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Re: Fixing Social Security game
Old 01-25-2007, 08:06 AM   #81
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Re: Fixing Social Security game

Quote:
Originally Posted by teejayevans
What did the republican congress
do for the last few years(hint, they don't call them the do-nothing congress for nothing).

Galt's Third Law of Government:

A "do nothing" congress is a wonderful thing.

JG
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Re: Fixing Social Security game
Old 01-25-2007, 08:11 AM   #82
 
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Re: Fixing Social Security game

Quote:
Originally Posted by wstu32
when i plan retirement, i DO NOT plan on ss income. ESPECIALLY with DEMS in control....
Not a student of history huh? - The Dems invented Social Security!
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Re: Fixing Social Security game
Old 01-25-2007, 11:53 AM   #83
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Re: Fixing Social Security game

Quote:
Originally Posted by Tadpole
I was not referring to interest of the fund but to the estimates on GDP used in all of the models. Thus far, even though the new securities have carried low rates, the economy has been outperforming the assumptions used by the trust fund reports. This is predominately the reason that the trust fund estimates have moved from 2029 to 2041. The actual data has when updated in the models has put the newest data in at a level which has outperformed the low cost model. In fact, some people say that if the economy performs as poorly as the numbers used in the intermediate model, not only will the SS system be in trouble but also other elements of the economy including investments. Demographs is a parameter that is more tightly bound in the estimates, as well as longevity estimates. The economic estimates have a huge compounding affect as can be seen by the movement of the dates over the past few years. The lack of good fit of the estimates one and two and three years out really shows the error that exists fifty or seventy years out. Thats why I likened it to a crap-shoot. You need to plan down the road, but even your best or worst predictions become fuzzier with time. That said, they could also be fairly good since they are longer term smoothed (less volatile) than the nearby (in time) points. I only was pointing out that, thus far, the real data is out performing the projections. That out-performance also compounds down the projection time-lines.

All I am saying is economics has won over demographics in the models. That is shown by the results so far. The ratio of workers is fairly static compared to other adjustable parameters.

When it comes to what the power brokers were trying to accomplish in '83, it is difficult to think they wanted the trust fund to grow as large as it is projected because of the problem of paying it back on a timed, non-optional cash flow model. People need to defocus from a fund that currently is maintaining a surplus cash flow and focus on what is really going to cause a problem when that cash flow is reversed and that problem is the borrower fund not the loaner fund. When, in the future, the SSA calls for withdrawals, so will some of the other holders of securities. I know my deferred savings has bonds and securities as does everyone else's and there is the massive build up of debt held by foreign countries over the past few years.

Remember that the current projections have the pay-go plus trust fund lasting the lifespan of the boomer wave so it is not a SS problem at this point so much as a general fund problem. I proposed moving the trust fund to "other than federal government investments" for a reason. I wanted people to see that the federal government would still be spending the money but would need to borrow it from someone other than Americans paying payroll taxes. In my mind there is a spin going on that makes people divert their attention to a future problem but obscures all of the root cause of that problem - the yearly compounding of debt with interest that general fund yearly deficits add to the debt at a time the SS funds would need to be drawn upon cannot be sustained. This would have left future workers with the same total level of debt whether the Social Security System with it's trust fund had existed or not. The trust fund has offset the level of borrowing from other sources to cover yearly deficits in the general fund. My challenge remains - why not start converting those trust fund debt certificates to non-federal investments as a pool which, according to pundits, will grow faster than it is growing currently and not need tax revenue to repay. Doing it now uses the higher earning years of most of the boomers while they are still working? It would also help uncover the TRUE deficit of the general fund since there will be less inter-transfer of funds between treasury accounts. Right now you have Susie's bank account running a $10 overdrawal and Joan's showing a $20 dollar surplus. So they get a joint bank statement that says both have a $5 surplus. How can Susie even know she is overspending when she barely glances at the statement and gets a false feel-good feeling?

Sorry, got to get ready for work. Got to end.

By the way, current high income current retirees are being taxed on SS and that some of that money is flowing back to the SS fund to purchase more securities which, in turn, are being converted to more "IOUs".
You obviously have a source that compares Trustees reports for various years. I don't. You probably posted a link somewhere before, could you point me to it?

When I look online, I can see them for 2002 thru 2006. The 2002 report says "Under the intermediate assumptions the combined OASI and DI Trust Funds are expected to become exhausted in 2041, 3 years later than projected in last year's report." So the 2001 report must have had 2038.

The 2006 report says "Annual cost will exceed tax income starting in 2017 at which time the annual gap will be covered with cash from net redemptions of special obligations of the Treasury, until these assets are exhausted in 2040."

So, over 5 years of reports, the projected date moved by two years. Maybe it was fluctuating a lot more before then.

I agree with your statement that the intermediate projections show a slower growth than we've seen in the past. I attribute that to slower growth in the number of workers. And I agree that Social Security, traditional pension plans, and individuals with 401k assets will all be trying to get cash at the same time in the future. That could lead to lower selling prices for lots of us.

Yes, it would have been nice if the SS surplus had been invested in private securities for the last 20 years. Not because we'd all be wealthier, that wouldn't have directly impacted productivity. But, it would have highlighted the depth of the deficits in the general fund, and we might have made better tax or spending decisions because of it. If Pelosi and company want to start moving some of the current trust fund to private securities, just to get the communication going (I think this is what you are suggesting), that might help.

I think there are two equity things going on. One is between the high and low income groups. As I posted before, I want to insist that the General Fund repay its loans from SS, because that will address this issue.

The other equity issue is between the boomers and their children. The boomers increased the federal debt while they were running the country. Now they expect their children to support them in their old age (either by higher SS taxes, or by higher FIT, depending on the paragraph above) and the children may not want to do that.

It's possible that economic growth can defer this conflict for a few more years, but I don't think it can hide it forever. Sooner or later we will need to deal with a population mix that has more retirees than we've seen before. They all want to consume but not produce. I think that will lead to difficult decisions.

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Re: Fixing Social Security game
Old 01-25-2007, 12:06 PM   #84
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Re: Fixing Social Security game

Independent:

In nominal terms you are correct however when you compare debt to GDP our debt isn't all that awful as compared to historical norms.

Also notice that our debt to GNP ratio was lowest (in the recent past) during the 70's when growth was very very small and interest rates were really really large.

Another way to look at things is that our debt to GNP is at about the same level as when either Reagan or Kennedy were president.
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Re: Fixing Social Security game
Old 01-25-2007, 06:05 PM   #85
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Re: Fixing Social Security game

Quote:
Originally Posted by Independent
You obviously have a source that compares Trustees reports for various years. I don't. You probably posted a link somewhere before, could you point me to it?

When I look on-line, I can see them for 2002 thru 2006. The 2002 report says "Under the intermediate assumptions the combined OASI and DI Trust Funds are expected to become exhausted in 2041, 3 years later than projected in last year's report." So the 2001 report must have had 2038.
Bruceweb has the numbers between 1996 and 2004 at this link. The data below comes from this page:
http://bruceweb.blogspot.com/2006/05...-plan-for.html.
Then go to his main page. He has the missing reports back to 1942. Have fun. (To find those prior to 2000, click on the 2001 report and the page it takes you to has links to the rest of what he has.)
Trustee report date
1996 1997 1998 1999 2000
Year when tax revenue falls short of benefits
2012 2012 2013 2014
Year when trust fund income falls below expenditures
2019 2019 2021 2022 2024

In fact, when I mentioned the phenomena I was only talking about the recent data points so, if you tabulate all the data, come back and tell me what you find.

Quote:
The 2006 report says "Annual cost will exceed tax income starting in 2017 at which time the annual gap will be covered with cash from net redemptions of special obligations of the Treasury, until these assets are exhausted in 2040."

So, over 5 years of reports, the projected date moved by two years. Maybe it was fluctuating a lot more before then.

I agree with your statement that the intermediate projections show a slower growth than we've seen in the past. I attribute that to slower growth in the number of workers. And I agree that Social Security, traditional pension plans, and individuals with 401k assets will all be trying to get cash at the same time in the future. That could lead to lower selling prices for lots of us.
Perhaps but might I point out that that slow growth was projected in these models while the boomers were still working also. GDP reflects productivity not numbers of workers.

Quote:
Yes, it would have been nice if the SS surplus had been invested in private securities for the last 20 years. Not because we'd all be wealthier, that wouldn't have directly impacted productivity. But, it would have highlighted the depth of the deficits in the general fund, and we might have made better tax or spending decisions because of it. If Pelosi and company want to start moving some of the current trust fund to private securities, just to get the communication going (I think this is what you are suggesting), that might help.
Oh, we could have funneled the investments anywhere once the growth of the surplus and the intention of the government to consider it their deficit reduction slight-of-hand in the 80s. Bruce Webb seems to think that people first woke up to the thievery in the late 90s but an ex-member of the 83 commission, Robert Ball, said in an interview that Moynihan figured this out in the late 80s and started screaming about the rapid build up of assets in the trust fund. Apparently, he wanted the payroll tax reduced immediately to keep the governments hands off the poor people's retirement money. The interview with Ball is on the ssa.gov site in the history section. I read it some time ago so my paraphrasing comes from my old-lady memory.

Quote:
I think there are two equity things going on. One is between the high and low income groups. As I posted before, I want to insist that the General Fund repay its loans from SS, because that will address this issue.

The other equity issue is between the boomers and their children. The boomers increased the federal debt while they were running the country. Now they expect their children to support them in their old age (either by higher SS taxes, or by higher FIT, depending on the paragraph above) and the children may not want to do that.
Nice talking point but no molasses. Someone entering the workforce today at age 20 was born in 1986. These are also the ones who could not vote in 2004. The last boomer was born in 1964 so there are 22 years of people younger than boomers as well as all the people born before the boomers that have contributed to the direction of this country. Take the GDP out of the graph shown in a previous post and graph the actual deficits. The future growth of the debt is baselined by the actual dollars and interest, not the deficit to GDP ratio. GDP plays back in when the borrowed funds are redeemed. The actual debt will grow by the rate of the issue even if the growth GDP goes negative or exceeds the highest value ever recorded. The pity of it all is that those who want to destroy the SS system are creating so much paranoia in this country that we the people cannot solve the problem in a simple, fair and rational way (if there is a problem outside the yearly federal deficit and interest on that debt). Did you play around with the "game"?

Quote:
It's possible that economic growth can defer this conflict for a few more years, but I don't think it can hide it forever. Sooner or later we will need to deal with a population mix that has more retirees than we've seen before. They all want to consume but not produce. I think that will lead to difficult decisions.
I think you are too excited. Make them raise taxes while the boomers have a large income to contribute. That is the best advice I can give. I can't help people who believe in free lunches. They do, indeed, end up hungry. Some of the free lunch crowd are those that who believe the federal bills can be paid by bring in less revenue than expenditures, while others are the people you mention. The hard truth that this nation has to face is that we cannot buy, as a nation, what we cannot pay for. You see it for an individual. I see it for all the people hiding under the abstract called government. Isn't is horrifying that our government which is the people is reduced to the point where the well-off will steal from the poor just to be more well off? It reflects the true values of the nation and not the pretended values.

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Re: Fixing Social Security game
Old 01-25-2007, 11:18 PM   #86
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Re: Fixing Social Security game

Quote:
Originally Posted by Cut-Throat
Not a student of history huh? - The Dems invented Social Security!
and the Republicans tried to end it
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Re: Fixing Social Security game
Old 01-26-2007, 07:56 AM   #87
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Re: Fixing Social Security game

Quote:
Originally Posted by Independent

I think there are two equity things going on. One...

The other equity issue is between the boomers and their children. The boomers increased the federal debt while they were running the country. Now they expect their children to support them in their old age (either by higher SS taxes, or by higher FIT, depending on the paragraph above) and the children may not want to do that.
But we gave them the Internet and nanotech so its kind of a wash.
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Re: Fixing Social Security game
Old 01-26-2007, 10:04 AM   #88
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Re: Fixing Social Security game

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Originally Posted by bosco
and the Republicans tried to end it
How??
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Re: Fixing Social Security game
Old 01-26-2007, 10:19 AM   #89
 
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Re: Fixing Social Security game

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How??
Private Accounts - This was the first step. - If you didn't know this, you weren't paying attention.
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Re: Fixing Social Security game
Old 01-26-2007, 10:31 AM   #90
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Re: Fixing Social Security game

Quote:
Originally Posted by Cut-Throat
Not a student of history huh? - The Dems invented Social Security!
Methinks the student needs to return to school...

In the early 30's, the predominant movement for a national "pension" system was put forth by democrat Huey Long, a senator and former governor of louisiana. His plan was to limit personal incomes to $1M, total personal fortunes to $50M (IIRC) and siphon off the residual money of the very wealthy in order to establish a monthly "pension" check for every non-criminal over the age of 60. His movement had around 8 million supporters and would have had a good shot at being presented as a bill and becoming the framework for social security, however Long was indicted on charges of bribery and gross misconduct.

Given the wide variety of varying programs, most of which singularly assailed the wallets of the very wealthy to pay the very poor, Roosevelt charged a committee composed of one democrat, one republican, and one fellow of unannounced political affiliation to come up with a proposal for what would become "the new deal".

The bill enjoyed decent bipartisan support and was passed, however the budget bill for the program was killed in the senate by a filibuster...by a democrat...and wasnt passed until the following year after the democrat...the very same Huey Long...was assassinated by a doctor who apparently had no clear motive for the assassination.

For the most part, its believed that while its plausible that Huey just had one too many enemies from his long and extremely scummy political career, its far more plausible that he was "taken out" by political enemies.

Its also worth noting that President Roosevelt's family, including his presidential brother, were rooted in the "progressive party" and that Franklin only left the progressive party to gain more broad based support for his runs to elected office. The progressive party and FDR's overall planks smell a lot more like nixons than carters.

Sort of rains on the "liberals good, conservatives bad", but had the real democrats had their way back in the early 30's, social security would look a lot different and there would have been very little motivation for people to become very successful or very wealthy, nor any compulsion for the poor/middle class to save as much for retirement. What would have been the effect of that? Who knows.

But if you like socialism, it'd have been okay.
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Re: Fixing Social Security game
Old 01-26-2007, 10:44 AM   #91
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Re: Fixing Social Security game

Want the "official history" of SSA go here http://www.ssa.gov/history/history.html. Lots of very good information for history buffs or just want some "nice to know" stuff.
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Re: Fixing Social Security game
Old 01-26-2007, 01:52 PM   #92
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Re: Fixing Social Security game

Quote:
Originally Posted by MasterBlaster
Independent:

In nominal terms you are correct however when you compare debt to GDP our debt isn't all that awful as compared to historical norms.

Also notice that our debt to GNP ratio was lowest (in the recent past) during the 70's when growth was very very small and interest rates were really really large.

Another way to look at things is that our debt to GNP is at about the same level as when either Reagan or Kennedy were president.
I suppose different people can look at that graph and see different things. I see the huge cost of WWII, then 35 years when we essentially grew out of that debt. During those 35 years we paid for the Cold War, had two shooting wars, and went up and down through business cycles. We also increased the real incomes of ordinary Americans a bunch. Through all of that, the debt/GDP ratio generally decreased, with the expected ups and downs due to various events.

Then something changed in the early 80's. The first part of the increase might be expected as we worked our way out of the 70's. But after that? I think it was a change in politics.

Reagan could see that the Republicans were the minority party, and that the pattern was that the Dems would propose popular new programs and the kill-joy Reps would say "we can't afford that". Reagan turned the tables and proposed a popular tax decrease instead, and dared the Dems to oppose it. The path after that wasn't smooth, but generally politicians learned that "fiscal responsibility" doesn't win elections. By 2000 the Reps were the majority party and proceeded with both new tax decreases and a new entitlement program.

Maybe there is an economic reason that I'm missing here, but I have trouble believing that it should have been tougher to pay for our government in the last 25 years than in the preceding 35.

I'm not going to say "the sky is falling". I am saying that we've got a political culture that is accustomed to deficit spending with no consequences (partially because we've had a captive lender in SS). I think that can continue for a while (we can probably find healthy countries with higher debt/GDP than we have), but not indefinitely. Sooner or later interest rates go up, or the Chinese don't want to hold T-Bonds, or the Japanese need to cash theirs in, and we've got a crisis. We've always managed to deal with crises before, but it will involve a lot of political weeping and gnashing of teeth, and some real losses to real people. I think we know that in the long run we have to Live Within Our Means, we'd be better off starting sooner than later.
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Re: Fixing Social Security game
Old 01-26-2007, 03:12 PM   #93
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Re: Fixing Social Security game

Quote:
Originally Posted by Tadpole
Bruceweb has the numbers between 1996 and 2004 at this link. The data below comes from this page:
http://bruceweb.blogspot.com/2006/05...-plan-for.html.
Then go to his main page. He has the missing reports back to 1942. Have fun. (To find those prior to 2000, click on the 2001 report and the page it takes you to has links to the rest of what he has.)
Trustee report date
1996 1997 1998 1999 2000
Year when tax revenue falls short of benefits
2012 2012 2013 2014
Year when trust fund income falls below expenditures
2019 2019 2021 2022 2024

In fact, when I mentioned the phenomena I was only talking about the recent data points so, if you tabulate all the data, come back and tell me what you find.
Now I can see where you're coming from. I looked at the site. It seems that he is arguing that the various trustees reports keep re-projecting the date when the trust fund runs out to later and later dates. Almost as if they are intentionally being ultra-conservative. If so, then of course there is no long term problem with SS.

I did go out and get these numbers from various reports. Here are the report years and the "exhaustion" years. I've ommitted the "19" and "20"

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
46 43 41 36 36 29 30 29 29 32 34 37 38 41 42 42 41 40

Bruceweb looked at the middle of this sequence and came to his conclusion. I look at the longer sequence and see the the variations that are likely when you are making financial projections over this long time frame. This particular number is the most volatile of the various values they calculate, because it includes not only the SS factors but also the interest rate on the trust fund.

It is also less important to me than, say, the difference between taxes and benefits in 2040. That is the real cash that we will need. I looked those number up in the 97 and 06 Trustees Reports. For the "Old Age, Survivors" fund only, the 97 report projects 2040 income and costs as 11.32% and 15.42% of covered payroll.
The 06 report projects 2040 income and costs as 11.40% and 15.22% of covered payroll. Note how far apart these two reports are on the exhaustion date and how close they are on the cash flows. (adding in DI doesn't change the story).
Quote:

Perhaps but might I point out that that slow growth was projected in these models while the boomers were still working also. GDP reflects productivity not numbers of workers.

Oh, we could have funneled the investments anywhere once the growth of the surplus and the intention of the government to consider it their deficit reduction slight-of-hand in the 80s. Bruce Webb seems to think that people first woke up to the thievery in the late 90s but an ex-member of the 83 commission, Robert Ball, said in an interview that Moynihan figured this out in the late 80s and started screaming about the rapid build up of assets in the trust fund. Apparently, he wanted the payroll tax reduced immediately to keep the governments hands off the poor people's retirement money. The interview with Ball is on the ssa.gov site in the history section. I read it some time ago so my paraphrasing comes from my old-lady memory.
No disagreement from me on this.
Quote:
Nice talking point but no molasses. Someone entering the workforce today at age 20 was born in 1986. These are also the ones who could not vote in 2004. The last boomer was born in 1964 so there are 22 years of people younger than boomers as well as all the people born before the boomers that have contributed to the direction of this country.
Well, you can try telling that to the younger set. You might even be right. But if it ever comes to the point where they have to pay more taxes to keep the benefits up, I think they won't believe you.
Quote:
Take the GDP out of the graph shown in a previous post and graph the actual deficits. The future growth of the debt is baselined by the actual dollars and interest, not the deficit to GDP ratio. GDP plays back in when the borrowed funds are redeemed. The actual debt will grow by the rate of the issue even if the growth GDP goes negative or exceeds the highest value ever recorded.
I think you're using too few words for me to follow your idea. What are you trying to conclude here?
Quote:
The pity of it all is that those who want to destroy the SS system are creating so much paranoia in this country that we the people cannot solve the problem in a simple, fair and rational way (if there is a problem outside the yearly federal deficit and interest on that debt). Did you play around with the "game"?
I'll agree that there is a lot of yelling and very little discussion. One side says SS is a corrupt Ponzi scheme, the other says that any suggested change will impoverish millions of grandparents.

Quote:
I think you are too excited. Make them raise taxes while the boomers have a large income to contribute. That is the best advice I can give.
I'm sure that I can't "Make them" do anything. I can vote and discuss.
I think this is your "simple, fair, and rational" solution, but I don't understand what you mean here. Which taxes, on whom, and what will you do with the money?
Quote:
I can't help people who believe in free lunches. They do, indeed, end up hungry. Some of the free lunch crowd are those that who believe the federal bills can be paid by bring in less revenue than expenditures, while others are the people you mention. The hard truth that this nation has to face is that we cannot buy, as a nation, what we cannot pay for. You see it for an individual. I see it for all the people hiding under the abstract called government. Isn't is horrifying that our government which is the people is reduced to the point where the well-off will steal from the poor just to be more well off? It reflects the true values of the nation and not the pretended values.
I don't think I was promoting free lunches anywhere, just questioning why you thought the projected SS deficits were fiction.

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Re: Fixing Social Security game
Old 01-27-2007, 05:56 AM   #94
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Re: Fixing Social Security game

Quote:
Originally Posted by Independent
Now I can see where you're coming from. I looked at the site. It seems that he is arguing that the various trustees reports keep re-projecting the date when the trust fund runs out to later and later dates. Almost as if they are intentionally being ultra-conservative. If so, then of course there is no long term problem with SS.

I did go out and get these numbers from various reports. Here are the report years and the "exhaustion" years. I've ommitted the "19" and "20"

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
46 43 41 36 36 29 30 29 29 32 34 37 38 41 42 42 41 40

Bruceweb looked at the middle of this sequence and came to his conclusion. I look at the longer sequence and see the the variations that are likely when you are making financial projections over this long time frame. This particular number is the most volatile of the various values they calculate, because it includes not only the SS factors but also the interest rate on the trust fund.
You are right about the volatility. In fact, in 2004, when the trustee report came in with 2042 number, the CBO estimate came in with 2052. I haven’t tracked it since then. I would speculate that the early projections were based on higher interest rates since the fund still held high yield securities from the early days. I have noticed a similar trend in my TIAA account interest rates as the securities I bought into in the early 80s have decreased in interest rate over the years. At this point my “legacy shares” are pretty well depleted and overridden by shares bought by compounding over the years. I don’t have the time but it would be interesting to compare both the assumed interest rates and the assumed productivity for the out-years in each of these reports. For example, in the 80s the interest rates may have consistently come in lower than projected one, two, three, etc. before. Perhaps even longevity increases were unpredictable until recently. Perhaps, also, last year’s move back from ’41 to ’40 reflected low interest rates of ’01-’03. Up to that point, for the most recent data, the move out seemed to come mainly from productivity values coming in above those used in the previous estimates. The problem is that the farther one moves out in the prediction, the more error in the projection. In fact, in 2003 the American Academy of Actuaries wrote this letter to the trustees warning them about error and the use of long-range, especially infinite, projections as serious talking points in politics with the public as opposed to in policy debates.
http://www.actuary.org/pdf/socialsec...tech_dec03.pdf

Quote:
It is also less important to me than, say, the difference between taxes and benefits in 2040. That is the real cash that we will need. I looked those number up in the 97 and 06 Trustees Reports. For the "Old Age, Survivors" fund only, the 97 report projects 2040 income and costs as 11.32% and 15.42% of covered payroll.
The 06 report projects 2040 income and costs as 11.40% and 15.22% of covered payroll. Note how far apart these two reports are on the exhaustion date and how close they are on the cash flows. (adding in DI doesn't change the story).
When the boomers were given the payroll increases in the 80s, they were coming out of their early career days of double-digit inflations, double-digit mortgages and car loan rates and an energy supply crisis, especially early boomers. Additionally, they competed in a workforce that was swamped with competition for jobs (so many more of them). Yet, I do not recall that they opted to reduce numbers by allowing the Vietnam War to help their demographics or to improve their personal economic situation by threatening the elderly of the nation. The problem is focused on SS, the least of the problems in this 40-year debt question. Let's do a "what if". What if, in the 80s, that extra payroll tax was placed in private accounts in the same pay-it-back and take an annuity model proposed by the president. Do you think the boomers would hold less or more US securities than the SS fund holds today? The G-fund of the TSP (proposed model) is a fund just like the SS fund and the F fund is a bond fund with US security holdings. Now consider the hype on big market returns and reallocation into bonds as one grows older. So, inevitably the boomers reallocate to large holdings of government securities that will be used as cash flow in retirement. Even if these holdings were less than SS, the cash flow problems from retirees to the general fund obligation would be the same - demographics. Now factor in the public debt build-up from the general fund. Do people fail to understand that, at payback time, the redemption comes from the same source – taxes? If the markets were bad, the total savings would be inadequate (requiring government welfare subsidies to lower income seniors) and if the market boomed for the most part, the savings would be great and the reallocations to securities as great or greater than the small amounts that have crept into the trust fund yearly through the surplus. Of course, we could pass a bill at the last minute, say in 2007, to bar or limit the boomers use of the G and F funds as a place to safely hide their money from volatility. Same difference and still, no molasses. So I see the only solutions to demographic arguments as being orderly, timed extermination of burdensome old people or preparation by raising taxes while the boomers still contribute significantly to the tax base. The spin that is being given to the young people is going to cause the boomers to be in retirement when the yet to join the workforce will be faced with the debt from WWII to gen-Y and beyond. At the rate we are going with deficit spending and free-lunch coming any day now promises, a buy-in to current policy of this government by pointing fingers between generations is exactly what our free lunch politicians want. They won't be around to clean up the mess. Every recent election (with the possible exception of the last - time will tell) has been won by promises of more government spending AND lower-taxes. Meanwhile, the individual’s private economy has taken a hit from a variety of sources. Note in the actuary letter the comment that projections don't see depressions and wars.

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Well, you can try telling that to the younger set. You might even be right. But if it ever comes to the point where they have to pay more taxes to keep the benefits up, I think they won't believe you.
The younger set diverts their attention from the federal deficit and Medicare at their own peril. I can't help those who simply will not listen. They are going along with the deficit spending and Medicare D while screaming about fund with the least looming future tax impact. Also, based on the 2004 and 2006 elections, the youngest voters are smarter than you give them credit for. Perhaps they will eventually topple the power base of the two major parties that have a grip on this nation. The slightly older younger people seem to be in a la la free lunch land. Nothing I can do about that.

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I think you're using too few words for me to follow your idea. What are you trying to conclude here?
I guess that all I was trying to say is that a year-by-year ratio of debt to GDP does not show the interest accrued over the years by the bonds sold to fund the yearly deficit. Look at the debt value rise and ask your self what it would look like if the GDP were to fall under 2.0 for an extended period of time like the trustee reports predict. (This only says that if GPD is 4.0 this year and 2.0 next year and beyond, what does this ratio look like?) The impact of these low GDP future values would be devastating to future generations and social security would be a mute point. No one could redeem the debt without massive devaluation of the dollar. That is what I am worried about, not the social security fund (which the country won’t be able to pay back anyway if this happened). Again this is just musing the data on my part. Although I disagree with much that Bruce Webb says, I agree on one thing: The pictures that politicians give about deficits and debt projections usually obscure the impact of interest on the debt. But be aware that I am not trying to diss the trust fund debt but rather trying to get people to look at all sources of debt that we are accruing. This is the slight-of-hand that I see. It is not one source of “looming” debt that is the problem. If one source, the one that currently is in surplus, is so much a problem, then all sources make for a worse problem. Also, if free lunch solutions are so good, the future worker can just reduce taxes to pay for social security.

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I'll agree that there is a lot of yelling and very little discussion. One side says SS is a corrupt Ponzi scheme, the other says that any suggested change will impoverish millions of grandparents.
I hope my "what if" above has served to equate the Ponzi scheme argument to all of the investment world. What is the stock market but a Ponzi. The market goes nuts whenever a company does not bring in higher profits this quarter than the previous quarter. They are not satisfied with just good profits. With Ponzi schemes, the bottom guy gets nothing. For the social security program, there are no projections that give anyone less than, if memory serves me right, 79% of promised benefits. Additionally, the 79%, when compared by inflation rather than wages, is greater than the benefits given out today. (I added this, not for any justification value, but for comparison value. I do not favor going to inflation indexing.)

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I'm sure that I can't "Make them" do anything. I can vote and discuss.
I think this is your "simple, fair, and rational" solution, but I don't understand what you mean here. Which taxes, on whom, and what will you do with the money?
We are a long way from my original post, which was another musing. I simply said that, if we buy into a 75-year (or infinite) projection that is only 4% of GDP at the end of 75 years, then why don't we retire those parts of the future debt that will add into that debt that we can control; namely the general fund deficits? Since all debt is a loan, let's figure out how much debt is added by each year of deficit spending. To the extent that this money has been borrowed by investors through inadequate tax collection, lets call the loan, let them keep the excess money gained by their investments on the borrowed money and have them pay back the principal plus bond rate interest to the government. The money will be collected over as many years and used to move the trust fund (as well as new payroll surpluses) out of the government securities, which leaves the taxpayer paying for all operations of the government. I don't even know how to compute my lifetime share of the debt built since the social security surpluses began to loan money to the government. You see, when we operate in deficit, there is a regressive benefit to all the public (the more income, the better one fares from deficit spending because only income taxes and not payroll taxes are reduced). Then, when we reduce benefits, even though the money owed is sufficient to cover those benefits, we hurt the workers. It is a permanent transfer of regressive payroll tax to cover lower taxes for those whose earnings are above the cap and who, coincidently are less dependent on social security in their old age. People like to spin that it is all the same money but, thankfully, that is the one spin that no one with an ounce of intelligence buys. That would only be true if payroll taxes were un-capped. As it is, if the trust fund is defaulted, it is outright theft of the workers savings. Note that many people have a greedy conscious that is currently attacking the loaners of the money and not the beneficiaries of that loan. The workers are under threats and attacks. This is the result of the spin that you are talking about. Again, I am not dissing the social security debt; I am saying that it is a debt and challenging those that want to think otherwise to simply collect it from those that actually borrowed the money in the first place. It is one of my more cynical musings based, in part, on another less cynical musing - the 85 year old woman in failing health will be there whether we want to factor her in or not. I think people want to ignore that simple fact in all of their spinning.

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I don't think I was promoting free lunches anywhere, just questioning why you thought the projected SS deficits were fiction.
I never said they were a "fiction". Indeed, depending on how you spin the 14th Amendment, Section 4, the trust fund may the only part of the Social Security system outside of government control. The point is amusing but, insofar as I can see, applying the Amendment and having it hold with respect to the trust fund would neither help or hurt the retired boomers. But I did say many things including a few comments on projections, a few comments on borrowed money, a few what ifs, and a few comments on letting the large populations get into retirement before turning attention to the total problem. By the way, if out-performance of the low-cost model were to continue, the trust fund d-day would never happen nor would the dire consequences. (The crap-shoot; we might be solving a non-problem in the sole case of social security debt.)

In short, I think talking points are politics and always exaggerated on all sides. That is why the people need to take back their government and run it correctly, not from the extremes of ideologies; the people need to run a responsible budget and find out a "truth" about the entitlements that we can all trust and buy into and, if there is a problem, can agree and fix it. I don't buy into a "truth" which claims that the government owes me my 401k government securities but does not owe the bloke, who, without a 401k, bought government securities with the same color money through Social Security his. I hope it sounds offensive to everyone when put that bluntly. I wish everyone could mentally track the cash flow; I think you need to be able to do it to really understand what I am saying and why I am challenging everyone to get the money back from the receivers of the loan and not take the money from future workers or the guy that provided the money for these loans.
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Re: Fixing Social Security game
Old 01-27-2007, 11:58 AM   #95
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Re: Fixing Social Security game

Tadpole,

I’m not sure where to go from here. Reading your post, I agree with much of it. For example, you reference the actuaries’ letter dismissing infinite projections. I think the actuaries are correct.

But I don’t know why you posted it. I don’t know if you thought I had said something favorable about infinite projections in an earlier post (I hadn’t), or if you thought it was relevant in some way to my other statements (I don’t see how it’s relevant), or if you just wanted to post it for some other purpose.

Maybe it would help if I repeated my opinions concisely.
I disagree with two things that Bruceweb seems to be saying:
(1) The numbers in the Trustees reports jump around so much that they aren’t of much use (in particular, maybe SS will never have a serious financial problem).
(2) The best thing for Congress to do about SS today is nothing.

I think that:
(1) The most important numbers are reliable enough to be taken seriously. I gave you an example of the projected taxes and benefits in 2040. The 97 estimate had taxes paying for 73% of benefits, the 06 estimate had 75%. Either of those numbers is low enough to indicate a problem.
(2) Congress should develop a long term plan to cover this future shortfall. For example, I think they were acting responsibly in the 80’s when they raised the normal retirement age for future retirees. Now, people who were born in 1960 should understand that their “full” SS benefits won’t be available until age 67. I think it’s irresponsible to just assume that there’s no problem because the “Trust Fund” will cover all the shortfall. I’m convinced that turning the Trust Fund into cash will be a big political battle, and it’s better to fight the battle today.

I asked what you would do. I think you responded that you’d like to see Congress:
1) Raise income taxes today. Make them high enough that we not only cover all of today’s General Fund spending, but also can pay down some of the General Fund debt that is currently held “by the public” (that is, not by SS). i.e. the General Fund should run a surplus and pay off publicly held bonds.
2) Plan to continue these taxes and surpluses into the future. However, note that eventually the GF will not be retiring “public” debt. Instead, it will be paying off its debt to the SS Trust Fund. This assures us that the Trust Fund will be taken seriously.

Maybe I completely missed your point, but that’s the best I could do.

Frankly, if my congressman voted for a bill like this, I’d be much more likely to vote for his re-election. I think your proposal is a good way to make sure that the Trust Fund really is taken seriously, and that we can afford to repay it.

But, I don’t think this is the “best” plan. It's not enough. Since I think the “intermediate” projections are more likely than the “low cost” projections. Sooner or later the Trust Fund is exhausted. At that point we walk off the cliff and I don't like cliffs. So Congress also needs to look at the other tax and benefit changes (some of which are in the SS Game, which started this thread) and pick enough to cover the rest of the cash shortfall. I have my own preferences there, but that’s a tangent I don’t want to start.

Now, I think you'll agree with a lot of the above, but probably not all. Is there anything here that really bothers you?
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Re: Fixing Social Security game
Old 01-27-2007, 01:25 PM   #96
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Re: Fixing Social Security game

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Originally Posted by Independent
I asked what you would do. I think you responded that you’d like to see Congress:
1) Raise income taxes today. Make them high enough that we not only cover all of today’s General Fund spending, but also can pay down some of the General Fund debt that is currently held “by the public” (that is, not by SS). i.e. the General Fund should run a surplus and pay off publicly held bonds.
2) Plan to continue these taxes and surpluses into the future. However, note that eventually the GF will not be retiring “public” debt. Instead, it will be paying off its debt to the SS Trust Fund. This assures us that the Trust Fund will be taken seriously.

Maybe I completely missed your point, but that’s the best I could do.
You did miss my point. I have said over and over that we should start now to move the entire trust fund out of the hands of the politicians and other people it does not belong to by moving the fund itself to other than federal securities.

I used to want to retire the general fund debt as a solution. I realized that Clinton tried that. It only took one President to come in after Clinton and try to make the general fund deficit so large that no President in the future could reduce it again. The concept of reducing the debt to ease the burden of redeeming the Social Security securities was ruining some people’s plans of destroy the New Deal entitlement systems. I call Clinton’s plan of paying down the deficit to solve the problem, “Clinton’s failed plan”. That is why I favor moving the worker’s money out of their hands. I want the continuing habit of deficit spending to stop but that is independent of the social security system, which is not part of the income tax system. I think that when the deficit and debt are not obscured by entitlement monies, people will see the truth about the cost of being the “richest and most powerful nation in the world” and start thinking about what we can really afford to do and what we really want to spend money on and what we can’t. And yes, I think we all know from Orzag's (sp?) testimony yesterday that the tax cuts must be allowed to expire on schedule and if the social security surplus were taken away from those CBO estimates either taxes or spending would have to give one way or the other. So I oppose raising income taxes for saving social security (see below or my previous posts about a special tax) but I am in favor of raising income taxes to cover spending on government operations of the general fund.

I think I'll cry uncle on the rest of your questions as this is taking a lot of time and I seem to be repeating myself at this point. You see, my musing don't and won't matter in the scheme of things to come.

This paragraph is repetitious and irrelevant to my answer to your question. I oppose personal names on payroll tax funds since that removes the progressive part of social security and steals from those that already have large investment in the current system. No, I would not raise the income tax, per se. But would create a special social security redemption tax in proportion to the benefit gained in the past by individuals when their tax burden was offset through borrowing the surpluses in the first place. This would all new entrants into the workforce harmless for the debt. So if you have been in the workforce for 1 year and I have been in the workforce 10 years at a constant inflation adjust salary equal to yours then I would owe more than you would (you would owe so little, I might not be able to tax you. It depends on salary.) I am mainly targeting people who have for years enjoyed lower taxes because of the borrowing and who have incomes above the cap and those who borrowed the money but didn’t pay into the social security fund. No one would be disputing that it is a reserve for shortfalls in the pay-go portion of the social security system. That is what the trust fund was meant be – a reserve. It wasn’t mean to be an excuse for tax breaks to wealthy people. I certainly would not raise the payroll tax to make it any larger in the off-chance that a 75 year projection might that has the country at a GDP lower than 2.0 might be right. As I have said, if the future is as bleak as the numbers currently used in the estimate, people will be grateful to get anything. Neither the government nor domestic investment will be very wealth making if the country isn’t productive. Note that if the trust fund is not a government investment, no one’s children and grandchildren are burdened by its redemption. We always assume that the market does better than government securities so the trust fund never goes to zero (3 to 5 percent extra interest) and there is dip to 73%. The lower income worker is not put at risk since the system can remain progressive payout from a single pot. There are no “transaction costs” in this unless you want to call my “call in the loan” a transaction cost. To me the people who benefited from the “unified budget” have nothing to complain about because they keep the difference in the potential investment value of that tax dollar and the cost of the loan. If they spent it instead of investing it – tough. It belonged to some else. As I have intimated before, I am only musing with this. I am combining all of the talking points into a single bundle that solves all the screaming except one. I won’t solve the problem of the guy who earns a bundle but wants to leave the low wageworker in a freezing apartment without food. That is what personal accounts might do in a down market. My husband said I should also mention the disability aspect but I don’t want to because that is a horse with a set of new diversionary talking point lies.
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Re: Fixing Social Security game
Old 01-27-2007, 01:27 PM   #97
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Re: Fixing Social Security game

Holy crap, and I thought *I* wrote long posts...
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Re: Fixing Social Security game
Old 01-27-2007, 01:28 PM   #98
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Re: Fixing Social Security game

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Holy crap, and I thought *I* wrote long posts...
Chuckle. I'm done (worn out).
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Re: Fixing Social Security game
Old 01-29-2007, 10:12 AM   #99
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Re: Fixing Social Security game

Tadpole,

I'm worn out, too. For one thing, I went back and re-read all your prior posts. I think I can see stuff in them that's consistent with this post. I'll make one more (hopefully last) attempt at re-phrasing your opinion on the tax question. Recall it was "Which tax? Who pays? What happens to the money?"

1) A new "social security redemption tax", in proportion to the benefit gained in the past by individuals when their [FIT] tax burden was offset through borrowing the surpluses in the first place.
2) Only individuals who had high incomes in the past 20 years (because low and middle income people didn't gain by past borrowing). "Income" includes both wages and investment income.
3) Use the cash to redeem bonds issued to the SS system (not to the public, as I had assumed). Then SS uses the cash to buy private securities.

Did I get it right this time? If so, I don't disagree with you. If a bunch of congresspeople can come up with a formula for estimating the past "benefit", then I'd like to see them sponsor legislation like this. I think the debate would be good because it would bring out real issues with the Trust Fund. And, (depending on some details) a law like this would also be good.

I don't think we've ever disagreed much on the issues regarding the Trust Fund.

I've taken issue with the notion that the Trustees Reports aren't reliable. I addressed the volatility issue in my last post.

I noticed that you've mentioned this "2% growth in GDP" a number of times. So I copied the Trustees report comments below (Section V. B. 6). It looks to me like they say the past growth was about 3.2%. In the future, the number of workers won't grow as fast as it has in the past, so the GDP won't grow as fast. Seems pretty plausible to me. Note that they aren't suggesting it drops off a cliff next year.

" The real growth rate in gross domestic product (GDP) equals the combined growth rates for total employment, productivity, and average hours worked. … For the 40-year period from 1964 to 2004, the average growth rate in real GDP was 3.2 percent, combining the approximate growth rates of 1.7, 1.8, and -0.2 percent for its components-total employment, productivity, and average hours worked, respectively."

"For the intermediate assumptions, the average annual growth in real GDP is projected to be 2.6 percent from 2005 to 2015, a slower rate than the 3.2 percent average observed over the historical 40-year period from 1964 to 2004. This slowdown is primarily due to slower projected growth in total employment."

"After 2015 … the projected rate of growth for real GDP falls toward the assumed productivity growth rate because of the projected decline in labor force growth over the period. By 2080, the growth in real GDP slows to about 1.9 percent, due to the assumed ultimate percent changes of about 0.3, 1.7, and 0.0 for total employment, productivity, and average hours worked, respectively."

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Re: Fixing Social Security game
Old 01-29-2007, 10:20 AM   #100
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Re: Fixing Social Security game

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Chuckle. I'm done (worn out).
It can be an inviting catharsis.

While I have several friends that you can engage in the sort of discussions we have here, the depth and breadth of people you find here is tough to come by.

Ornery, difficult and opinionated as hell, but interesting.
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