Funny how the funding gap estimate for social security got twenty times worse in the past year. It's almost like the numbers are being...I dunno...purposefully screwed with to make Social Security look like it's on the verge of collapse.
Isn't goofy accounting what got Enron in trouble?
It's so frustrating that the mainstream news outlets are too chickenshit to come out and say that the Bush administration lies. I understand why they're chickenshit...they stand to lose moderate and conservative viewers, not to mention incurring the wrath of the Republican leadership and being denied access to government sources...but that's exactly why it's so frustrating. Ignore for a moment the argument that the press isn't really free if it's bound by bottom lines and profit margins, thereby forcing it to pander to the lowest common denominator and to ruffle as few feathers as possible. Even if you pretend it's a philosophical argument about the position the press should take, it's still bullshit. Media theorists long ago abandoned the idea of objectivity in reporting. It's obviously an unachievable goal. Just the choice of what to cover and who will cover it involves a certain amount of filtering that is, in some sense, a bias. But the industry has flown haphazardly to the other extreme: they strive for this bizarre notion of "balance" (yes, the term was being thrown around in academic circles well before Fox leeched any semblance of meaning from it). The argument goes along the lines of: well, if you can't be objective, you can try to present an issue in a way that balances opposing viewpoints since the truth probably lies somewhere in between.
But think about that...at the risk of falling back on an utterly overused rhetorical point, imagine modern news covering Nazism. Think about what CBS News would look like in taking a "balanced" approach to Nazism. Point: Jews are people too and have a rich cultural heritage. Counterpoint: Jews are evil and must be exterminated to make way for the Third Reich. This week we explore the pros and cons of genocide of God's chosen people. Brought to you by Ford. Stay tuned!
It's fucking ludicrous. As Jon Stewart at some point pointed out, why even have "news" if all it's going to do is serve as a medium for people from the Left and the Right to spout talking points? A fucking wall could do that. You could have a hedgehog moderate. There's no reason for a journalism degree. The whole point of having freedom of the press was to allow some kind of objective reporting of the facts. Sure, "objective" is an unachievable ideal, but that doesn't mean it isn't worth striving for anyway. So much of the hijinx Bush has pulled has been objectively bullshit, and yet the main news organizations haven't called him on it. Social Security is a beautiful example of that...the numbers they're publishing are objectively fictitious, and yet the country is actively debating an argument based on smoke and mirrors.
Once again, I suppose, we must stand in awe of the ability of conservatives to manipulate a thoroughly broken system and get the poor and indigent residents of the red states to vociferously support the dismantling of the very programs that are designed to help them.
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Okay, I've been quiet on this for a while (despite what I can only imagine are Nick's desperate efforts to goad me into debate) but before I jump in, I want to be clear exactly what we're debating. Because it seems that, once again, a number of disparate viewpoints have chosen to congregate under infamous "Anybody('s) but Bush('s)" idea banner.
The prevailing sentiment here seems to be that social security reform is bad, social security is fine, privatization of any portion of Social Security--not only as a practical but as a theoretical matter--is the first step on the road to eternal damnation (in a wholly non-religious way, of course). My question is whether or not there still exists the remmants of a belief that Social Security is a system designed to provide for workers when they can work no more by forcing them to put aside a portion of their earnings for their retirement years. Or has the realization set in that Social Security has disintegrated into a welfare payout system that depends on age rather than income only for the esteemed Left to decide, "Hey, it's been almost 10 years since welfare reform cut down on indiscriminate cash handouts from the government! We'll be damned if we're going to make that a habit! Save Social Security--whatever it is!" I'm not sure how else to explain quotes like these from the Krugman column:
"...we can argue about whether it's a good idea to maintain the present system, but there's no question that the basic form of the system could be maintained indefinitely through some combination of tax increases and/or benefit cuts."
I mean, sure. We can maintain, well, pretty much anything if we just gave the government all of our money the form of taxes and let them hand it back out how and to whom they saw fit. Problem solved? Or does that create another politial system that's unsustainable in the long run (the name of it escapes me right now...)?
Social security is an insurance policy. It's a baseline, guaranteed income for old people so that grandma isn't eating catfood and living in a cardboard box when she's old. In the sense that it's possible for the very poor to end up getting more out than they pay in, then yes, it can be considered a welfare system. Find me the indigent fucktard who purposefully avoids working or getting any kind of an income over his/her entire life just to game the social security system for $952 a month at age 65.
As for Krugman's quote, his point is the same point I've been making: social security is not fundamentally flawed. A shift in demographics is putting a temporary strain on it, and sure, we'll have to do something about it. But dealing with it amounts to covering a shortfall, not pouring money into an ever-widening hole. Even if it were, privatization wouldn't be a fix. Just to fund the switchover would require a massive cash infusion which will require (you guessed it) short-term benefit cuts (or more taxes!) regardless of the solvency of the current system.
Privatization and a perceived social security budget crises are essentially orthagonal issues. Privatization doesn't change the finances. It's a purely ideological concept that just increases the risk and puts a huge amount of federal capital into the political arena and within reach of those conscientious, honest, and competent fund managers that did so much to protect the retirements of so many people in the dot-com era and haven't, say, been under investigation by the FEC...
Social Security is fundamentally flawed. There is a structural disconnect between payee and beneficiary that makes it an insuitable insurance policy. You focus on the wrong extreme when you make the example of the poor who avoids work to get a benefit at the end. The problem is the worker who contributes for 49 years with no guarantee of benefits at retirement. What (good) insurance policy works under that premise? There's a reason the law requires insurance companies to match assets and liabilities rather than just hope more people sign up and pay premiums. The difference is that while most insurance policyholders don't expect to have to cash in their benefits, most people that pay into social security expect to one day, hit 65 and claim their insurance benefits based on the premiums they've been paying for decades.
My fundamental problem is that social security doesn't work like an insurance program. It doesn't work like a savings program. It never has. It is, at its core, a welfare program that was at one point overfunded and has always run the risk of being underfunded. To my knowledge, the creators of social security didn't wait for one generation of workers to retire to start paying out benefits. Insofar as there is a belief that it is a problem that someone could theoretically game the system by not working for a lifetime and then pocketing $952 a month, there needs to be the corresponding understanding that that's how social security _started_.
The so-called temporary strain caused by a shift in demographics is the inevitable result of any system set up to pay existing members solely out of money raised from new investors. It only works as long as the participating population keeps expanding (see also Ponzi scheme, http://en.wikipedia.org/wiki/Ponzi_scheme and the more generic pyramid scheme, http://en.wikipedia.org/wiki/Pyramid_scheme . I swear I didn't know beforehand that this entry used Social Security as an example). So unless we're waiting for all the current boomers to die and for another baby boom to come along to fund our retirement, there's nothing temporary about the fundamental flaw in the system.
Privatization is only a fix if you believe that there should be a link between the payer and payee of any insurance program. (I want to take this point to mention that the current proposal only calls for less than one-third of the premiums be dedicated to the person paying into the system. Why the outrage isn't that the percentage owned isn't more than a measly third is beyond me). But you are right in one regard, privatization doesn't change the finances. It changes the structure. Rather than worry about whether or not the entire system is going to crumble, your worry becomes what happens to your personal account. If you're not worried, play it all in the Mexican swap market (cause I'm sure the government will let you). If you are, leave it all in government bonds (which, incidentally, is supposed to be what's backing the current "trust"). But at least you know that if you put money in, the money is yours to get out. Eventually. In some form.
This argument reminds of arguments that companies should be required to keep pension plans rather to offer employees 401Ks (and you thought Enron and Worldcom created retirement issues). The basic argument is one for or against personal ownership of retirement benefits. Even the arguments of the AARP today railing against benefit cuts starts to ring hollow with the realization that it's not their money to claim. It's ours (mine, specifically). They already sent their money to the first name on the list and added theirs to the bottom. just like their parents did 70 years ago when someone convinced them that they'd never have to worry about the day when the cash would stop flowing, which, to be fair, they didn't. We do. Our benefits don't start until the 2040s. How long do you think lifespans are going to be then? If you want to argue that we should blissfully pay into the system because it's the right thing to do for the country today, so be it. If there's an argument that takes into consideration my retirement benefits, or yours, or those of 16-year old John Smith who wants to know what the hell FICA is doing with his money, I'd love to hear it.
As I said, it is in some senses a welfare program. So yes, obviously, it's somewhat of a shitty deal with respect to those with lots of money.
It's also potentially a shitty deal for people in the current younger generation. Yes, we're going to have to fund the geezers in the baby boomer generation without changes in benefits, and that kinda sucks. No argument there. That's why I said I'm in favor of cutting benefits and making it more of a welfare program than it currently is. That kinda sucks for those just above whatever bar we would hypothetically set, but it sucks in the same way that us paying for geezers sucks. Let's spread the misfortune around a bit.
But that doesn't speak to social security's long-term viability or justification. That just happens to suck for a particular group of people at a particular point in time in the program. Namely, us.
In the long term, one of two things happen. Either the geezer hump passes (they die off), and the ratio of geezers to payees adjusts back, in which case we're fine. As the wiki article points out, that might not be the case...lower birth rates and higher life expectancies could potentially keep shrinking the geezer-to-payer ratio. If that happens then yes, the system needs to be readjusted. As I've said, personally, I'm in favor of reducing benefits to cover the difference. But it's not clear that that's the case...the historical increase in life expectancy and the decrease in birth rate have correlated with the increasing affluence of the US as a whole. If I may be a bit uncharacteristically fatalistic for a moment, I suspect we've peaked, and things are going to start getting worse. Free trade/globalization are going to be increasingly equalizing the differences in economic status of people in different countries. Right now we're far more affluent than most of the world. That will inevitably change. That's just basic economics. The improvements in communication and transportation are going to make businesses increasingly location independent. In that world, there's no reason for them to pay into the US economy. They'll go elsewhere. Our economy will tank (or at least stagnate), and as our collective affluence falls, so will our life expectancy (or, again, it will stagnate), and birth rate will increase. In that world, which could easily resemble a 21st century version of the Depression, which let us note was the catalyst for the creation of social security in the first place, it's all the more important to have a system installed with guaranteed benefits not pegged to a market system that can, after all, implode any time it wants to.
The Ponzi system comment is intriguing. Ponzi systems are scams because they ultimately can't exponentially expand. Eventually (generally rather quickly) they reach a scale of people such that individual gullibility can't sustain their expansion, and enough people are intelligent enough to not want to give money to the scheme that it collapses. Strangely, social security doesn't have that problem. There _are_ an exponentially increasing number of people in the United States who all contribute to the program, so theoretically such a system can be sustained so long as that's the case. If it's a Ponzi system, it's one that relies on the false promise of exponential expansion of human population. But at the point at which we're talking about that, the viability of social security is the least of our worries. Global resources would ultimately be strained so thin that civilization would collapse. People would be eating puppies and punching babies just to survive. Kind of a cool thing to think about, but not worth delving into in a debate about social security except for amusement value.
All that said, I don't think social security should be entirely a welfare program. It's part welfare, part retirement program. Government has a responsibility to its citizens, and sometimes that means protecting them from themselves. There are things you can't do not because they'll affect someone else, but because there's the chance you might fuck yourself over (choose your favorite example). Yes, this is of course a slippery slope, but in this particular case it's warranted. People tend to do stupid shit with their retirement. They do things like leaving it entirely in Enron stock. They invest it in a fictitious Mexican chocolate-dipped donkey ball factory because some slick young salesmen recommended they do so. Or they, say, fall prey to some self-interested douchebag fund manager who's trying to artifically inflate the price of his particular pet dot-com. Point being, it is a good idea to force people to put money into a regulated, transparent, and guaranteed retirement system. Now we can quibble over the tradeoff between mandatory retirement contribution and individual ownership and choice, but that doesn't change the fact the idea is sound in principle. Moreover, even if you want to shift the balance more towards personal ownership, PSAs are the worst way to do it. Putting a vast amount of money up for grabs by private industry at the whim of political forces is a really, really, REALLY bad idea. You're just asking for the fund managers to take as much off the top in fees as they can get away with and for the governmental overseers, who may well depend on PAC funding from said fund managers, to let them. Much better to keep the money in government bonds where only Congress can fuck with it.
In regard to the last point, I think the debate is fundamentally different from the pension debate because corporations are not individually responsible to the public good. Indeed, ultimately this debate boils down to a question of what one thinks the role of government is. Privatization of social security amounts to its dismantling. Privatization is a system of individual responsibility for one's retirement, which amounts to a rollback of the very concept of social security. If you're in favor of that, fine. I happen to disagree. I think government has a role in making sure every citizen has a basic standard of living and health, including and especially its elderly. The Depression taught us that things can and do go wrong on a massive scale, and that we have to have public systems in place to provide for such eventualities no matter how big a fucktard fuckup the recipient may be, even if that means being a drain on the "efficiency" of the economy as a whole. Playing games with probability and expected rates of return doesn't cut it.
What bugs me about current privatization efforts, besides the Bush administrations usual arrogance and lying, is that it's being presented as a way to "fix" social security. It isn't. I think we're in agreement about that to some degree. It's a fundamental change in the way we, as a society, think about retirement.
And btw, I'm aware the proposal is only to allow a "small percentage" of social security to be diverted into private accounts. This is a bait and switch. I won't even discuss this point insofar as this administration has showed time and again that the way they intend to boil us is by slowly raising the water temperature lest we leap out of the pot. They did it with the "temporary" tax cuts which, suprise surprise, Bush now wants to make permanent, and they'll do it with social security. If we're talking about privatization, we're talking about much larger scale privatization, and we're talking ultimately about very lax retrictions on where the private investment money can go. Considering anything short of that in this political climate is naive.
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