout would have become a full-bore stock market bailout. This would have been declared the ultimate failure of free markets.

I think we can be pleased that Bush was unable to muster public enthusiasm for the program. ... It's hard to be grateful for anything during the Bush presidency, but the failure of a phony privatization that would have discredited free markets is one.

Of course, their point is that the government shouldn't be in the business of providing social insurance at all ("abolish it completely and instantly"), but once you accept that won't work, and it won't for a variety of reasons including significant market failures, these are some of the reasons why Social Security privatization schemes should be avoided.

Thursday, March 13, 2008

The "Impending Demographic Crisis"?

John Shoven argues we should raise the Social Security retirement age to solve the "impending demographic crisis":

The Truth About Aging Boomers' Effect on Our Economy, by John B. Shoven, Foreign Policy and Alternet: There is a looming catastrophe stalking the developed world. It promises to devastate the global economy, overwhelm hospitals... What is the calamity... It's the aging of the world's baby boomers, the coming tidal wave of senior citizens who will live longer, consume more, and produce less, seriously challenging societies' ability to care for their graying ranks.

At least that's how the dire warnings generally sound. Alarming forecasts bombard us about an impending demographic crisis in the United States, Europe, Japan, and even China that will reshape the way we live and work. ... The fiscal burden of supporting this rapidly expanding segment of the global population not only threatens to bankrupt national healthcare systems..., but also revolutionize electoral politics, with political clashes no longer governed by right versus left, but young versus old.

If it sounds distressing, it shouldn't. The gloomy projections are deeply flawed. The reason lies in the misleading way in which we measure age. Typically, a person's age has been determined by the number of years since his or her birth. ... Thanks to the medical revolutions of the past century, however, life expectancies have been radically prolonged. Since 1960, the average Chinese person's life span has increased by 36 years. Over roughly 40 years, South Koreans have seen their lifetimes extended by an average of 24 years, Mexicans by 17 years, and the French by nearly a decade. Given these drastic changes, our conception of what qualifies as "old" has itself become old-fashioned.

Measuring age by years since birth is just as foolish as using the dollar as a timeless unit of value. ... Just as with the dollar, it is time to introduce inflation-adjusted ages as a superior method for measuring age. The best replacement gauge is mortality risk, or the chance a person has of dying within the next year. The higher the mortality risk, the "older" a person is. It's a measurement that reflects a much more accurate picture of a person's health, likely productivity, and remaining life expectancy.

When the U.S. Social Security system was designed seven decades ago, the 65-year mark was deemed the moment when Americans moved "beyond the productive period" and into dependency. That age was chosen based on mortality risk: a 65-year-old man in 1940 could expect to live an additional 11 years, a 65-year-old woman another 15 years. But medical advances have shifted mortality risks enormously. ...

The implications are significant: The magnitude of the elderly wave that demographic forecasters have predicted is, in reality, far smaller. Forecasts today tell us that the fraction of the population over the age of 65 will grow enormously. But consider what would happen if we replaced the 65-year marker with a mortality risk measurement that governs who is considered "elderly." In 2000, 12.4 percent of the U.S. population was over the age of 65... By 2050, only ... about 15 percent of the population ... will have a mortality risk greater than 1.5 percent. That's hardly a demographic tidal wave. The global outcomes are similarly striking: A mortality-based measurement lowers the projected elderly population in 2050 in Japan, Spain, and Italy by an average of 30 percent.

Just consider the consequences of altering the age when entitlement benefits kick in or retirement becomes mandatory to these new inflation-adjusted measurements. It doesn't mean shortening retirements, just stabilizing them. In 20th-century America, the average length of retirement grew from two years to more than 19 years. As life expectancies continue to rise, retirements will continue to get longer -- and the pension bill far larger. If benefits and retirements are governed by mortality risk instead of age, the costs will be far more manageable. ...

Three comments. First, there is no guarantee that the ability to work and lead a productive life expands at the same rate as life expectancy (e.g., if most of the extension in life expectancy in the future comes from expensive interventions toward the end of life rather than improvements in health during, say, the late 60s, that make working easier then there would be no reason to extend the retirement age). It would be better to define retirement in terms of the minimum of these two concepts, the time at which the typical person can no longer be expected to work full-time on a typical job that may have physical demands, and the life expectancy adjusted retirement age discussed above. But that is not the main objection. A second issue is that Social Security is not the entitlement problem we should worry about, that title belongs to Medicare where costs are expected to increase rapidly in the future. And the problem with Medicare costs brings up the third issue, demographic change is not the driving force behind rising healthcare costs (e.g., see this article from the CBO, "The rate at which health care costs grow relative to national income—rather than the aging of the population—will be the most important determinant of future federal spending."). Most projections see large increases in health care costs in the future, but the main problem is not from the growth of the elderly population. Even if the population remained stationary, costs would still be expected to escalate rapidly.

Friday, February 29, 2008

Mortgaging the Nest Egg

This is not a good sign. A lot of people are borrowing from their retirement accounts to pay off debt:

Borrowing from the Nest Egg, by Lane Kenworthy: This news is discouraging, but hardly unexpected. According to a “Marketplace” report, a survey by the Transamerica Center for Retirement Studies (pdf here) finds that the share of workers borrowing from their 401(k) retirement funds increased from 11% in 2006 to 18% in 2007. Nearly half of those taking out such loans in 2007 cited the need to pay off debt, compared to a quarter in 2006.

Stagnant wages and salaries, most spouses already employed, rising health care and college tuition costs, higher mortgage debt loads, and falling home values mean lots of American households — including many middle-income ones — are pinched financially. The late 1990s economic boom lessened the strain for a while. Then home equity loans helped. More recently, credit card usage has jumped. Borrowing against retirement savings is the logical next step.

See more discussion here, here, and here.

This is why I wonder about the long-term participation rate in "opt out" retirement accounts that are being promoted as a way to deal with the retirement security problem. How many people will opt out of these accounts when economic conditions for the household deteriorate temporarily for some reason? And once they opt out, will they opt back in? People who are motivated enough to borrow against their retirement accounts - almost one fifth in 2007 - would also be motivated enough to opt out of an automatic savings plan. Many of the studies, at least the ones I have seen, do not track people over long periods of time where this type of deterioration would be present, and they do not follow people through a recession when the pressure to opt out would be greatest. I'm not saying we shouldn't have these programs, they do help some people save, and even if some people opt out at least they have a source of funds to use when times get tough. The point, though, is that the people most likely to opt out are the very ones we would like to see participate in savings programs so that they have more than just Social Security available during their retirement years. Because of that, we should be careful not to place too much emphasis on opt-out types of mechanisms for solving the retirement security problem. These accounts may not provide as much of a boost as we hope to key segments of the population.

Update: Megan McArdle follows up with comments on forced saving as a solution to this problem.

Saturday, January 12, 2008

Time to Lower Moody's Rating

If Moody's, the credit rating agency, can't get this analysis right, how can it possibly handle the evaluation of complex financial instruments? Or is it the case, as Dean Baker wonders below as he points out the flaws in the analysis, that analytical accuracy and objectivity are being sacrificed in the name of politics?:

Moody’s says spending threatens US rating, by Francesco Guerrera, Aline van Duyn, and Daniel Pimlott: The US is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring healthcare and social security spending, Moody’s ... said on Thursday.

The warning over the future of the triple-A rating – granted to US government debt since it was first assessed in 1917 – reflects growing concerns over the country’s ability to retain its financial and economic supremacy. ...

Most analysts expect future governments to deal with the costs of healthcare and social security and there is no reflection of any long-term concern about the US financial health in the value of its debt. ...

Unlike Moody’s previous assessment of US government debt in 2005, Thursday’s report specifically links rises in healthcare and social security spending to the credit rating.

“The combination of the medical programmes and social security is the most important threat to the triple-A rating over the long term,” it said.

Steven Hess, Moody’s lead analyst for the US, told the Financial Times that in order to protect the country’s top rating, future administrations would have to rein in healthcare and social security costs.

“If no policy changes are made, in 10 years from now we would have to look very seriously at whether the US is still a triple-A credit,” he said. ...

Moody’s did once threaten to cut the rating of some of the US Treasury’s debt when Congress refused to pass the president’s budget in the mid-1990s.

Dean Baker has the response:

Does Politics Affect Moody's Ratings?, by Dean Baker: That is the question that the Financial Times reporter should have asked when Moody's apparently threatened to downgrade U.S. debt within a decade if the country does not reduce the projected growth of Medicare and Social Security.

This threat is very odd for several reasons. First, it is not clear why Moody's would be concerned about the composition of U.S. government spending. Lenders have reason to be concerned about the overall budget balance, but they have no obvious interest in the composition of spending. The United States recently increased its defense spending by more than a percentage point of GDP to cover the cost of the wars in Iraq and Afghanistan. If the government reduced defense spending to pre-war levels, as an alternative to cutting the cost of Social Security and Medicare, it is difficult to see why lenders should care.

It is also odd that Moody's would single out Social Security. Its cost is not rising at an especially rapid rate, in a decade its cost will have just risen back to its 1983 level measured as a share of GDP. Presumably, bond holders don't have any particular reason to object to spending on Social Security, so it is difficult to see why a bond rating agency should.

In the same vein, it is also possible to make up projected budget shortfalls with tax increases. Bondholders presumably care about borrowers ability to pay off their debts, ... tax rates in the U.S. would still be far below the OECD average even if they were raised by several percentage points.

The Financial Times reporter (and other reporters) should have asked why one of the world's leading bond rating agencies would make such an unusual intervention into U.S. domestic politics. Such detailed policy prescriptions for the United States are certainly rare, if not unprecedented.

In this context, it is worth noting that Moody's could face legal difficulties due to its recent rating practices. It gave top credit ratings to tens of billions of dollars of securities that were partially backed by very risky subprime mortgages. Now that these bonds are being written off at a very rapid pace, there may be some legal consequences for Moody's. Moody's potential legal problems should have been mentioned in the context of this intervention into U.S. politics. ...

Wednesday, December 12, 2007

It's *Not* Social Security

This is from Peter Orszag, Director of the CBO:

The Biggest Budget Buster, by Peter Orszag, Commentary, WSJ: The nation's economic outlook may look troubling in the short run, but these difficulties pale beside the economic consequences that will follow if we don't address the nation's long-term fiscal gap...

The fiscal gap does not arise, as many believe, primarily from the coming retirement of the baby boomers. Rather, the rate at which health-care costs grow will be the primary determinant of the nation's long-term budget picture. ...

The bottom line is that while we need to address the effects of the coming retirement of the baby boomers and the projected imbalance in Social Security, we have to pay even more attention to the health-care costs that exert the dominant influence on our fiscal future. ...

Over long periods, the cost growth per beneficiary in the Medicare and Medicaid programs has tracked cost trends in private-sector health-care markets. As a result, many analysts believe that significantly constraining the growth of costs for the public programs while maintaining broad access to hospitals and doctors under them will be possible only in conjunction with slowing cost growth in the health sector as a whole. ...

But it's too soon to conclude that the fiscal picture is hopelessly dismal. There remains the promising possibility of restraining health-care costs without incurring adverse health consequences. It may even be possible in some cases to reduce cost growth and improve health at the same time. Costs per beneficiary in Medicare, for example, vary substantially across the U.S. for reasons that cannot be explained fully by the characteristics of the patients or price levels in different areas.

High-spending regions do not generate better health outcomes, on average, than the lower-spending ones. ... Some academic research suggests that national costs for health care can be reduced by perhaps 30% without harming quality. ...

Here's a graph and accompanying report.

Wednesday, November 28, 2007

The Ruth Marcus Obsession with the Social Security Crisis that Does not Exist

Ruth Marcus of the Washington Post is at it again, trying to portray Social Security as a system in need of immediate fixing. But, as these responses by Dean Baker, Kevin Drum, and Paul Krugman make clear, Marcus is doing her best to elevate a second-tier problem (if it's even that) to the crisis, first-tier level. It appears that having taken a position on Social Security that is wrong, i.e. that it is a system headed for "crisis," she is incapable of admitting her errors and instead continues to defend the indefensible. She says it's irresponsible not to attack the problem now in her guise as one of the "Very Serious People," but the irresponsibility is coming from those, like herself, who are promoting a crisis that doesn't exist.

Here's Dean Baker:

More Social Securty UFOs at the Post, by Dean Baker: Ruth Marcus is on the warpath again arguing that those who don't want to jump in line on the SS crisis train are being irresponsible. Read it and weep.

A couple of quick points are in order.

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