Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Wednesday, February 16, 2011

Understanding Social Security

I understand it. Kevin Drum understands it.  Rethugs refuse to understand it.  How about you?


The weird thing about this is that Social Security isn't even hard to understand. Taxes go in, benefits go out. Unlike healthcare, which involves extremely difficult questions of technological advancement and the specter of rationing, Social Security is just arithmetic. The chart on the right tells you everything you need to know: Right now, Social Security costs about 4.5% of GDP. That's going to increase as the baby boomer generation retires, and then in 2030 it steadies out forever at around 6% of GDP.

That's it. That's the story. Our choices are equally simple. If, about ten years from now, we slowly increase payroll taxes by 1.5% of GDP, Social Security will be able to pay out its current promised benefits for the rest of the century. Conversely, if we keep payroll taxes where they are today, benefits will have to be cut to 75% of their promised level by around 2040 or so. And if we do something in the middle, then taxes will go up, say, 1% of GDP and benefits will drop to about 92% of their promised level. But one way or another, at some level between 75% and 100% of what we've promised, Social Security benefits will always be there.

Go to the link to see his chart.

Another possibility (my favorite) is to remove the payment cap.  Currently, SS Premiums are collected on the first $106,800 earned in salaries and wages.  Take off the cap.  Apply the pay-in rate to all earned income, and then to unearned income like interest, dividends and capital gains, if that's what it takes.

Part of the Rethug disinformation campaign is to make you believe that we are broke.  We are not broke.  We simply have a very skewed distribution of wealth in a very rich country, and a strong instinct among the greedy rich to skew it even further.  It's the middle class that is going broke.

Now that the Rethug party and the tea party are both wholly-owned subsidiaries of Koch industries, the goal is transparent.  The actual .extent of their avarice is not always apparent, though, and can be difficult to comprehend.  I've wondered for a long time if their goal was 12th Century style feudalism or more modern version as in a So. American style banana republic.  Either way, it's a stark have vs have not divide.

Thom Hatrmann says the Rethugs want to roll back the New Deal.  A caller suggested they want to go beyond F.D. Roosevelt to roll back the progressivism of Teddy Roosevelt.  I say they want to roll back the enlightenment and return the world to feudalism.

UPDATE:  Karl Smith weighs in, with  trichotillomania and associated emesis.


Steve Roth said...

Curiously enough, removing the income cap on SS taxes *exactly* balances the (projected) SS account far beyond the reasonably foreseeable future.

Now: how do we deal with the inexorable rise in what providers charge for health care?

Oh wait! That was Obama's job one. Hope it works. Otherwise, WASF.

Jazzbumpa said...

Steve -

Yeah - I read that somewhere recently.

So much of heath care spending is wasteful. This is a deep, deep problem with a lot of vested interests on the receiving end, and no simple solutions.