Blog on the Run: Reloaded

Friday, December 13, 2013 7:08 pm

The New York Times does not understand Social Security

For evidence of this, I offer the following email exchange between me and D.C. bureau reporter Jonathan Weisman. I first wrote him regarding this article, in which he stated as fact:

Some conservatives feel betrayed, as they often have since the Republicans took control of the House in 2011. Representative Jim Jordan, Republican of Ohio, said the House Republican conference agreed in the spring that spending levels exacted by the sequestration cuts would not change unless Congress and the White House could strike an accord to control the long-term causes of the rising costs of the federal debt, Medicare, Medicaid and Social Security.

Leave aside for the moment that the actual biggest drivers of federal deficits, and thus the growing national debt, are, in fact, NOT entitlements:

The key fact on which I wish to focus is that Social Security does not contribute to the federal deficit AT ALL. This is a simple and widely understood fact with which the reporter took tendentious issue before throwing in the towel, as shown:

On Thu, Dec 12, 2013 at 2:26 PM, <> wrote:

URL:Your budget-deal story
Comments:Jon, how many times does it have to be said before it sinks into the heads of reporters for the Times Almighty? SOCIAL SECURITY DOES NOT CONTRIBUTE TO THE DEFICIT. It is funded by contributions that, since 1983, have been accumulating a large surplus to be used to pay retirement benefits to the Baby Boomers. Now that Baby Boomers have begun to retire, that surplus, which peaked at around $3 trillion, is being drawn down … just as planned in 1983. There is enough of a surplus that SocSec can pay 100% of expected benefit demands until the mid-2030s and, with continuing FICA withholding revenue, about 80% of benefit demands pretty much forever after that even if we do nothing at all to Social Security. And with small changes (raising the cap on income subject to FICA withholding), we could have SocSec paying 100% of benefits pretty much forever.

Once again: Social Security does not contribute in any way, shape or form to the government’s operating budget deficit. And this isn’t just a matter of opinion, this is an error of fact so egregious that it demands a published correction. My next stop is the public editor, for that very purpose.

Lex Alexander
Greensboro, NC

On Thu, Dec 12, 2013 at 2:35 PM, Weisman, Jonathan <> wrote:

You are simply wrong here. Since 2010, Social Security has been operating in deficit since 2010. As the annual trustees report said, Social Security’s “cash-flow deficit will average $75 billion between 2013 and 2018 before rising steeply”

It is true that the system is now cashing bonds it has been given by other parts of the government that have “borrowed” from its surplus over decades. But the fact is, every bond cashed must be paid in cash by the U.S. government and the taxpayers. Social Security as a system is not in debt yet. It is redeeming what is owed it. But those redemptions ARE driving the the debt upward, along with Medicare, Medicaid and other programs impacted by the aging baby boom.

On Thu, Dec 12, 2013 at 2:56 PM, Lex Alexander <> wrote:

OK, fine, if you’re not going to believe me, how ’bout walking down the hall or picking up the phone and talking about it with your colleague Paul Krugman, OK? Or, hell, economist Dean Baker at the Center for Economic and Policy Research, or Brad DeLong at Berkeley, or … pretty much any half-sentient economist not on a corporate payroll. Will you do that for me? Please?

On Thu, Dec 12, 2013 at 3:01 PM, Weisman, Jonathan <> wrote:

I am aware of their position on this. They are saying Social Security is solvent because it has trillions of dollars in bonds that are real and owed to it. That is true and it is a valid position. But Krugman, DeLong et al also know that as those bonds are redeemed, the cash must come from the Treasury. That is why Larry Summers wanted to wall off the Social Security surplus, to run large surpluses for the day when the bills come due. That did not happen. Now we are paying the piper. What liberal economists would say is it is simply unfair to make Social Security and its recipients pay for the rest of the government’s profligacy (and maybe theft).

Ask them. (Krugman is at Princeton, not in the building)

On Dec 12, 2013, at 4:27 PM, Lex Alexander <> wrote:

Had the government borrowed the money for its deficits from, say, a private bank, would you seriously argue that the private bank is contributing to the deficit? No, you would not; it would be ridiculous. But, in part, that’s exactly what the government did: It borrowed, in the form of U.S. bonds, not only from the Social Security Trust Fund but also from investment banks, commercial banks, institutional investors and individuals. So how is Social Security “contributing to the deficit” when these other bond holders are not? Or are you going to argue that they ALL are “contributing to the deficit”? That argument, though also basically silly, at least would have the benefit of being consistent and contextually complete.

On Dec 12, 2013, at 4:30 PM, Jonathan <> wrote:
OK, whatever

Jonathan Weisman

New York Times
* * *
So that’s the kind of intellectual firepower the Times is assigning to the biggest domestic-policy story of the week. Good to know. I’ve emailed the Times’s public editor, for all the good that will do.

Friday, June 7, 2013 5:01 am

Matt Yglesias gets shrill. And real.

We’ve heard a lot of bullshit these past several years about Social Security, so as an antitoxin, here’s Matt Yglesias:

The Powers That Be hate Social Security and always will because it’s a program whose entire purpose is to pay people money not to work. That’s not a perverse consequence of Social Security. It’s not a contentious partisan claim about Social Security. It’s not a dubious interpretation of what Social Security is all about. That’s the point. It’s to give people money so they can retire with dignity. “Retire” being a fancy word for “not working.” You’re never ever going to persuade business leaders to stop agitating for cuts in a program that has this feature. Business leaders want people to work! At a minimum, if people are hoping to not work, business leaders are going to want people to save (i.e., loan funds to business leaders) in order to achieve that purpose. Taxing people who are working in order to pay money so that people can enjoy retired life in peace is the antithesis of everything business elites want out of public policy.

And guess what we haven’t done during this era of changing projections? We haven’t cut Social Security benefits. We haven’t raised the age at which people become eligible for Medicare. We’ve done things to reduce budget deficits, in other words, but we haven’t really acted to make it tougher for people to retire. But people don’t like to say they want to make it hard for people to retire so instead they talk about “the deficit,” and they’re not going to stop.

The Powers that Be have had their way for way too long. I think it’s time that the rest of America slapped them and told them to shut their whore mouths.


Monday, November 12, 2012 7:21 pm

Repeat after me, kids: There. Is. No. Fiscal. Cliff.

The Washington Post continues to lie, and economist Dean Baker, bless him, continues to call them out on it. Logic having failed, he now turns to mockery:

The Washington Post is throwing all journalistic norms aside in its drive to cut Social Security and Medicare. It continues to hype the budget standoff as an ominous “fiscal cliff” and tells readers on the front page of its web site that it could provide a “magic moment” in which Social Security and Medicare can be cut. The piece begins by telling readers:

“Two years ago this month, the leaders of a presidential commission rolled out a startling plan to dig the nation out of debt. After decades of stagnating incomes, they said, Washington must tell people to work longer, pay higher taxes and expect less in retirement.”

Okay I tricked you, this is the Washington Post which doesn’t acknowledge economic realities like stagnating income. The piece actually began:

“Two years ago this month, the leaders of a presidential commission rolled out a startling plan to dig the nation out of debt. After decades of profligacy, they said, Washington must tell people to work longer, pay higher taxes and expect less in retirement (emphasis added).”

This departure from reality gives you the gist of the story. The piece continues:

“Lawmakers recoiled from the blunt prescriptions of Democrat Erskine Bowles and Republican Alan K. Simpson. But their plan has since been heralded by both parties as a model of clear-eyed sacrifice, and policymakers say the moment has come to live up to its promise.”

Well, yes people have praised their plan. They have also ridiculed it. For example it proposes immediate cuts in Social Security benefits that would be a larger share of the income of the typical beneficiary than President Obama’s proposed tax increases on the top 2 percent would be for most of the affected taxpayers. It also proposes increasing the age for Medicare eligibility, even though this would add tens of billions to the country’s health care costs over the next decade. And, it proposed a minimum Social Security benefit for low wage earners that few low wage earners would actually qualify for due to the number of working years required to qualify.

You  know what the worst thing will be to happen immediately if we don’t have a new deal by Jan. 1? Very rich people will start having to pay a little more in income taxes. Quelle horror.

Also, everyone just needs to shut up about Erskine Bowles being some kind of selfless patriot and/or competent leader. As White House chief of staff, he made Bill Clinton’s affair with Monica Lewinsky possible (not that Clinton wasn’t a Grade A horndog, but you don’t give people like that lots of free time if you expect them to lead the nation without embarrassment). The guy’s an investment banker. He personally will profit a great deal from any kind of austerity deal, as will the investment bank on whose board he sits. Also? Obama is expected to get 60 votes in the Senate to get anything done, a situation the Framers never intended, and Bowles couldn’t even get 14 votes for his own plan from a committee that was named after him. I think that tells you just about all you need to know.

Monday, April 23, 2012 6:35 am

Why does income inequality matter?

Because it’s a matter of life and death:

If the recent trend of growing inequality in life expectancy continues through the next three decades,
then workers in the bottom half of the wage distribution can anticipate substantial reductions in the
expected length of retirement if the normal retirement age is increased in accordance with this
schedule. A male worker born in 1973 retiring at age 70 can expect to live 13.8 years in retirement, a full year less than the expected length of retirement for a worker born in 1912 …

Monday, December 20, 2010 8:43 pm

Eat the rich before they eat you?

Filed under: I want my money back. — Lex @ 8:43 pm
Tags: ,

Having reached a hideous “compromise” with Republicans on tax cuts, sometime soon, possibly in his next State of the Union address, President Obama is going to propose some spending cuts.

The conventional wisdom in Washington is that these cuts will require “tough decisions,” which is code for cutting Social Security. But if you’re one of the people actually making the decision, it really ain’t all that tough:

As you can see, people in the top 40% of earners, and particularly in the top 20%, rely far less on Social Security for their retirement income than do the less fortunate of us in the American majority.  (And it’s worth remembering that congresscritters and most prominent DC journalists aren’t just in the top 20%, they’re in about the top 5%.) Conversely, if we go cutting Social Security to try to balance the budget, you can see what kind of damage it’s going to do to the least fortunate in this country.

And the even bigger picture is this: 1) Federal taxation is at its lowest in 60 years relative to GDP, and that was the case even before the recession. 2) Our deficit problem is, to a large extent, a health-care cost problem and is, to an almost complete extent, a combination of a health-care cost  problem and ahistorically low tax rates on the highest earners and wealthiest individuals. If we fix health care (which the Affordable Care Act was well on the way to doing) and start taxing the wealthy at anything like historical averages, then most if not all of our deficit problem goes away.

These statements are arithmetical facts. But you won’t hear politicians or DC journalists mentioning them, and now you know why.

Beware those who profess bravery in the face of other people’s suffering.

Friday, October 15, 2010 10:27 pm

Important things to remember about Social Security when discussing deficits

Filed under: I want my money back. — Lex @ 10:27 pm

A primer from Paul N. Van de Water, a senior fellow at the Center for Budget and Policy Priorities, who specializes in Medicare, Social Security and health coverage, which is to say that he studies this stuff for a living:

Here are the facts.  Social Security is a well-run, fiscally responsible program. People earn retirement, survivors, and disability benefits by making payroll tax contributions during their working years.  Those taxes and other revenues are deposited in the Social Security trust funds, and all benefits and administrative expenses are paid out of the trust funds.  The amount that Social Security can spend is limited by its payroll tax income plus the balance in the trust funds.

The Social Security trustees — the official body charged with evaluating the program’s long-term finances — project that Social Security can pay 100 percent of promised benefits through 2037 and about three-quarters of scheduled benefits after that, even if Congress makes no changes in the program.  Relatively modest changes would put the program on a sound financial footing for 75 years and beyond.

Nonetheless, some critics are attempting to undermine confidence in Social Security with wild and blatantly false accusations.  They allege that the trust funds have been “raided” or disparage the trust funds as “funny money” or mere “IOUs.”  Some even label Social Security a “Ponzi scheme” after the notorious 1920s swindler Charles Ponzi.  All of these claims are nonsense.

Every year since 1984, Social Security has collected more in payroll taxes and other income than it pays in benefits and other expenses.  (The authors of the 1983 Social Security reform law did this on purpose in order to help pre-fund some of the costs of the baby boomers’ retirement.)  These surpluses are invested in U.S. Treasury securities that are every bit as sound as the U.S. government securities held by investors around the globe; investors regard these securities as among the world’s very safest investments.

Investing the trust funds in Treasury securities is perfectly appropriate.  The federal government borrows funds from Social Security to help finance its ongoing operations in the same way that consumers and businesses borrow money deposited in a bank to finance their spending.  In neither case does this represent a “raid” on the funds.  The bank depositor will get his or her money back when needed, and so will the Social Security trust funds.

As far back as 1938, independent advisors to Social Security firmly endorsed the investment of Social Security surpluses in Treasury securities, saying that it does “not involve any misuse of these moneys or endanger the safety of these funds.”

Moreover, Social Security is the “polar opposite of a Ponzi scheme,” says the man who quite literally wrote the book about Ponzi’s famous scam, Boston University professor Mitchell Zuckoff.  The Social Security Administration’s historian has a piece on this topic as well.

Unlike the frauds of Ponzi — and, more recently, Bernard Madoff — Social Security does not promise unrealistically large financial returns and does not require unsustainable increases in the number of participants to remain solvent.  Instead, for the past 75 years it has provided a foundation that workers can build on for retirement as well as social insurance protection to families whose breadwinner dies and workers who become disabled.

Now, despite these facts, the catfood commission in DC is going to recommend, soon after the November elections, that Congress cut Social Security benefits either literally, or in effect by raising retirement ages, or both. There is no fiduciary or fiscal reason to do this. This is the single most important fact to consider in this year’s elections.

So print out Van de Water’s comments here and go staple them to the forehead of every politician you see.


Monday, September 6, 2010 7:23 pm

Illegal immigrants and Social Security: Good news/bad news

Filed under: Weird — Lex @ 7:23 pm
Tags: ,

Bruce Krasting, writing at Zero Hedge, takes note of a Washington Post article on the contributions of illegal aliens to Social Security.

The short version: A lot of illegal immigrants are paying money into the Social Security Trust Fund that they will never see. That’s bad news for them and good news for Social Security.

BUT, they’re paying so much in that it’s making the Social Security Trust Fund look like it’s in better shape than it actually is. That’s bad news for Social Security, particularly if that money were returned to the immigrants and their employers.

But wait, there’s more. Krasting thinks this article isn’t appearing by accident — that the Obama administration sees a way to leverage this situation to come up with a way to “bribe” opponents of immigration reform into going along. Really. He writes:

We know that the actuaries at the Fund have been aware of the magnitude of this issue for a very long time. The question I have is, “What did they do about it?” We need to understand what this means in terms of anticipated future benefit payments. There are two possibilities:

(1) The Fund knew the money was from illegal workers but chose to close their eyes. For the purposes of calculating future liabilities they assumed that everyone, including the illegal workers, would someday get benefits. But they won’t. This would imply that the future liabilities of the Fund are much smaller than has been projected. This “good” news would have to be offset with the reality that the “true” assets of the fund are significantly overstated.

(2) The Fund knew all along that the benefits that are associated with these illegal receipts are never going to be paid and therefore it has reduced the liabilities associated with this to some degree. This would essentially make a fraud of all of the SS accounting. I doubt (hope) that this is not the case. To restate both assets and liabilities would create a very big credibility gap for SS.

I have said repeated that nothing happens in D.C. by chance. That every nuance must be looked at closely. They all have meaning. In my opinion the WaPo article shines a very bright light on SS. They have been knowingly overstating assets and financial conditions for years. What possible motive could be behind this Labor Day weekend bombshell? My guess:

The Administration will use the Goss revelation to prove to the American people that illegal workers have made a major contribution to the US economy via the taxes they paid to SS. This will be done to blunt the growing tide of ire among those who actually live here. There could be another chapter to this story. It could be the ticket whereby some illegals get legal. The cost for a Green Card would be that the applicant would have to (among other things) agree to give up their rights to any future SS benefits based on prior contributions made to SS. They would be entitled to benefits based solely on what they were taxed in future years. Any previous contributions (both employer and worker) would be given up as a penalty. This thinking would set up the possibility for two extraordinary outcomes.

(I) If SS eliminated the future liabilities associated with the estimated $320b of excess contributions and they were allowed to keep those tainted contributions SS would be transformed overnight to an overfunded position of significant proportions. It would be so significant that the Fund could reduce the current 12.4% PR tax by 20-30% for the next three to four years. That would have a meaningful impact on the economy.

(II) America would get paid $350b (P+I) [principal + interest] for allowing a significant number of workers to become legal. Many would still gripe. But the tradeoff of a partial tax holiday for 150mm workers and their employers would shut down much of the opposition.

The Administration needs a win-win on the economy and immigration. Steve Goss at the Trust Fund may have given them the opportunity to do that. Stay tuned. It does not get much weirder than this.

Given the volatility of both Social Security and immigration as election-year issues, this may or may not get weirder but definitely is going to get more interesting.

Friday, August 27, 2010 8:25 pm

Alan Simpson, the Cat Food Commission and Social Security

Former Sen. Alan Simpson, co-chair of the presidential commission looking at deficit reduction — and, by “looking at deficit reduction,” I mean, “looking for ways to cut Social Security unnecessarily so as to benefit wealthy taxpayers” — said some condescending things to to the head of the Older Women’s League and some economically ignorant things to the head of the Center for Economic and Policy Research, apparently not understanding that he was saying sexist things to a woman and economically ignorant things to an actual economist and that both of them were not inclined to sit on their respective butts and nod at stupid things.

The Older Women’s League, Rep. Jerry Nadler (D-N.Y.), and North Carolina’s Democratic Senate nominee, Elaine Marshall, have all called for Simpson to be fired. Won’t happen; as long as you don’t insult AIPAC or rich white conservatives, you’re safe. But the main problem is, they’re wrong.

President Obama needs to fire the whole damn commission.

As currently structured, the commission is a fraud, a single, particular solution in search of a nonexistent problem. You want to fix the U.S. deficit? Then you fix health care, because health-care costs are the biggest part of the deficit (closely followed by a bloated defense budget and two wars, one of which should have ended long ago and the other of which never should have been fought in the first place).

Social Security benefits do NOT need to be cut, retirement ages do NOT need to be raised, and Alan Simpson calls Social Security “a cow with 310 million tits” like that’s a BAD thing, apparently because he doesn’t understand that we’re all feeding the cow, too. Moron.

Wednesday, July 28, 2010 10:25 pm

Quote of the day; or, Economics is not a Billy Idol song

Filed under: Evil,I want my money back. — Lex @ 10:25 pm
Tags: ,

Avedon Carol’s Sideshow:but she has it formatted as a blockquote and it’s not clear from the other links in the post where this passage comes from. So I don’t know who said this. (UPDATE: Avedon e-mails: “Psst!  That was me doing one of my ‘suggested fliers you should print out and distribute to your neighbors’ things.  So I wrote it.” So I’m happy to set the record straight.)

But more people need to be saying it, and, dammit, somebody needs to be saying it who actually is in a position to do something about it:

You worked hard and played by the rules, and now people in expensive suits who sat in offices recklessly gambling with other people’s money want to stop you from being able to retire.

They exported jobs to other countries and made it harder to start new businesses to create new jobs. They slashed government spending to the point where even schools are closing. They failed to honor contracts that said they would put money into your pension fund, and now there is no pension fund. And now they want your unemployment insurance so they can gamble that away, too.

They say you need to tighten your belt to pay for their mistakes.

Well, why should you?

You paid for insurance to protect you from this. Demand what you paid for.

Social Security: You paid for it. We have the money. You earned it. You deserve it. And they don’t.

We don’t have a deficit problem. We have a financial problem, oh, yes, but we do not have a deficit problem.

What do we have?

We have, first, a health-care financing problem. And that problem is caused overwhelmingly by the inefficiencies in our private-sector health-care system, not Medicare or Medicaid or VA health care.

We have, second, a fighting-two-unnecessary-wars-at-once problem.

And third, we have a problem with a small fraction of the wealthiest Americans, who are collecting all the economic gains there have been to collect in the past decade, who are paying taxes at the lowest rates in 30 years and who still want more, more, more. Not surprisingly, there is significant overlap between the “people in expensive suits” mentioned above, the people supporting these wars, and the people in this group of taxpayers.

The reason they’re saying we have “a deficit problem” is that, having taken pretty much everything else of yours that they can take — your retirement savings, your home value, money for your kids’ education, your salary (if you’re like most Americans, you and your spouse combined make today what you alone would have made for the same work a generation ago) — they have a problem: They’re running out of things to take. Social Security is the last big target out there, so they want to take your Social Security, too.

Well, screw them sideways; they’ve already taken more than enough. It is time for them to start giving back.

First, do nothing: that is, let Bush’s 2001 and 2003 tax cuts for the wealthy expire.

Second, eliminate the preferential tax treatment for capital gains, benefits of which flow overwhelmingly to the very wealthiest Americans. It’s time for these free-marketers to see what happens when we let the market decide the best allocation of capital.

Third, raise income taxes on the wealthy. A lot. The top tax rate under that socialist Eisenhower was 91%. I don’t think we actually need to go anywhere near that high, but an effective 15% tax rate on the five millionth dollar of income is a freaking joke.

Fourth, institute a wealth tax. Damn right I’ll go there. We need to put people back to work AND we have enormous amounts of work to do in infrastructure — everything from higher education to dams to the Internet to the power grid — if we’re going to have a prosperous future. The companies to whom we exported our computer-making jobs 30 years ago are also the same companies eating our lunch now on battery technology, so we’ve got a lot of lost ground to make up.

Fifth, single payer. Right now. Put the private medical-insurance companies out of business and let’s find more efficient, productive uses for that capital than insurance-exec CEO bonuses while the poor end up using the ER, and very inefficiently at that, for primary care.

Finally, let’s stop sitting around pretending that our problems are so huge that there is nothing we can do about them. There is plenty we can do about them. And most people in Washington know it. But the wealthy have so completely bought the government that it’s more rewarding for individuals in government to pretend we’re helpless than to do the right thing for the people for whom they supposedly work. This is the elephant in the room — see what I did there? Although Democrats are on the take as well — that the so-called liberal media won’t talk about.

Friday, July 2, 2010 8:48 pm

Try this at home, kids

Filed under: More fact-based arguing, please — Lex @ 8:48 pm
Tags: ,

Fixing the deficit with the Center for Economic and Policy Research’s deficit calculator.

The calculator begins with the baseline that if nothing much changes, then by 2020, the national debt will be 85% of GDP. If you want to follow the Willie Sutton philosophy and go where the money is, the only single items things that take big chunks (5 percentage points or more) out of the debt over the next 10 years are:

  • The Fed buying/holding $2 trillion in debt: gets debt down to 71% of GDP.
  • Negotiating Medicare drug prices: 75%
  • Financial Speculation tax: 75%
  • Allow all (Bush-era) cuts to sunset: 78%
  • Quick end to Iraq/Afghan wars: 80% of GDP.

I don’t know enough about the ramifications of the Fed’s buying/holding that debt to endorse it. Negotiating Medicare drug prices we definitely should be doing and that should have been incorporated into health-care reform, Big Pharma be damned. A financial speculation tax is a good idea; markets need to be allocating capital for productive long-term investment, not quick profits. Sunsetting the Bush cuts makes perfect sense; those cuts account for about a third of the current size of the deficit and were ill-advised from the start. And getting out of Iraq and Afghanistan is such a moral and practical imperative that the economics, though significant, are almost beside the point.

There are other options on the calculator, many of them attractive, but most aren’t going to make more of a difference than a point or two. Still, keep in mind that I’ve addressed each of these items in isolation. Although enacting some of them together might well have effects that wouldn’t occur if only one were enacted, together they’ll also substantially reduce the projected debt load. And we can probably find a politically acceptable approach that will bring the debt down substantially without putting seniors on a cat-food diet.

Wednesday, June 30, 2010 7:54 pm

Memo to John Boehner and his batsh*t friends

We need to get the hell out of Iraq and Afghanistan. We do not need to stay there, let alone raise the retirement age to 70 and cut Social Security benefits to pay for it.

Friday, June 18, 2010 8:13 pm

But … but … all the OLD peoples …

One of the seemingly endless arguments in favor of cutting Social Security to help get deficits under control is that the population is aging and there will be fewer wage-earning workes supporting more Social Security recipients in coming years. It makes intuitive sense, what with the pig-in-the-python Baby Boomers heading into SocSec territory and all, so even I thought this argument, at least, was probably true. But was it?

Well, Rule 5 of investigative journalism is — say it with me, kids — do the math.

Economist Dean Baker does the math:

At a time when we have the greatest oversupply of labor since the Great Depression, we are now supposed to be terrified that in a few very short years we will not have enough labor. Is that possible?

Not if we know arithmetic. The NYT gave us a little glimpse of this horror story in its Economix blog today. It showed that the ratio of dependents (defined as people over 64 or under 20) to working age people (those between the ages of 20 and 64) is supposed to rise from 0.67 today to 0.74 in 2020, and 0.83 in 2030; pretty scary, right?

Well suppose we defined a slightly different dependency ratio. This will be the ratio of people who are not working to the people who are. The idea being that people who are working must support the people who are not, regardless of their age.

In 2010, this ratio stands at 1.22. We have 139.4 million people working and 170.1 million not working. However, if we assume that we get back to near full employment and the labor force grows as the Congressional Budget Office projects and population grows as the Census Department projects, this dependency ratio will have fallen to 1.05 in 2020 and then rise to 1.07 by 2030. So, are we scared yet?

So if I understand him correctly, that means the biggest problem isn’t the aging population, it’s the lack of jobs.

Tuesday, May 25, 2010 2:00 pm

“Obama Administration Has Secret Plan to Raise Your Taxes and Cut Your Social Security.”

It’s true:

Over the past week, top White House officials have been floating a trial balloon for their strategy on the economy. At its core is a decision to put deficit reduction ahead of job creation.

The premise is that the bond markets and allied deficit hawks are demanding action to cut the budget, that Obama lacks the votes in the Senate for a serious jobs initiative, and that polls show voters care more about deficit reduction than about jobs.

So the plan, modeled closely on the work of the Peter G. Peterson foundation and the anticipated report of the president’s own fiscal commission, is a deal that includes cuts in Social Security plus a new Value Added Tax (VAT), in order to get deep cuts in the deficit. As a sweetener to get Republicans to back the VAT, White House officials would cut the corporate income tax.

This is nuts both in terms of whether it actually would help the economy AND in terms of whether it would help Democrats politically. It’s like Obama is bent on repeating all his biggest mistakes in the health-care debate.

Of course, there is some good news:

In the end Republican opposition to a VAT is likely to save the Democrat budget hawks from themselves.

We may end up with a mirror image of the health-care endgame, where the choice was between an unappetizing bill and an even more unappetizing status quo. Only here, the choice may be between an unappetizing status quo and an even more unappetizing package of recommendations from Pete Peterson’s anti-Social Security committee that Congress would have to vote up or down. Fun.

Monday, May 10, 2010 11:10 pm

Rumors, like mushrooms, grow where there’s no light and lots of manure

In the absence of any of the promised transparency for the Simpson-Bowles commission looking at entitlement reform (read: screwing even more wealth out of what’s left of the middle class and working class under the guise of ensuring the long-term survival of Social Security, which actually is in relatively decent shape, and Medicare, which, whoa), we are left only with quasi-informed speculation as to the motivations and likely behavior of the commission based on the records and affiliations of its members, which Jane Hamsher of Firedoglake has helpfully compiled.

And what do we learn from this compilation? Short version: We are so screwed, and by “we,” I mean anyone making less than about $5 million a year.

There has been much talk over the decades about “making tough choices” with respect to entitlements. Now, from where I sit, a “tough choice” is a choice that discomfits people with real power, like, say, a substantially higher marginal income tax rate or, God forbid, a quasi-confiscatory wealth tax to try to claw back some of what has been stolen from us over the past few decades. But, trust me, with this crowd the only tough choice to be made is whether to yell “Tough t—y!” or “Tough s—!” at us proles.

Read ’em and weep:

Member Open to cutting benefits? Expressed support for privatization? Conflicts of Interest
Erskine Bowles, Chair YES – Bowles is on the record that the commission will “mess with Medicare, Medicaid and Social Security, because if you take those off the table, you can’t get there. YES – Negotiated deal with Newt Gingrich to raise Social Security retirement age & some privatization under Clinton; deal was stopped by Lewinski scandal. Sits on the board of Morgan Stanley. Wife Candice is on the board of JP Morgan Chase. Finance, insurance & real estate sector donated over $3 million to his unsuccessful 2004 Senate bid.
Alan Simpson, R-WY-ret, Co-Chair YES – When asked about cuts he would recommend to the President and Congress on CNBC, Simpson said “We are going to stick to the big three,” meaning Social Security, Medicare and Medicaid. YES – “[A]s recently as 2005, Simpson…supported attempts by President George Bush to privatize Social Security by turning part of the pension and insurance program into millions of individual investment accounts, which by now would have lost 20 percent of their value.” (2/27/2010) Simpson and Peterson were appointed to Bill Clinton’s Bipartisan Commission on Entitlement Reform in 1994. Both voted to recommend partial privatization of Medicare, and raising Social Security age of eligibility to 70, Simpson awarded “Economic Patriot” award by Peterson’s Concord Coalition in 1996.
Ann Fudge Unknown Unknown Board member on the Council of Foreign Relations, where Peterson is Chairman Emeritus and Robert Rubin is Director/Co-Chair, fundraiser for Obama campaign, Novartis Board of Directors
Alice Rivlin YES – Co-author with OMB director Peter Orszag of a Brookings report titled “Restoring Fiscal Sanity” advocating $47 billion in entitlement cuts, including an “increase in the retirement age under Social Security” and “more accurate inflation adjustments to Social Security benefits.” Unknown Board member with Pete Peterson on Committee for a Responsible Budget, Former board member with Peterson of Public Agenda (Peterson gave them $500,000 in 2009), Advisory Council member of Robert Rubin’s Hamilton Project, Senior Fellow at the Economic Studies Program at the Brookings Institute (position funded by Peterson Foundation/Concord Coalition donations).
John Spratt (D-SC) Yes – “House Budget Committee Chairman John Spratt of South Carolina and his counterpart in the Senate, Kent Conrad of North Dakota….are promoting a “grand bargain” in which a bipartisan commission enacts spending caps on social insurance as the offset for current deficits.” (2/23/2009) Yes – “Spratt favors supplementing Social Security with a private savings plan that would either be mandatory “or else so attractive that everyone would sign up for it.” He also advocates investing about 20 percent of the Social Security trust fund in the stock market.” (4/7/1998, per Lexis)
Andy Stern Unknown – Previously opposed to cuts, but said recently that entitlement programs “need to be re-examined”. Expressed support for of “the possibility of add-on universal private accounts.”
Dick Durbin (D-IL) YES – Durbin admonished “bleeding heart liberals” to be open to program reductions to restore fiscal balance. Unknown
David M Cote Likely – Cote is a Republilcan. Unknown CEO of defense contractor Honeywell. The defense industry has consolidated itself into a few big players, and they see their financial futures in competition with social safety net programs for government dollars. They won big when 9/11 blew the lock off the Social Security “lockbox.”
Paul Ryan (R-WI) YES – Ryan’s recently released budget plan calls for “enormous tax cuts for the affluent and “very large benefit cuts… in Medicare, Medicaid, and Social Security.” YES –Ryan proposes to give people under age 55 the choice of opting out of Social Security into privatized personal accounts. Ranking minority member on House budget committee.
Jeb Hensarling (R-TX) YES – On Hardball, “Rep. Jeb Hensarling (R-TX) argued that to balance the budget Congress needed to consider reducing Social Security spending for yet-to-be-retired beneficiaries.” (2/2/10) Yes – In a 2005 Congressional hearing, said that “the trust fund has already been raided 59 different times,” but that “with the exception of the great depression there has never been a four year consecutive period where the stock market has declined.” If allowing people to invest in half their Social Security in a personal account will “give them greater retirement security,” he said, “why wouldn’t we choose that plan?” Second ranking minority member on House budget comittee
Dave Camp (R-MI) Likely – Says he doesn’t want to cut current retirees’ monthly checks, but Diamond-Orszag plan being pushed by the Obama administration cuts benefits for future retirees who are now under 55. Yes – “He was a strong supporter of Bush’s proposal to create private investment accounts within Social Security, despite the backlash the plan encountered,” per CQ Healthbeat, 2/2/09 (Nexix). Also a signatory to Republican Main Street Partnership 98-RMSP3. Ranking minority member, Ways & Means Committee
Xavier Becerra (D-CA) No No
Jan Schakowsky (D-IL) No No
Judd Gregg (R-NH) Yes – Gregg’s plan “would reduce the traditional guaranteedretirement benefits for today’s workers.

” (USA Today, 7/27/98, Nexis)

Yes – Gregg’s solution to “Social Security’s fiscal problems” included “large-scale privatization” and raising the eligibility age to 70 by the year 2029. Ranking member of the Senate Budget Committee
Tom Coburn (R-OK) Yes –“There are only three things you can do with Social Security,” Coburn said. “You can raise taxes on Social Security, you can allow option-out into private accounts or you can delay retirement age…I’m not for raising taxes on Social Security when you fix it other ways.” (4/25/10) Yes – “Coburn called for creation of private accounts that would keep Congress from spending the money.” (Oklahoman, 11/26/04, Nexis)
Mike Crapo (R-ID) Likely – Co-sponsor of the DeMint-Crapo Amendment, which would have “made no changes to the benefits of those Americans born before January 1, 1950.” Like Dave Camp, implied benefit cuts to those born afterwards. Yes –DeMint-Crapo Amendment would have “provided a voluntary option for younger Americans to obtain legally binding ownership of a portion of their [Social Security[ benefits…I believe that individuals have the right to make decisions about their own money.”
Max Baucus (D-MT) Likely – Baucus said he was open to discussion if Bush would take privatization off the table Unknown Chairman of the Senate Committee on Finance, tapped by Reid to lead the battle against President Bush’s privatization of Social Security. But according to Yglesias, “the Democrats’ only real victory of the last five years–stuffing the administration on Social Security–came after Harry Reid explicitly ordered Baucus not to negotiate with the White House.”
Kent Conrad (D-ND) Yes – “House Budget Committee Chairman John Spratt of South Carolina and his counterpart in the Senate, Kent Conrad of North Dakota….are promoting a “grand bargain” in which a bipartisan commission enacts spending caps on social insurance as the offset for current deficits.” (2/23/2009) Yes – “I think there is a kernel of a good idea with individual accounts because we do need to find a way to get a higher rate of return on funds invested in Social Security. But I cannot support a plan that is financed by massive new debt.…This administration is not collecting the taxes that are due now. Hundreds of billions of dollars a year that are owed that are not being paid. We should do that. That would give us a new revenue stream that could be applied to individual accounts and the other parts of the budget deficits that are hurting the country.” (This Week, February 13, 2005, Nexis) Chairman of the Senate Budget Committee.

Share This icon

Saturday, February 13, 2010 6:26 pm

Why people hate Washington

Shorter Dean Baker: Because it keeps taking money from honest working people and using it to reward rich douchebags who effed up.

Saturday, December 12, 2009 9:13 pm

Odds and ends for 12/12

It ain’t just me: The AARP also apparently has sussed out that this proposed bipartisan deficit-reduction committee is just a stalking horse for gutting Social Security and Medicare without Congress standing in the way.

Jackasses du jour: Vail Resorts CEO Rob Katz and Summit (Colo.) Daily News Publisher Jim Morgan, Katz for defrauding his customers and Morgan for firing one of his journalists for writing about it (i.e., doing his job). May you both rot in bankruptcy early in the New Year and learn the joys of seeking a job in the Bush-league Depression.

It ain’t the climate they’re worried about: In a vacuum, an Ipsos/McClatchy poll finds, a bare majority (52%) of Americans supports cap-and-trade. But 60% support it, even if it would raise electric bills an average of $25 a month, if it also creates “green” jobs. My takeaway? Jobs are Job 1.

Quote of the day, from commenter “liam” at PlumLine: “If we go to clean renewable energy, and it turns out that the global warming claims were wrong, we still end up with cleaner air and are not dependant on foreign oil. … If we heed the skeptics, and do nothing, and they turn out to be wrong, then our planet will have become a complete disaster, and it would be too late to reverse the damage.”

Quote of the day runner-up, from David Dayen: “This is the worst possible time to put on plastic armor and go into your backyard and yell “Wolverine!” in arguing for cutting the deficit. It’s not a matter of being resolute, it’s a matter of being foolhardy.”

Friday, December 11, 2009 6:21 pm

Odds and ends for 12/11

Memo to Rick Warren has not “done the right thing.” Rick Warren has merely done the only thing that might stave off a PR disaster for himself and what he laughably passes off as a “ministry.” There’s a difference. “Doing the right thing” would have required Ranger Rick to immediately, loudly and repeatedly denounce state-sanctioned murder of gays (and imprisonment of their families/friends for not reporting them). Now study up; this will be on the final.

Why don’t we have a health-care bill yet? Here’s one reason.

Success! Because why in the world would we want to regulate the financial instrument that almost destroyed the global economy?

Aetna’s solution to Robert Steinback’s health-insurance needs: “Die, Mr. Steinback.” As the brother of two guys with Type 1 diabetes, I feel his pain, and I’m still waiting for someone to explain credibly to me why we don’t need at the least a national, robust public option, if not single-payer.

Not exactly giving us what we like: The Senate health-care proposal is less popular than the public option. How much less popular? Seventeen percentage points. That’s huge.

You want death panels? You can’t handle death panels!

And speaking of panels: Digby has a name for the panel Pete Peterson is proposing to figure out a way to balance the budget: the Bipartisan Committee To Destroy Social Security and Medicare So Wealthy People Don’t Ever Have To Pay Higher Taxes. Prolix but accurate.

Facts matter. So take that, Glenn Beck supporters.

The party of responsibility and accountability, which controls the S.C. legislature, has declined to impeach Gov. Mark Sanford.

Another way to get by without health insurance: Yitzhak Ganon just didn’t go see the doctor. For sixty-five years.

We’ve killed al-Qaeda’s No. 3 guy. Again.

The grownups of fact-checking take on “Climategate.” Their findings will surprise no one and enrage denialists.

Shorter Sarah Palin: “Correcting my (many) factual mistakes = making the issue something it’s not.”

Does Fox News want to make us laugh, or is it simply trying to bankrupt Rupert Murdoch?: Even by the rug-burn standards of online polling, this question is so loaded it is leaving big cracks in the digital asphalt.

Green? Shoot!: The number of people shifting to emergency unemployment insurance because their regular coverage had run out topped 379,000 last week, bringing the overall total to a record 4.2 million. At the current rate of increase, the number of people getting emergency payments will top the people getting regular payments (5.5 million) within a month.

Green? Shoot!, the sequel: Independent financial analyst David Rosenberg (via ZeroHedge) says that 1) because of contracting credit and asset deflation, we’re not in a recession, we’re in a depression; 2) the 20% deflation of household assets in the past 18 months — a loss of $12 trillion in value — is “a degree of trauma we have never seen before”, 3) … aw, hell, just go read the whole thing. It’s orders of magnitude more depressing than anything on CNBC, but also appears orders of magnitude more fact-based, unfortunately.

Green? Shoot! Reloaded: Paul Krugman offers some objective criteria by which we might determine exactly what constitutes “good news on the job front.”  Just remember, we’ve got to make up lost ground. A lot of lost ground.

Public pants-wetting: Why do Reps. Trent Franks, Steve King and Sue Myrick hate America?

In news that will surprise exactly zero parents, scientists now say 98% of children under the age of 10 are sociopaths.

And, finally, some good news (h/t: Fred), or, When the Germans say “Prost!”, they mean it: Beer could fight prostate cancer.

Tuesday, November 17, 2009 8:39 pm

The deficit monster

Filed under: I want my money back. — Lex @ 8:39 pm
Tags: ,

Now that the economy is stumbling back to normal health (disclaimer: at least, that’s what CNBC appears to be trying to get me to believe), I’m supposed to believe that the biggest threat to our economic health right now is the deficit. Inasmuch as I have believed for pretty much my entire adult life that the biggest threat to our economic health right now is the deficit, this shouldn’t be a hard sell.

But at least at the moment, I’m not buying it. And if the people who are selling are having trouble getting someone like ME to buy, whether or not a majority of the country agrees with them (which in fact it does, at least at the moment), then maybe they need to entertain the possibility that the deficit is NOT, in fact, the biggest threat to our economic health right now.

I would argue that the biggest threat to our economic health right now is the lack of jobs, which is hurting us at the most basic level: The number of Americans who “lack consistent access to adequate food” is now 49 million. Yeah, you read that right, 49 million, or about 1 in 6. Of those, a third are actually skipping meals or at least cutting portions; the rest are eating regularly, but only with the help of food stamps, food banks or soup kitchens:

“Many people are outright hungry, skipping meals,” said [James Weill, director of the center that did the story]. “Others say they have enough to eat but only because they’re going to food pantries or using food stamps. We describe it as ‘households struggling with hunger.’ ”

Well, some of us do:

“Very few of these people are hungry,” said Robert Rector, an analyst at the conservative Heritage Foundation. “When they lose jobs, they constrain the kind of food they buy. That is regrettable, but it’s a far cry from a hunger crisis.”

During the last close-to-comparable recession, in the early 1980s, news like that would have been atop the front page — not only because of the number of people doing without but also because back then the public was still capable of outrage at such deliberate lying about the misfortune of our fellow Americans. Now? Eh. We shrug, so much have our expectations been lowered by those who are stealing from us.

But I digress.

Let us say, for the sake of argument, that the deficit really is the single greatest economic danger we face. Problem is, the media are both explicitly and implicitly conflating ALL spending with deficit increases. But not all spending increases the deficit, if it is offset by increased revenues and/or by spending cuts elsewhere.  Consider this bit of Politico analysis:

… it will be tough for many Democrats to sell themselves as deeply concerned about spending after voting for the stimulus, the bailouts, the health care legislation and a plan to address global warming, four enormous government programs.

Well, yes, it will … if all four of those programs increase the deficit. However, at least two will not. Politico even acknowledges manages to report this fact without acknowledging that it completely undermines the whole deficit argument:

For starters, the White House has not dropped plans for an aggressive global warming bill early next year that will be loaded with new spending on green technology and jobs – that would be paid for with tax increases. Democratic lobbyist Steve Elmendorf says the White House focus on deficit reduction could easily kill the cap-and-trade effort. “I think this means cap-and-trade has to go to the backburner,” he said.

Now, whatever you think of the merits of cap-and-trade, we’re talking about a bill that, as Politico explicitly acknowledges, would be paid for with tax increases. That means it will not add to the deficit. So why even bring it up in this context?

OK, so what about health-care reform? Well, David Sirota has a math problem for you to solve:

Let’s say you’re a congressperson or “tea party” leader looking to champion deficit reduction — a cause 38 percent of Americans tell pollsters they support. And let’s say you’re deciding whether to back two pieces of imminent legislation.

According to the nonpartisan Congressional Budget Office, the first bill’s spending provisions cost $100 billion annually and its tax and budget-cutting provisions recoup $111 billion annually, thus reducing total federal expenditures by $11 billion each year. The second bill proposes $636 billion in annual spending and recoups nothing. Over 10 years, the first bill would spend $1 trillion and recover $1.11 trillion — a fantastic return on taxpayer investment. Meanwhile, the second bill puts us on a path to spend $6.3 trillion in the same time.

Save $110 billion, or spend $6.3 trillion? If you’re explicitly claiming the mantle of fiscal prudence, this should be a no-brainer: You support the first bill and oppose the second one.

The first bill would be health-care legislation. As currently priced and structured, it would actually reduce the deficit, compared with doing nothing. So explain to me again why enacting it would make the deficit worse?

Sirota’s related point, which isn’t someplace I’d originally set out to go but is probably worth addressing anyway, is that right now we’re spending $636 billion annually on defense. And that’s just what we budget. The actual war-fighting appropriations for Iraq and Afghanistan aren’t even part of the budget, and they total hundreds of billions more.

Moreover, we spend more money on defense every year than the rest of the world combined. I’m thinking that if we want to reduce the deficit, we need to do a Willie  Sutton and go where the money is. That’s defense spending in general and spending for two unnecessary Asian land wars in particular.

But if, God help you, you watch the Sunday talk shows, what you’ll hear is that the only way to bring the deficit under control is for entitlements to take a hit. Crap. We can cut defense spending. We can raise taxes on the wealthy. We can raise the cap on income subject to the Social Security withholding tax. If we stop and think about it, we have a number of options for reducing the deficit without gutting Social Security or Medicare. (And it bears repeating that although you often hear about a Social Security crisis, there isn’t one: Even if we do nothing, Social Security can continue to pay what it owes for several more decades, and only minor fixes now would suffice to keep Social Security solvent over its entire 75-year time horizon.)

We can also stop sending hundreds of billions of taxpayer dollars to the banks. If they’re going to fail — and, in a truly free market, Citi and Bank of America, at the least, would have failed long ago — better to bite the bullet and let them do it now. Let’s further eliminate “too big to fail” as an instrument of public policy: “too big to fail” means too big, period.  And when banks do dumb things with their/our money, they need to go under and be nationalized, not kept artificially alive with endless transfusions of your hard-earned cash.

These steps, even in combination, wouldn’t eliminate the deficit. But, done right and targeted correctly, they could bring the deficit down to a more sustainable level, buying us time to rebuild a healthy economy whose expansion, based on solid fundamentals, eventually will build the tax base up to the point at which a final assault on deficits becomes feasible.

But the answer is NOT to let them take more of your Social Security. And when you hear anyone suggest otherwise, very quickly turn around and stick your pocketknife through the hand he’s about to place on your wallet.

Friday, November 13, 2009 8:49 pm

Odds and ends, Nov. 13

  • Typing Under Ladders: Today’s Friday the 13th. I have exactly no interesting Friday-the-13th stories to tell. To the extent that I can remember the dates at all, two of the unluckiest days of my life, one involving romantic failure and one involving serious physical injury, occurred on the 4th of a month.
  • Home Game: Khalid Sheikh Muhammad and four other accused planners of the 9/11 terror attacks will be tried in civilian federal court in New York, just blocks from Ground Zero. The wingnuts are soiling their drawers at the thought of terrorists (accused, but still) on U.S. soil. Me? I think the U.S. court system can handle the case and that the FBI and NYPD are more than up to handling the security. This ain’t, in other words, an issue over which I’m going to lose any sleep. Nor should you.
  • Bloviation By Other Means: I watched CNN’s Lou Dobbs only enough to determine that he was a pompous, phony ass upon whom none of my time should be wasted, and so I don’t care that he left CNN except that I think he’s planning to run for president. Or for governor of Alaska. Whichever.
  • Nice Guys: Married women who learn they have a serious illness are seven times as likely as married men to end up separated or divorced.
  • Back from the Dead: Under the guise of deficit reduction, the rich are coming after your Social Security again. Don’t let them get away with it.
  • Undessicated after all: You remember when we rammed our manly missile into the moon a few weeks ago? Turns out the moon was wet. All innuendo aside, while this doesn’t throw everything we thought we knew about the moon up for grabs, it changes quite a lot, including the consensus on whether there ever might have been life on the moon. Cool.
  • Double Standard: If pro-choice women are considered immoral for threatening to oppose any health-care reform that bans spending federal money on abortion, what does that make the Roman Catholic Church?
  • Delay, Deny & Hope That I Die: Why would Senate Republicans delay extending unemployment benefits for weeks and weeks, and then finally vote unanimously in favor of them? Because procedural rules made delay the functional equivalent of denial, so they could screw people and still look good as far as the voting record went. Bastards.
  • Listening to the People Who Were Right: Ten years ago, Sen. Byron Dorgan, D-N.D., correctly told his colleagues that repealing the Glass-Steagall Act was a bad idea, one that within 10 years we would come to regret. So why is it that Byron Dorgan isn’t running all things financial in Washington today? Did you not just hear what I said? He correctly told his colleagues that repealing Glass-Steagall was a bad idea.
  • Cyber Pearl Harbor has already happened. Twice. Both times on George W. Bush’s watch, although so far as anyone can tell, it doesn’t look like Obama has learned anything from his predecessor’s mistakes.
  • I Believe the Technical Term for This Is “Fraud”: One reason Chrysler got a lot of taxpayer money was that it was going to produce greener cars. Only now that it has actually gotten the money, guess what it’s not doing?
  • Another Sin to Lay at the Feet (Tentacles?) of the Vampire Squid: Oh, nothing much, really. Just an oil scam. A $2.5 trillion oil scam.
  • Relatedly, and finally, Why Goldman Sachs Should be Broken Up, by, interestingly enough, Goldman Sachs.

Tuesday, August 12, 2008 9:58 pm

Simple answers to simple questions: Social Security

How do we ease Social Security’s problems? Cracking down on employers who don’t pay Social Security and Medicare taxes to the government would help.

This has been another edition of Simple Answers to Simple Questions.

(h/t: Mom)

Wednesday, February 23, 2005 11:46 pm

Always do the math. Even when you’re an economist.

Filed under: Aiee! Teh stoopid! It burns! — Lex @ 11:46 pm
Tags: ,

You already know what the first three rules of investigative reporting are.* Rule No. 4? Always read the documents. And either Rule No. 5 or Rule No. 4A is: Always do the math. This is particularly important when writing about taxes and government spending.

The Washington Post’s Robert Samuelson agrees, I’m happy to report: “It’s always necessary to do the math. By this I mean that journalists need to measure politicians’ promises against underlying realities, as represented by numbers.”

So why didn’t he do it?

Our central budget problem, as I’ve noted in earlier columns, is the coming spending explosion in Social Security, Medicare and Medicaid, driven by aging baby boomers and rising health spending. In 2004 these programs cost $965 billion, or 8.4 percent of the economy (gross domestic product). The Congressional Budget Office projects that by 2030 their costs will rise to 14 percent of GDP, or more than $1.6 trillion in today’s dollars. Avoiding a (nearly) $700 billion annual increase in taxes or deficits would require comparable spending cuts in other government programs. It won’t happen. The projected increase in retirement spending nearly equals all federal “discretionary spending” — a category that includes defense, homeland security, environmental programs, national parks, scientific research and much more. We’re not going to eliminate all these programs.

Once you’ve done this math, you recognize that benefit cuts in Social Security, Medicare and Medicaid are inevitable. They’re the only other way to limit massive tax increases or immense budget deficits. Moreover, the benefit cuts have to affect baby boomers, because they will be the people on Social Security, Medicare and Medicaid. The critical period occurs from 2011 to 2029, when all baby boomers (people born from 1946 to 1964) hit 65. That’s when budgetary pressures intensify.

Samuelson, although identified here as a political columnist, is an economist, for God’s sake. And yet it somehow has escaped his notice that if we do nothing at all to Social Security — nothing at all, meaning no benefit cuts, no tax increase, no borrowing, and even taking into account the likely need for increases in spending on benefits — it can continue to pay full benefits to 2042, more than a decade later than the “critical period” Samuelson is worrying about.

Medicare and Medicaid are indeed disasters waiting to happen. But the current budget deficits and trade deficits, which he doesn’t even address, are disasters happening right now. Social Security? Pfffft. Yeah, we’ll need to do something eventually. But right now and for the next couple of decades or so, we’ve got much bigger problems. And surely Samuelson is smart enough to know it.

His column comes with the headline “Journalistic malpractice.” Truth in advertising, I guess.

*OK, maybe you don’t. They’re: 1) Follow the money. 2) Follow the money; and 3) Follow the money.

Blog at

%d bloggers like this: