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On the Fall of the PU
I followed what Biden and Ryan had to say about Social Security in their debate. My take on their words:
Ryan said four times that his plan was to restructure Social Security. He said his plan would not involve a sacrifice for anyone who is now 55 or older. Ryan has created a new “Red Line”. If you’re 54 or younger, you are below the red line; bend over. If you are above Ryan’s artificial red line, you get a free ride.
This is an extremely unfair plan. I can’t imagine how it could be implemented without ripping the country apart.
Ryan was referring to a version of the Simpson-Bowles plan for Social Security. A combination of increased taxes, coupled with increased retirement age and lower monthly benefits. There would be delay in implementing these changes, so that those who are now near retirement age would not be hurt.
I give Ryan a B+ for honesty. America’s politicians have to fess up to the fact that Social Security (SS) must make significant changes to remain solvent. Higher taxes and lower benefits are necessary if SS is to last another twenty-years. There is no way around that fact. Any politician, who says otherwise, is just lying.
But I give Ryan a D- for fairness. The idea that everyone today aged 54 or younger gets screwed, while those a few days older get off Scott-free is insane to me.
America’s problem is the Baby Boomers. Every day there are 10,000 new beneficiaries who are hitting up SS for a monthly check. At that rate, over 40 million Boomers will be getting their full monthly checks by the time Ryan’s “Red Line” comes into effect. After the first SS check is written, the future payouts can’t be reduced. So the Ryan plan creates a carve-out that protects a huge chunk of the Boomers. It does it at the expense of everyone who is today under 55.
That’s the plan? Protect the age group that is causing the problem? At the expense of the next few generations? None of the 40 odd million Boomers will suffer at all? None of them? Where’s the fairness in that plan?
What Ryan promised for SS is just a political lie. The fact is that all of the folks who are today 55+ probably liked what they heard Ryan saying. And that is a very big block of voters.
The Boomers are the problem. They have to be part of the solution. Any plan that gives the Boomer age cohort a free ride at the expense of the rest of the population is a recipe for disaster. The risk is Age Warfare.
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Everyone says that Biden is the “smart” debater. Maybe so. His comments on SS were carefully crafted. But if you look through his words, he was just playing politics.
Joe went straight to a liberal hot spot on SS. He flat out promised that an Obama/Biden ticket would never, ever privatize SS. This was a very smart move on Joe’s part. It plays to one of the great fears that the lovers of SS have; that one-day, the Republicans will let the evil guys on Wall Street get their hands on the SS Trust Fund.
Ryan rebutted that privatization should be considered for younger workers, but Biden blew him away with one of his now famous chuckles. Biden knew that he had scored points, as he knew that even the mention of the word “privatization” would get a few hundred thousand folks to the voting booth.
On this exchange I would give Biden a B+ and Ryan a D-. Ryan is wrong on privatization, he should have known better.
Ten years ago SS was running $100+Bn annual cash surpluses. If there ever was a time to consider a partial privatization, that was it. A portion of the surpluses could have been allocated to other investments back then. But not any longer.
SS is running annual deficits now. They are in the -$50Bn range for 2012, but the red ink will grow rapidly north of $100Bn in just a few years. If any portion of SS’s current cash flow were diverted to other investments, it would mean that there would be a larger drain on the Trust Fund surplus. The fact is, privatization is no longer a policy option. So Ryan was selling sound bites of a policy that has no chance of seeing the light of day.
Outside of the attack on the privatization of SS, Biden said nothing about SS that was worth noting. As a debate move, this was brilliant. If you say nothing, have no position and avoid critical issues, you win debates.
Here’s the facts Joe Boy:
Before 2016 the SS Disability Fund will run dry. They next administration has to confront this reality. A fix is required in less than 36 months. There is a gun to your head for action Joe. You have two choices. Raise taxes or cut DI benefits. Which one is it? You can’t hide under a rock for another four years, so what are you going to do?
The retirement side of SS will run off the cliff in 20 years according to the CBO. But that estimate is off the mark. It is not possible to run the SS Trust Fund to zero; a minimum of one-year’s worth benefits has to be retained as a minimum reserve. Over the next decade there will be at least one recession, when that happens the SS death spiral will be advanced by five or so years (as it was from the 08 blowout). The reality is that the SS drop dead date is closer to ten-years away from today. You can pretend this does not exist, but that makes you a liar.
Ryan has a bad plan, Biden has no plan at all. As it turns out, Ryan’s plan of “55 and under get clobbered” is about right. That is exactly the way this is going to play out. Either there is legislation that screws everyone 55 or under, “the Ryan Plan”, or there is the Biden “Do Nothing Plan”, and in about ten-years SS falls off a cliff. Either way, the same folks get screwed.
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I think America needs a new political party. I would call it the Purple Unders Party (PUP). Purple, because it is the color when Blue and Red are mixed equally. Unders, for that group of people who are 55 and under.
The funny thing is that the PUs are out there. They will be voting for either a Red or a Blue. One fringe or the other will win, the PUs will all lose. Those PUs make up most of the population, and well more than half of the votes.
What a stupid system.
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After the first SS check is written, the future payouts can’t be reduced.
Well Bruce, here you are putting all the pieces right in front of us, but carefully avoid to draw the logical consequence: We need substantial inflation which mysteriously doesn't show up in COLA, as the only applicable solution! Or do you have a better approach?
let the evil guys on Wall Street get their hands on the SS Trust Fund
Here Bruce you seem to repeat a carefully crafted point once more that doesn't hold water. The SS Trust Fund is mostly "invested" in non-marketable Treasury securities. Which means they cannot be redeemed in the free market. Which by extension means there is no free market price for them, so the government can assign any value it wants to them - unsurprisingly always 100% par.
And now if those SS Trust Fund "investments" were to be handled by anyone else (for example evil Wall Streeters), then they would get the blame when they need arises to mark the values down - how convenient for the government to deflect all the blame! And you Bruce tow that line here as well, very disingenuous.
Matter of fact is the "value" of those non-marketable Treasury securities already needs to be written down by at least 30% right now, and getting worse by the month. That's the biggest elephant that even you are avoindin to mention.
Those "non-marketable Treasury securities" (and the marketable ones as well) are being written down continuously. The ones created over five years ago are already worth at least 30% less than they were when they were created even with their accrued interest.
Every dollar that is created by the Fed and its bankster buddies makes those Treasuries worth less.
If that were true to that level, then we would have no problem as the retirement liabilities would have been written down by the same factor (COLA-adjustments were miniscule over the past 5 years).
400 individuals in the United States have more wealth than one half of the entire population. SS is broke because our entire economic system is designed to funnel money up the ladder. Over the last 40 years the very wealthy have become wealthier, while the middle class has shrunk. By design. Trickle down wasn't vodoo economics -- it was a brilliant if diabolical plan to increase wealth of the few by duping the sheep into replacing income with debt. And the Bush tax cuts were never intended to improve the economy by spurring job growth or whatever other false excuse was given. They were simply a way to increase the wealth at the top. Only fools ever believed otherwise. SS is broke because it has been underfunded on purpose, while otherwise intelligent authors like Bruce Krasting suggest that there is literally nothing that can done about it. That is the elephant in the room that no one wants to mention.
On the margin, Ryan does deserve a B+ for honesty. afterall, the largest voting block are the Boomers.
(Legitimately, these are the boomers as they are the ones who have been getting f'ed by the Fed and Bernake since 2001 and need some indication of hope. Not the illegal or nuevo immigrant Mexicans who don't need ID to vote but I do board a plane or the blacks with their iBamaPhones 5.0).
Ryan is saying that the system is not sustainable. its not. Bruce can do all the math in the world with this red paintbrush and Corel drawings but its not going to work.
ZH readers will note that most of the populace is broke and mired in an assortment of debt.
They will be contained in the can that will be kicked down the road to be courted by Hillary in 2016 or 2020.
It's all gamesmanship.
and who runs the program again?
War on Poverty
War on drugs
War on terror
All failures, see a pattern there? Didn't think so, go back to sleep.
The pattern I see is "starve the beast." "Starving the beast" is a political strategy employed by American conservatives in order to limit government spending[1][2][3]by cutting taxes in order to deprive the government of revenue in a deliberate effort to force the federal government to reduce spending. The short and medium term effect of the strategy has increased United States public debt rather than reduced spending.
The term "the beast" in this context refers to the American government and the programs it funds, particularly social programs[4] such as welfare, Social Security, and Medicare[3]; and does not usually refer to spending on military, law enforcement or prisons."
We can all thank Grover Norquist who -- if he could -- would travel back in time and kill FDR before he could ever implement the New Deal. Since he can't do that, he came up with the no tax pledge that most Republicans have signed onto. The running up of the deficit is intentional and it is part of the plan. We are watching the successful dismantling of all social programs in this country because the programs have been delibertely defunded in favor of lower taxes on the wealthy. Period. You can agree or disagree with the merits of doing this, but that is just a fact.
Two problems:
1)SS and all entitlements are a ponzi scheme. Only the first "investors" ever get to collect. In this case those currently over maybe 60 or so.
2)The problem with socialism is that pretty soon you run out of other people's money.
Only those lacking real skills and abilities (like you) favor statist solutions like SS, medicare and medicaid.
If you want to see the future of all social welfare states just look to Greece, Spain and Italy. I can't wait to see the collapse of all of all of FDRs and LBJs ponzi schemes. But first we'll get to observe that effect in Greece (in a month or so) Then you'll discover just what your "skills" are worth in a truly free market. Not much I'm guessing from your statist comments.
since the fed is buying 100% of the treasury issue, i think we can say that we have 'run out of other peoples money'. i doubt that even the over 60 group will be paid much longer....
Plus 100. Steal from the poor & give to the rich.
Not one of Bruce's better pieces of work.
First and foremost, Social Security is NOT an entitlelment program. My soon to arrive first SS check is not a federal benefit. It is a return on my investment that I started making when I was in Junior high school, over 50 years ago. Every dime of wages for most of those years had a portion witheld, and my employer paid an equal percentage. I am very aware of this second part, since I have also been an employer for over 30 of those years. Today's percentage is 7.5% for both parties, or a total of 15% of wages.
If you averaged 30K/yr over your working life, you will have invested $180,000. Averaging $375/month investment over 40 years compounded monthly at just 1% gives me a personal investment of $1.3 million.
Today's average SS check is $1230/mo. If I had that $1.3 mil, and took it down at the rate of 3%/yr, the monthly check would be $3277....and it would last for 33 years. If I died early, I could pass it on to my heirs.
I am not in favor of eliminating SS, or of turning it over the vipers on Wall St. Maybe my return would have been 1%, or 5%, or minus 50%. There needs to be a guaranteed program, but don't tell me that something I bought and paid for does not belong to me. It is not a fucking benefit or entitlement. It is ROI. It is an Earned Retirement Program.
If the wealthy need to be taxed at a higher rate, so what? They are the ones who have benfited the most from all the money the government robbed from the SS Trust Fund over the years. They are the ones who the laws are written to benefit. Their investment in lobbyists, political partys, and politicians have paid off handsomely for them.
Anyone who looks at this knows that simply increasing the amount where SS deductions stop (currently $110K), immediately changes the equation in a very positive way.
Or, we could, as I thought I heard Congressman Rayn suggest Thursday night, implement means testing.
I assure you, it will get fixed. All you under 55's can relax. I don't care how much you do or don't like it, society has a responsibility to the greater good, and when voters get to decide, eventually the chickens will come home to roost in the nest of the wealthy. Wait & see.
...First and foremost, Social Security is NOT an entitlelment program. My soon to arrive first SS check is not a federal benefit. It is a return on my investment that I started making...
Chum, ask yourself this question - when SS first started paying out, had those early recipients been paying 'into' the scheme all their lives?
No? Then SS must have been a transfer scheme, not a savings scheme.
There's a reason people here (and elsewhere) have labelled it a ponzi.
Sorry FDR lied to you. If it makes you feel any better he lied about practically everything else, too.
re: 11b40
So "rich" folks who maxed out their SS "contributions" apparently can not take your position of "don't tell me that something I bought and paid for does not belong to me."
Turning SS into welfare for the elderly (aka means testing) will just continue the 50 year torturing of SS laws.
It was Paul Ryan who brought up means testing in the debate Thursday night. The words were not said out lound, but the description was there.
The principal is simple. Call it what you like, but the SS contributions from wages have been increased along the way to accomodate the need for additional revenue. Witholdings will be increased again to continue the program. There may, or may not, be means testing in the future. Dollars will almost certainly be worth less, but that has not much to do with SS. Regardless, SS will continue. Just wait & see.
You think taxes are an "INVESTMENT"? What?
Dream on. Enjoy your check while you can. They will inflate it away to nothing. You 'invested" in a ponzi scheme that cannot possibly pay out what was promised.
At least wake up and smell the roses. They lied to you. Just like they lied about free health care for life if you did 20 years in the Army. Latest news is they are going to base retired military health care payments on rank, the more you get the more you pay. Progressive enough for you, 11B40?
Snap out of the coma.
It would be kinda funny watching "progressives" spin their web of bullshit...if it weren't so damned serious.
They will come before us and say SS is an "ïnvestment" in one breath, then turn and scream that we are not being taxed enough to make any kind of return on "the ïnvestment" with their next breath. It requires one to leave the bounds of reality behind and accept the proposition that black is white and white is black...in other words "progressive" grey.
As I often do when the topic of SS comes up I point to the architects own words for guidance & historical perspective...
"But they are guilty of more than deceit. When they imply that the reserves thus created against both these policies will be stolen by some future Congress, diverted to some wholly foreign purpose, they attack the integrity and honor of American Government itself. Those who suggest that, are already aliens to the spirit of American democracy. Let them emigrate and try their lot under some foreign flag in which they have more confidence."-Franklin Delano Roosevelt, Madison Square Gardens Speech Oct 31 1936.
http://millercenter.org/president/speeches/detail/3307
Well now Mr.FDR..."they" were right afterall weren't they?
It has indeed been stolen by some future Congress hasn't it? There are no reserves are there? There is no Trust Fund. There is just a steaming pile of non-marketable IOU's replacing those reserves dependent on an insolvent governments ability to issue even more debt to make good on those IOU's.
It's funny.. the more I read about the 'heroic' FDR, the more I realise what a complete and utter shit he was.
I was going to comment on the tone of his speech...the pure, unbridaled demagoguery of it...but was trying to stay on topic.
You did note his acknowlegment of Governor Lehman...yes, of those Lehmans ;-)
It's not hard to see why he was an admirer of Mussolini, and fascism generally.
It is a fascinating period of time to look at in its totality...1850-1950. Here we had all the elements that crop up in our modern times today.
Immigration to our shores of diverse cultures & beliefs who may or may not have Americas best interest at heart...government education (from Prussia)...states rights and greenbacks (Civil War)...popular election of senators (misguided populism)...creation of the Federal Reserve...government-corporate alliance (fascism)...Marx...communism...eugenics (Harvard & Yale academics actually promoted this quackery just like Hitler & Mayor Bloomberg did and do today)...it was a helluva period we're still trying to deal with.
And I used to think history was boring
Dead on. I find it especially irritating that most people do not realize that the money we've paid into the SS program has gone to the same wealthy who now tell us we need to tighen our belts because the money has "vaporized" and we can no longer afford the program. When I talk about funding SS, I am merely advocating that what is ours be taken back from those who stole it, directly or simply by lobbying for a federal tax and spending system that would benefit them and defund SS.
if you worry about getting you're ss check then you have not been reading carefully. you will get your ss check with cola no problem. they have unlimted dollars and no the debt does not have to and will never be paid back if you were worrying about that as well.
they will gladly send you your 5¢ dollars but what will they have to back it up. sleep well you will get your dollars
While I completely agree with this discussion I am suspicious that, having come so far, the right will find a way to destroy the system you've come to depend on. That you've come to depend on it because you invested your hard-earned wages is no obstacle. The truth is, sadly, that those numbers are all theoretical. The treasury has been looted. Only through inflation will this nation be able to pay its bills and the belt tightening will not come from the military industrial congressional complex - gots gold makes rules and all that.
I fear those 40 million Baby Boomers will be very surprised if they believe in their hearts that SS will be there for them.
Something else will happen.
I want to vote you up and down at the same time.
" the right will find a way to destroy the system you've come to depend on" vs. "The treasury has been looted." Since the Left has owned the Senate for the last six years and the White House for four, how did this happen?
"That you've come to depend on it because you invested your hard-earned wages is no obstacle." If he was rich, he wouldn't care about SS - don't think Bill Gates is too worried about SS. And again, there is no "investment" involved in SS - see my comment way down below on this same subject (#2885466).
"I fear those 40 million Baby Boomers will be very surprised if they believe in their hearts that SS will be there for them." It won't be there for very long, Boomer or not - if the Treasury is indeed looted, where will the money to redeem those SS IOU securities come from?
"Something else will happen." Yes, I can think of a few possibilities:
1) ObamaCare suffocates the economy, tax receipts plunge, system failure and SS is un-funded.
2) The Euro collapses, takes the dollar with it, SS checks keep coming but bread costs $15 a loaf and milk $15 a gallon - seniors depending on SS starve, slowly.
3) Responsible officials are elected; they tell the truth, SS is slashed because there is nothing to support it, along with defense, welfare, you name it - you're on your own.
Well, maybe not #3, but you are right that something else WILL happen. Which Black Swan lands first is up for discussion.
Well #3 is quite posssible under the present two-party scheme, with the Divisions slashed being all but defence.
The weatlhy will have their private army (funded in part by you), whilst you will be fighting each other in the streets.
Seems to fit nicely with the Kissinger et al Globalist Depopulation meme doesn't it??
Why does Bruce keep proposing Koch brothers "solutions" to the SS funding difficulties? Inquiring minds need to know. If one were a tin-foil hatter, one could suspect that he worked for that group.
He worked for Citi and even infamous Mike Milken, and no doubt to some extent he's talking his book. He certainly is not going to suffer if he doesn't get his SS check when he retires. Having said that, I generally think he brings great insight to his topics of choice.
All the money wasted on crony capitalism for obummer's friends would have gone a long way in paying back the debt the government owes to Social Security. The same is true for the Banks they have no problem continuing to print money for those programs and we're talking Billions and Billions lost on the UAW, Solyndra, etc. This just goes to show that the Democratic Limosine Liberals like Bruce (who said he is a Dem) have no problems using Age Warfare even if it means throwing granny under the bus. Bruce is also either lying or ill informed the way Social Security is set up people will only get full benefits if the program has enough money when it doesn't by law since it can't tax or deficit spend the benefits will automatically be reduced. If not for liberals using it as a backdoor welfare program for illegals, people who aren't really disabled, etc. the program would also be much better off.
Don't be fooled Jackass Joe was for Ryan's plan before he was against it.
"As the Pulitzer Prize-winning former New York Times economics reporter David Cay Johnston has repeatedly explained, this is the primary demonstrable myth being used by the DC class (like Bruce ) – which largely does not need entitlements – to deceive ordinary Americans into believing that they must "sacrifice" the pittances on which they are now living"
Taxpayers still owed more than $200 billion from bailouts
The Solyndra scandal: Pre-empting plunder
General Motors Is Headed For Bankruptcy -- AgainToday’s Retirees First to Pay More Into Social Security Than They’ll Get Back
The unsustainable bubble is in healthcare i.e. Medicare, Medicaid, Obama-care or any health insurance plan. SS is a pimple compared to the healthcare bubble that is killing America. And with some simple free market reforms the problem could be ended, permanently. But it's a bubble that the economy needs.
So let's just keep the spotlight on SS income, right Bruce? Can't be giving money directly to the people and cutting out your cronies, can we?
Bruce i am missing your reports on the CHF/EUR monthly market. Beautiful how the SNB can do what ever they want to do, without any intervention possibilities on the CH political side. They are investing in Nokia, why not in greek stocks with a total greek market cap even, without CocaCola, of 20bn? What are the monthly sizes of EURO buying vs CHF?