It’s a crisis, but not a ‘Social Security crisis’
Back in 1983, Alan “the Maestro” Greenspan, Ronald Reagan, Tip O’Neill and others cut a deal of short-term political genius. At the time, the recently enacted Reagan tax cuts for high-end earners were creating huge budget deficits, and action needed to be taken. Meanwhile, Social Security needed additional revenue and benefit changes to keep operating long term. Somewhere in that mess were the makings of a deal.
Under terms negotiated by the Greenspan Commission, Social Security payroll taxes on low and middle-income workers were raised significantly, high enough to start building a significant surplus in the trust fund. The idea was that the surplus, added to year after year, would grow so large that it could later be tapped to fund retirement payments to the Baby Boomers.
But in the second part of the deal, that “surplus” was then immediately spent, year after year, to help disguise the impact of the Reagan tax cuts. It was a nice little shell game, in which income and capital gains taxes were cut at the high end but raised in the form of payroll taxes on the middle and lower income workers. And all the lower and middle income folks got were government IOUs stacking up in the Trust Fund where the surplus was supposed to be.
It was all a fiction, and inevitably, that kind of game comes to an end. (See: Madoff, Bernie.) Thanks to the recession, the endgame is now predicted to occur in 2016, a year earlier than had been projected. Seven years from now, payouts from the Social Security trust fund to retiring Baby Boomers will finally begin to exceed the tax revenue that flows into the fund from payroll taxes. To pay those benefits, Social Security will then start to draw on the massive “surplus” it has allegedly been building the past 26 years, a surplus that in reality has been spent on other things.
That is now said by some to have created a “Social Security crisis.” That is absolutely incorrect. (The Medicare crisis, on the other hand, is all too real. But that’s another topic.) Unless the feds intend to renege on those IOUs in the Trust Fund, Social Security itself is pretty sound, able to pay 100 percent of benefits until at least 2037 and, with some relatively minor tinkering, well beyond that as well.
If anything, what we have here is a looming general government revenue crisis. It’s the dreaded double whammy: The annual Social Security surplus is disappearing, forcing us to confront the true size of our deficits, and all those IOUs will now have to be paid back.
It is not, under any rational definition, a Social Security crisis. Those who describe it in those terms are attempting to mislead. The system has done its part under the 1983 deal; it is simply time for the rest of government to perform its part
That’s where a double whammy becomes the dreaded triple whammy, because both the federal budget and the national debt are already exploding for largely unrelated reasons. President Obama has sold the massive stimulus expenditures as a temporary response to what we hope is a temporary problem, the biggest recession since the Depression. Most mainstream economists accept the necessity of such a government spending program under these conditions.
The true test will come perhaps two or three years from now, when we have a better sense of where the economy has settled and the one-time stimulus money has washed through the system. At that point, painful cuts will have to be made, and even more painful tax increases will have to be enacted. The free-spenders in Congress won’t be able to hide any longer behind the need for temporary stimulus; the tax-cutters won’t be able to hide any longer behind the Social Security surplus or the “deficits-don’t-matter” nonsense.
It will be interesting to see whether the American people and its political leadership have the maturity to deal with all that.
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220 comments Add your comment
Susan Myers
May 13th, 2009
8:19 am
Ronald Reagan, the gift that keeps on giving.
Night Train
May 13th, 2009
8:23 am
You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away people’s initiative and independence.
You cannot help people permanently by doing for them, what they could and should do for themselves.
…..Abraham Lincoln
I Report :-)/ You Whine :-(
May 13th, 2009
8:25 am
(The Medicare crisis, on the other hand, is all too real. But that’s another topic.)
No, it’s the same topic plus you can add Obozo’s health care entitlement on top of it all.
And yes, it is a “crisis.”
But not for the socialists that want to ruin the United States economy, they see it as an opportunity.
The end of an era.
Coming soon to a screen near you.
Night Train
May 13th, 2009
8:25 am
Borack Obama, the gift that keeps on destroying!
DB, Gwinnettian
May 13th, 2009
8:29 am
You cannot make a solid case against a blog post by copy/pasting phony Abe-quotes.
DB, Gwinnettian
May 13th, 2009
8:35 am
BTW, Jay, your own rag bears some responsibility for running a really crappy NY Times article on this that did the usual ZOMG Teh SS is DYING! rhetoric on its front page, today.
(and by “really crappy” i mean something about 30x better than anything the right wing twits posting here are likely to see on the topic. But still.)
DB, Gwinnettian
May 13th, 2009
8:36 am
Andy says:
And yes, it is a “crisis.”
Pretty reliable proof it’s not, then. Thanks, Andy!
Curious Observer
May 13th, 2009
8:37 am
So, for the past 28 years or so the tax cuts for the wealthy and the high-end middle class have come at the expense of the wage earner. How surprising! Better still, exempting earned income above $100,000 or so from payroll taxes seals the deal. The gift that keeps on giving indeed! And what is the solution proposed by the wealthy and the high-end middle class, you might ask? Why, it’s eliminating the only programs that ensure some kind of base floor for retirement income and medical expenses during old age! Now that the payroll taxes have served their purpose of funding the tax cuts, we can discard them.
Susan Myers
May 13th, 2009
8:37 am
The fact is the Republicans have said, and I quote Grover Norquist, field marshal of the Bush plan, “I would like to see government small enough to drown it in a bathtub.”
They want to bankrupt government. They don’t see that without our government we wouldn’t have roads and bridges. We wouldn’t have police and fire departments, teachers,etc.
As long as people believe in the Republican form of really lousy government we will begin to look more and more like Somalia or Mexico.
The kind of thing Republicans think would make things better for them!
The problem is they are mostly cowards and without what we have now these people would be too scared to even come out of their houses.
say what?
May 13th, 2009
8:39 am
Let’s just go ahead and take care of this morning’s blog business with two simple statements: Jay and the liberals think Reagan didn’t know what he was doing and was a moron because of it. The conservatives know that obama knows exactly what he’s doing and is a moron because of it.
There, now everyone can run along to Starbucks and sip coffee until lunchtime!
Taxpayer
May 13th, 2009
8:40 am
Further, the 20 percenters still don’t have a clue…and that’s the way their ‘leaders’ want it to stay. But, they can only hide from the truth for so long. Then again, perhaps they just want to hide it until they die — then it’s their children’s problem to contend with. The day of reckoning is coming though and I just cannot wait to see how the Party of NO deals with the lack of funds to pay all those folks on Social Security while simultaneously giving tax cuts to the wealthy and to corporations, fighting wars, funding medicare and medicaid, etc., and doing it without the ability to borrow from the likes of China. I think a good Democrat Party strategy would be to dump it all on the Republicans as soon as the bills come due while making certain that there are no hidden funds to draw on or suckers to borrow from, etc.
Ray
May 13th, 2009
8:41 am
DB,Whether Abe said them or not, they are pretty good things to live by. But that would make people too responsible, wouldn’t it? We’re already working until mid May to pay for all of the government programs that those in the past have fostered on this Republic. Spending SS funds to pay for them is one of the biggest scams that government has ever shoved down the throats of the electorate. But no one blames that for the demise of SS funds, do they?
jewcowboy
May 13th, 2009
8:49 am
Get the ice flows ready for the old folks. Oh, wait, they’ve melted.
Night Train
May 13th, 2009
8:52 am
You are correct DB, it was not Abe that made that quote, the real author was Rev. William John Henry Boetcker (1873-1962). Although it is often attributed to Abe.
However, there is a lot of truth in the statement.
RB from Gwinnett
May 13th, 2009
8:52 am
“They want to bankrupt government. They don’t see that without our government we wouldn’t have roads and bridges. We wouldn’t have police and fire departments, teachers,etc.”
No, Susan, we’re all smart enough to see the need for these things and have NO problem paying for them. Sweetie, it’s YOU who aren’t smart enough to separate a needed police force and roads from all of the crap pork our friends in Washington keep funding with our tax dollars. How do you feel knowing you’ll work your entire life paying taxes so the state of PA can train their liquor store employees to be nicer? Does that make you want to get up every morning and head to work knowing you’re doing your part?
Here’s an idea. If the employees can’t be nice, fire them. End of story. And it won’t cost hard working Americans $180,000.
What about that kind of reasoning is not getting through to you?
jewcowboy
May 13th, 2009
8:52 am
The ice flows that is, not the old folks
MaJo
May 13th, 2009
8:56 am
See, government has done such a great job with Social Security, we don’t we let them also run a nationalized healthcare program! Great idea! There’s no way they can mess that up!
DB, Gwinnettian
May 13th, 2009
8:56 am
Ray, setting aside the question of why you’d bother to read a phony, obviously mis-attributed list of platitudes, let’s get to this: “Spending SS funds to pay for them is one of the biggest scams that government has ever shoved down the throats of the electorate.”
It’s been pretty scammy, all right, and Jay’s done a pretty good job of splaining why. But this has all been done in plain sight, with the ongoing approval of our dear leaders, all this time.
More to the point is the central issue here–the real super scam, which has been to blame the revenue shortfalls on Social Security, whose administrators have behaved responsibly all along, and whose recipients are now being asked to be the fall guy.
I’ll repeat one line in Jay’s piece which needs to be shouted early and often:
The system has done its part under the 1983 deal; it is simply time for the rest of government to perform its part.
Stop blaming SS’s administrators and recipients for acting in good faith. Just effing stop it, already.
DB, Gwinnettian
May 13th, 2009
8:57 am
“government has done such a great job with Social Security”
MaJo, can you read?
I think you can’t. Not for comprehension, anyway.
Susan Myers
May 13th, 2009
8:59 am
RBFG @ 8:52,
Link, please. And I don’t mean sausage.
DB, Gwinnettian
May 13th, 2009
8:59 am
However, there is a lot of truth in the statement.
Actually, it’s pretty f-cking stupid, given that every single sentence rests upon a straw man argument. who are these people “destroying the rich” or “taking away people’s initiative and independence” and whatnot?
It’s weak, like the people who copy/paste it.
Later, all.
Ben
May 13th, 2009
8:59 am
Bookman has exposed the real problem here. Trusting government with our money. They can’t be trusted, not Democrats, not Republicans, nobody else but you! I should be able to opt out of social security so I can keep my money and make far better decisions with it than a bunch of priveledged group-think Senators in Washington D.C.
And to all you government apologizers, there are lots of ways we would have roads and rbidges and teachers and fire departments and whatnot without a large and invasive federal government. Instead of paying $10 in taxes that go to lots of things we never see, plus a road nearby, a company will build the raod and charge you to drive on it and it will cost far less than the taxes would, plus you’ll actually get to see and use what you are paying for.
Taxpayer
May 13th, 2009
9:02 am
Republicans already whine and moan about how bad the traffic is, for example, and how they cannot get to their kid’s games or home from work in a reasonable amount of time. Yet, in the same breath they moan and whine even more about paying the taxes that provide them with the roads and bridges that don’t go to nowhere. And, how many retirees are there out there living off of social security, medicare, and medicaid while complaining about paying taxes. Well, perhaps the elimination of all trust funds and savings would be a good thing. Then, when tax revenues stop, everything going out stops as well and people will finally get their eyes opened, the hard way. Things would change, that’s a given. Maybe it is time for some real change. What if Obama announced a date when all Social Security recipients will cease receiving payments. And, the same for Medicare and Medicaid. Just tell them that there is a limited amount of tax revenues and we have to set our priorities — tax cuts for the wealthy, tax cuts for corporations, wars, defense department expenditures for future wars, etc. Somewhere down the list are veterans and Social Security, etc. Now there’s something that should make the GOP transform into the Party of YES. Right?
TnGelding
May 13th, 2009
9:08 am
It’s no crisis at all, as long as someone will buy bonds to pay back the slush fund, i.e. China, Japan, EU. But why can’t the patrioic wealthy start buying U.S. tresuries instead of tax-free munies, or “investing” in off-shore tax dodges or Ponzi schemes?
Road Scholar
May 13th, 2009
9:15 am
RB: You are obviously not from Georgia, or have an inflated view of our Governor and legislature. Your quote “.. we’re all smart enough to see the need for these things and have NO problem paying for them.” does not apply to Georgia Repubs. They either want to privatize, regardless of benefit and costs,, or they don’t want to pay for anything, esp transportation.
Perdue came into office in 2002 with an alledged transportation agenda. He did put the DOT into debt (1/5th of their revenue goes to pay debt) by implementing the Fast Forward program based on bonds. Is there a report card? Haven’t seen one. He also said that additional projects and funds would be fothcoming.
In response to that GDOT began the preliminary design on a multitude of projects to see which were prudent and most needed. And where is the money to implement? Two years in a row the legislature is so dysfunctional that they couldn’t even pass legislation to let the voters decide how to pay for statewide or regional improvements.
Now the governor wants to appoint the Planning Director at GDOT, shortcircuiting the chain of command of the Board (elected by the legislators) and the Commissioner (elected by the Board). The Governor controls both since he has backed the majority of the board members. Another power play w/o benefit to the public.
It is going to be interesting this summer when a Federal 6 year transportation bill will be up for debate and passage. In 1992 the legislation noted there were to many funding categories, they eliminated a few, and have done nothing more than to add additional programs (Trans Enhancements, Safe routes to school, etc) without additional funds to pay for them.
Let’s hear the Repubs ideas on funding transportation. Heck, let’s hear their ideas on funding anything?!?
ty webb
May 13th, 2009
9:15 am
Susan,
What, in your opinion, are the proper roles of the federal, state, and local(city, township) governments? and no, I don’t require a link. Just your opinion.
Susan Myers
May 13th, 2009
9:24 am
RBFG @ 8:52,
I know you’re busy right now hunting a link, but in the meantime…
No way in hell do Republicans want to pay for a d@mn thing – I know it, you know it, all God’s children know it.
Donovan
May 13th, 2009
9:24 am
Based on the replies given from my conservative brothers, Jay has been made to look like a fool once again, along with his few silly supporters of liberal naivity. Way to go! The beatings will continue until morale improves.
TnGelding
May 13th, 2009
9:25 am
The SS trust fund was always spent on other government programs, just not to the extent that the 1983 changes created. It was more of a pay as you go system with only modest surplus accumulation.
Paul
May 13th, 2009
9:28 am
Jay
Thanks for the clarification. Initial articles seem to say it’s the trust fund that will be exhausted. From what you wrote, the headlines could be rewritten “Social Security payouts expected to equal receipts one year earlier.” So much for ‘reporting’ vs ‘repeating’ in those other sources.
[[At that point, painful cuts will have to be made]]
You’re always good for a laugh! I’ve said before: Pres Obama will find Republicans more amenable to deal with than Democratic leadership. Cuts? Cuts? This is one area where I predict that will happen. Democrats will stonewall him.
But, Pres Obama has said he’s going to take this on, along with Medicare. So far he’s kept his word.
Let the games begin!
Susan Myers 8:19
Did you miss House Majority Leader Tip O’Neill in your reading?
SOMALIDAWG
May 13th, 2009
9:34 am
Susan -” As long as people believe in the Republican form of really lousy government we will begin to look more and more like Somalia or Mexico.”
برابرند، همه دارای اندیشه و وجدان هستند و باید درIt now here.
http://www.youtube.com/watch?v=g7×2S_4A_P0
TnGelding
May 13th, 2009
9:35 am
Donovan
May 13th, 2009
9:24 am
It’s your wealthy conservative brothers that have intimidated politicians from raising enough tax revenue to pay for vital government programs that have helped get us into this mess.
Wake up fellow citizens! We’re sitting on at leat $40 trillion in household wealth and the national debt is $11 trillion, so what’s the real problem? The debt is rising at an alarming rate due to the latest shenanigans on Wall Street, tho, and that needs to be addressed by eliminating wasteful spending on unwinnable wars (Iraq, Afghanistan, drugs) and raising taxes slightly on the 88% of us that still have income.
Paul
May 13th, 2009
9:36 am
Susan Myers 8:37
[[“I would like to see government small enough to drown it in a bathtub.”
They want to bankrupt government. ]]
Ummm, doesn’t it seem to you that if revenue stayed where it is and outlays were reduced (govt small) then we’d be going in the opposite direction from bankruptcy? Revenues constant, outlays reduced = outlays closer to revenue.
Police, fire depts and teachers are local responsibilities. I believe we’re discussing federal.
And isn’t it kind of obvious, at least from reading your posts, that talk is cheap and what Republicans really do is outspend and grow gov’t faster than Democrats, hmmmm?
MaJo 8:56
Exactly! In fact, government has done such a great job with Defense and the military, we don’t want them to also run a nationalized healthcare program!!!!
RB from Gwinnett
May 13th, 2009
9:38 am
Roadie, you’re confusing “agreeing to fund roads” with “agreeing with what roads to fund”. Applies to rail as well. There are also discussions about how to pay for all of it, which is a fair discussion. Why should people in Augusta be paying for Atlanta’s roads? Those are relevant discussions. Nobody disagrees all of it is paid with tax dollars, but there has to be limits and it has to be done smartly.
For the record, I don’t think Atlanta and the surrounding area has a very good plan for roads and to handle growth and I do fault everybody from Shirly to Sonny and the counties involved. They all need to put their own selfish insterests aside and develop a plan that works for the greater Atlanta area. I also support running Marta rail all the way out to Covington and up to the mall of GA.
ty webb
May 13th, 2009
9:39 am
Paul,
Thanks. That’s what I was getting at with my question to Susan.
RB from Gwinnett
May 13th, 2009
9:41 am
Susie, are you saying if I can’t find a link to the liquor store funding bill you won’t believe our government wastes our tax dollars? Are you really that stupid?
Susan Myers
May 13th, 2009
9:42 am
Paul @ 9:28,
Bill Orvis White
May 13th, 2009
9:45 am
Ah, there you go again, Bookman: “even more painful tax increases will have to be enacted.” Herein lies the problem with Liberal Jay, Obama, Pelosi, Kucinich and all of the other radicals out there. Just that part of the sentence alone is reason enough to keep fighting for something like the FAIRTax, which is OK with me. Liberals like you say that conservatives like Dick Cheney don’t have solutions to Obamanomics. I do! Let’s shut down everything except for the military. Here I go again: Do you want roads? Privatize them! What’s wrong with a Walmart Highway? Do you want water? How about your community digs wells and reservoirs! Do you want schools? Again, the local community can band together and build their own school houses. See, it’s that easy. I could go on, but my solutions can work and create jobs. Social Security? Let’s scrap it.
Joey
May 13th, 2009
9:46 am
The true test will come perhaps two or three years from now, when we have a better sense of where the economy has settled and the one-time stimulus money has washed through the system.
“One-time stimulus money”? Are you serious? TARP(s), Bailouts,
Loans, Government Take-overs, Massive Ear-marks in 2009 Budget,
Massive spending in the new Budget, …….
Yes, please, let’s carefully focus on monitoring that “one-time stimulus money.”
Susan Myers
May 13th, 2009
9:47 am
Paul @ 9:36,
:]
Susan Myers
May 13th, 2009
9:52 am
RBFG @ 9:41,
No link, huh?
Bosch
May 13th, 2009
9:53 am
If Mrs. G. is around:
Free Marketers.
Teehehehehehe.
Taxpayer
May 13th, 2009
9:54 am
Call your Congressmen and tell them that you want them to get rid of those wasteful programs such as Social Security, Medicare, and Medicaid. Tell them that you want to see their vote in the Yea column on legislation to eliminate these entitlement programs. Tell them that you will vote against them if they do not do this. Well, what are you 20 percenters waiting for. Do it. Do it now. Do it for your children.
Night Train
May 13th, 2009
10:00 am
Thomas Jefferson
3rd. President, Democrat
‘A government big enough to give you everything you want, is strong enough to take everything you have..’
How about a little history of Social Security folks?
Franklin Delano. Roosevelt (Terms of Office March 4, 1933, to April 12, 1945), a Democrat, introduced the Social Security (FICA) Program. He promised:
1.)That participation in the Program would be Completely voluntary,
2.)That the participants would only have to pay 1% of the first $1,400 of their annual Incomes into the Program,
3.)That the money the participants ELECTED to put Into the Program would be deductible from their income for tax purposes each year,
4.)That the money the participants put into the Independent ‘Trust Fund’ rather than into the General operating fund, and therefore, would ONLY be used to fund the Social Security Retirement Program, and no other Government program, and
5.)That the annuity payments to the retirees would NEVER be taxed as income.
Since many of us have paid into FICA for years and are now receiving a Social Security check every month — and then finding that we are getting taxed on 85% of the money we paid to the Federal government to ‘Put Away’ — you may be interested in the following:
Dwight David Eisenhower
34th. President, Republican,
Term Of Office: January 20, 1953 to January 20, 1961
1958 is the first year that Congress voted to remove funds from Social Security and put it into the General Fund for Congress to spend.
It was a democratically Controlled Congress.
Congress logic at that time was that there was so much money in Social Security Fund that it would never run out / be used up for the purpose it was intended / set aside for.
Lyndon Baines Johnson 36th. President, Democrat
Term Of Office: November 22, 1963 to January 20, 1969
Question: Which Political Party took Social Security from the Independent ‘Trust Fund’ and put it into the General Fund so that Congress could spend it?
Answer: It was Lyndon B. Johnson and the democratically Controlled House and Senate.
Question: Which Political Party eliminated the income tax Deduction for Social Security (FICA) withholding?
Answer: The Democratic Party
William Jefferson Clinton
(Bill Clinton)
42nd. President
Democrat Term of Office: January 20, 1993 to January 20, 2001
Albert Arnold Gore, Jr.
(Al Gore)
45th. Vice President
Democrat Term of Office: January 20, 1993 to January 20, 2001
Question: Which Political Party started taxing Social Security annuities?
Answer: The Democratic Party, with Albert Arnold Gore, Jr. casting the ‘tie-breaking’ deciding vote as President of the Senate, while he was Vice President of the US .
AND MY FAVORITE:
Question: Which Political Party decided to start giving Annuity payments to immigrants?
Answer: That’s right! James Earl Carter, Jr. (Jimmy Carter) (Democrat, Term of Office: January 20, 1977 to January 20, 1981) and the Democratic Party.
Immigrants moved into this country, and at age 65, began to receive Social Security payments! The Democratic Party gave these payments to them, even though they never paid a dime in to it!
Then, after violating the original contract (FICA), the Democrats turn around and tell you that the Republicans want to take your Social Security away!
And the worst part about it is, the uninformed sheep on the left believe it!
Maybe a seed of Awareness will be planted and maybe changes will Evolve. Maybe not, some Democrats are awfully sure of what isn’t so.
AND CONGRESS GIVES THEMSELVES 100% RETIREMENT FOR ONLY SERVING ONE TERM!!!
jewcowboy
May 13th, 2009
10:02 am
Taxpayer,
“And, how many retirees are there out there living off of social security, medicare, and medicaid while complaining about paying taxes.”
One of my favorite shows, Futurama, has a great scene; in the episode time is skipping forward randomly at a fast rate, and in front SS office are 2 kids. One says, “Stupid senior citizens. Why should we have to pay for their social security benefits?”
Time skips forward, and the kids are now elderly. The one that spoke before says, “I deserve free money!” raising his fist.
jt
May 13th, 2009
10:02 am
SOMALIDAWG SQUEEZE-
Get a new keyboard. Nobody can understand your drunk chicken scratches.
SOMALIDAWG
May 13th, 2009
10:03 am
WHAT IS THESE SQUEEZE?
jewcowboy
May 13th, 2009
10:04 am
Road Scholar,
“Heck, let’s hear their ideas on funding anything?!?”
Tax cuts for the wealthy and corporations. I’m not sure how that is suppose to work, but you can bet that will be the answer.
Wyld Byll Hyltnyr
May 13th, 2009
10:04 am
Well at least Jay didn’t blame President Bush for this one. But, he did manage to blame a Republican. I’m sure in Jay’s world view it was President Reagan or President Bush, nay Rush or Newt, that was serviced by Monica Lewinsky.
The problem with Social Security is pretty simple and it is the bottom 75% of American wage earners, i.e. what will become the “permananent underclass” during the Ob-amateur administration.
eagle scout
May 13th, 2009
10:05 am
Bill Orvis…Have you done a cost survey lately on how much the initial cost would be to build a resovoir not to mention the upkeep then there is the little matter of water testing and all the other associated costs? Oh yea, and where are you going to get the water to keep the resovoir filled?
Your non-solutions to privatize everything has enough holes to fit the state of Montana in.
Back to the drawing board……………….