Really, Alan Simpson - social security was never supposed to be a retirement program?

[jillan]

It was designed only to help the ditch diggers? It was never meant to help the disabled or the children.

He told AARP they need to contributing.

oh - but don't touch foreign aide!

Is anybody else listening to this garbage on C-span?

[dkf]

1. Life expectancy wasn't that great back then. It wasn't meant to support so many.

[Hannah Bell]

2. bullshit.

[dkf]

5. Okay they picked 65 because it was manageable with modest levels of taxation according to actuarial

Tables.

"The studies showed that using age 65 produced a manageable system that could easily be made self-sustaining with only modest levels of payroll taxation"

What do we do when the actuarial tables have significantly changed making things unmanageable? My understanding is that actuarial tables the insurance industry uses changed big time over the last maybe 10 years

Modest meant 1% for employers and 1% for employees. After that it got bigger and bigger and will grow to the point where it probably cannot be called modest.

[Hannah Bell]

7. word soup. we've been paying more than needed to pay for current retirees

for 30 years.

i have no clue what you're babbling about, but nothing you're saying is factual, & none of it adds up to any coherent point except the 60-year-old winger point: "it's going to go broooooookkkkeeee!"

not true when they said it in 1935, not true now.

[BzaDem]

9. Just because we have been paying more than needed in the past does not mean that will continue in

the future. Most estimates indicate the trust fund will eventually run out, resulting in significantly reduced benefits at some point in a few decades. The cap eventually needs to be raised to bring in the same level of taxation it did in the past.

[Hannah Bell]

10. yes, if we stay in a recession for the next 75 years, i.e. if our economy continues to decline,

we'll only be able to pay out 75% of promised benefits starting about 25 years from now.

well, clearly something must be done *immediately*,

maybe we can double the amount of unnecessary money we're paying so that rich people can get more income tax cuts to feed the war pigs.

[BzaDem]

11. It isn't just if we stay in a recession for the next 75 years. It is if we grow at around 2%, which

despite being less than the average growth rate of the past, is a reasonable projection given demographic changes but assuming similar productivity growth as in the past. (There was a discussion on this some weeks ago.) It might even be too optimistic for other reasons, but one would actually have to assume significant above-historical-average productivity growth to get beyond around 2% (given demographic changes).

I never said anything had to be done or should be done immediately, and I specifically said we should raise taxes to deal with it.

[MannyGoldstein]

17. If the economy never gets better than in 2010 (God forbid!), SS will pay full benefits

as far as been projected (75 years).

http://fdrdemocrats.org/the-common-sense-guide-to-social-security/2/

The publicized projections are cooked. Obama has a fetish for gutting Social Security, it's just sick.

[BzaDem]

19. False. The question is whether the AVERAGE growth will be better than 2009, which is very unlikely

given the fact that 2009 was the first year out of a recession. (As has been pointed out to you in the past by many people, it is much easier to dig out of a hole to get back to potential than to grow beyond the hole and raise the potential. Using the first year out of a recession as any sort of baseline is ridiculous.)

More generally, your analysis is incorrect. The 2% projected growth rate is lower than the average over the past few decades (~3%) because the labor force will stop growing as fast, due to changing demographics -- not due to a projection of less productivity than in the past.

In other words, when you magically substitute in your favored growth rate, you are actually projecting a huge increase in productivity (balanced out by the shifting demographics). Yet you are assuming such a huge increase in productivity (relative to the average over the last few decades) without any substantiation or basis whatsoever, because there is none.

Your numbers have already been debunked in your last thread, so I'm not sure why you are still pushing this.

[MannyGoldstein]

24. False, my ass.

You're right that previous recoveries saw higher-than-average GDP growth as we dug out. But in 2010 (the year I meant to put), we weren't digging out. Real unemployment sat at more than 15%, didn't budge. It was not a dig out, it was a hover.

Secondly, the Trustees of Social Security have been projecting for decades that GDP growth was about to plummet to 2.1% or lower. They've always been wrong before. Always. Are you thinking that they're suddenly right this time? If so, why? The reality is that these projections were designed to be somewhat pessimistic so that we could see if Social Security was at near-term risk if things became pretty bad for an extended time. They weren't designed to be used as a tool to gut benefits if they showed a modest issue 25 years out.

Do you realize that Obama's "Deficit Commission" voted to cut earned benefits by 22%, or $56,000 in lifetime repayments for the average recipient? Maybe you can afford a $56k cut in your retirement insurance plan, but I (and most other Americans) cannot. And did you know that 10 of the 18 commissioners were on record, prior to being selected, as saying that Social Security earned benefits need to be slashed? And that Erskine Bowles, the other fabulous co-chair Obama picked along with Simpson, brokered a deal with Newt Gingrich to slash Social Security Benefits when he was Clinton's Chief of Staff (thank goodness Congress tole Gingrich, Bowles, and Clinton to go away that time)?

Obama has a fetish for gutting Social Security. It must be stopped.

[BzaDem]

26. I think you are missing the point: growth from within a hole is much easier than growth outside of a

hole. The recession was over. The fact that unemployment was "hovering" means the hole is even deeper, which means growth is even EASIER, which makes it even WORSE of a baseline to use. Looking at ANY single year would be silly, but looking at the years after a recession is especially silly. It is better to look at long run averages, which is exactly what the 2% growth figure does. It takes the long run average of producitivity growth, the continued trend of slower labor force growth due to demographic changes, and projects onward. The lower absolute growth rate stems from the known demographic shifts, not from assumptions about lower productivity growth in the future.

As for your "they were wrong before" quip, you used the same unresponsive rhetorical talking point last time you were called out on it, and it is no more persuasive now than it was then. They are projecting ~2% growth as an average of decades well into the future -- not next quarter's growth. To keep the same total growth rate as we have had over the last several decades (as you suggest), we would need ahistorical, unprecedented long term productivity growth at rates well above past averages. You magically assume such an outcome, without providing ANY substantiation for it. For such an incredible assumption, the burden is on YOU to justify it, rather than using the "two wrongs make a right" style logic you are using (ignoring the gaping hole in your argument and instead redirecting the conversation to something else).

I'm not sure why you are trying to steer the conversation to the deficit commission, other than to change the subject away from your flawed growth analysis. I never claimed I support cutting Social Security benefits, because I don't. The preferred remedy for the shortfall is a separate question from the size of the shortfall.

[MannyGoldstein]

27. You continue to evade the question: why are they right *this* time?

I gave my answer - the numbers have always been far lower than what came to pass because the numbers is intended to be pessimistic to test if we need to start taking action right away in case things do suddenly get bad for a sustained period. What's *your* answer?

I hold the rest of my remarks so you can focus on this one question.

[BzaDem]

29. I already explained why: they are using long term average productivity rates (rather than your

unprecedented and unrealistic rates). That's why they are far more likely to be right than you. A pessimistic take would assume a significant drop in productivity growth, not the same long run average.

However, your entire premise (that two wrongs make a right) is flawed in the first place. Have you considered the possibility that undershooting past projections makes it more likely to OVERSHOOT future projections (rather than undershoot)? Furthermore, have you even looked at what precisely what component of their analysis they supposedly "undershot" in the past? You certainly haven't described such here. All I have is your claim that they were wrong -- no sources that show

a) past projections for an average from years x-y that have already passed
b) the actual average from years x-y that have already passed
c) most importantly, if your source shows that a and b differed significantly for ranges x-y in the past, WHY they differed. Were they undershooting productivity? Incorrect demographic estimates? Something else entirely? Did they correct for whatever they purportedly got "wrong" in their new analysis? Might they have overcorrected for it, possibly making their new projections too optimistic?

[MannyGoldstein]

30. But they've never been right about long-term rates in the past

In the past, for decades, the Trustees have predicted most-likely long-term GDP growth of 2.1% or even lower. They have always been wrong.

For example, in 1994, they predicted 1.5%: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=931203&mesg_id=931329 Actual since then has been about 3%.

You can dive into the rest of the Trustee reports yourself, they're archived at ssa.gov.

[BzaDem]

36. They were projecting 1.5% over the average of many decades (not just the last decade).

Of course in an average, some years/decades will be higher and some will be lower. In this particular case, since you are looking at total growth rate (as opposed to the demographic components and productivity components of the growth rate), it makes much more sense that growth is going to be higher early in the average and lower later in the average, since demographic shifts are going one way. So while you claim they have always been "wrong," that couldn't be true at least for your data point, unless you have a time machine to decades into the future.

You keep acting as if it is abnormal or pessimistic (rather than normal and reasonable) to expect lower growth rates, because you aren't taking into account that the labor force will grow more slowly. They are holding productivity approximately constant -- the only thing they are changing is demographics (and even there they are extrapolating past trends for that). You then say they by doing this, it proved they were "wrong" about the growth rate, but they were making a 75 year projection (not a 10 year projection).

[Hannah Bell]

32. They assume nothing of the sort. I don't know where you get your information.

The long-term assumptions in the trustees' reports are all below trend.

Trustees Continue to Assume Slowing Immigration, Weak Productivity

May 1, 2006

By Dean Baker

The 2006 Social Security trustees report contained few major changes from the 2005 report. The most striking features are that the trustees (the secretaries of Treasury, Health and Human Services, and Labor, along with the Social Security Commissioner and two independent trustees) continue to assume that productivity growth will be much slower than most other forecasters project and that the pace of annual immigration will slow even as the baby boom cohort retires.

The trustees assume that economy-wide productivity growth will average 1.7 percent over the 75-year planning period. This is 0.1 percentage point higher than in the 2005 report, but they also assumed that the gap between the CPI and the GDP deflator will be 0.1 percentage point higher than in the 2005 report, so that the change in the productivity assumption had not impact on projected real wage growth, and therefore no effect on the long-term solvency of the program. By comparison, in their long-term projections, both the Congressional Budget Office and the Office of Management and Budget assume that productivity growth will average 2.1 percent.

http://www.cepr.net/index.php/social-security-bytes/trustees-continue-to-assume-slowing-immigration-weak-productivity/


The Social Security Trustees explain their long-run productivity growth assumptions. From pp. 82-83 of the 2005 Trustees' Report:

1. Productivity Assumptions
Total U.S. economy productivity is defined as the ratio of real gross domestic product (GDP) to hours worked by all workers. The rate of change in total productivity is a major determinant in the growth of average earnings. For the 40 years from 1963 to 2003, annual increases in total productivity averaged 1.8 percent, the result of average annual increases of 2.5, 1.1, 1.5, and 2.0 percent for the 10-year periods 1963-73, 1973-83, 1983-93, and 1993-2003, respectively.

However, productivity growth can vary substantially within economic cycles. Therefore, it is more useful to consider historical average growth rates for complete economic cycles. The annual increase in total productivity averaged 1.6 percent over the last four complete economic cycles (measured from peak to peak), covering the 34-year period from 1966 to 2000. The annual increase in total productivity averaged 2.2, 1.2, 1.3, and 1.6 percent over the business cycles 1966-73, 1973-78, 1978-89, 1989-2000, respectively. The ultimate annual increases in productivity are assumed to be 1.9, 1.6, and 1.3 percent for the low cost, intermediate, and high cost assumptions, respectively. These are the same as the ultimate rates assumed for the 2004 report.

One would think that the fact that productivity growth has averaged 3.0% per year in the four years since 2000 would be worth a mention. One would expect some reason for completely throwing away the last four years' worth of data on productivity.

But it isn't there.

What would happen if the Trustees' Report had forecast productivity growth of 1.8% per year? How different would the numbers be? My back-of-the-envelope is that it would knock a bit more than a quarter of a percentage point off the 75-year actuarial deficit--reduce it down to 1.5% from the 1.8% of taxable payroll in the Trustees' Report.

Small differences, yes. But we've had good productivity news in the past four years: the Trustees' Report should recognize it.

http://delong.typepad.com/sdj/2005/03/the_social_secu.html

[BzaDem]

35. Your own information says that productivity growth averaged 1.8% over the last several decades,

or 1.6% on average from peak to peak of the business cycle. The report projects 1.7%. Your report confirms exactly what I have been saying, confirms the actuarial deficit that I have been talking about but has been denied by others, and shows that the report is making reasonable assumptions (and that the assumptions of those who just arbitrarily and baselessly jack up growth are the assumptions that are unreasonable).

:shrug:

[Hannah Bell]

37. which is below trend. but that was what their assumptions were in 2004. they change in every report

but what you might question is that by dividing up the periods into subperiods, averaging within those periods, then averaging the subperiods, you can get different figures, depending on where you divide.

you noticed that, but you didn't question it.

and if you think anyone can predict economic growth over a 75-year or infinite window, well, i don't know what to say.

[BzaDem]

38. So your huge complaint is that they projected 1.7 instead of your preferred 1.8? Newsflash: either

one would cause a shortfall and a huge reduction in benefits in a few decades. 1.8 was not determined by dividing up into subperiods (that was 1.6) -- 1.8 is simply the long run average.

[Hannah Bell]

39. if you read more carefully, you will find that it is. from bls:

••Labor productivity is output, adjusted for price changes, divided by hours worked at all jobs. Productivity in the U.S. nonfarm business sector grew an average of 2.2 percent per year over the past 63 years, despite a prolonged slowdown from 1973 to 1995.

••Real hourly compensation is the hourly cost to businesses, adjusted for price changes, of wages, salaries, and benefits paid to workers. Real hourly compensation grew at an average annual rate of 1.7 percent over the 63-year period. Since the 1970s, real hourly compensation has grown more slowly than productivity.

There's a nice little chart on page 59.

http://www.bls.gov/opub/mlr/2011/01/art3full.pdf

The SS Trustees engage in a bit of massaging in every report. Which tells me that their projections are also massaged.

Basically what happens, or has been happening for more than 10 years, is that the trustees' assumptions usually come in so that the "low-cost" assumption more accurately predicts events than the "intermediate" assumption.

The intermediate assumption is massaged in order to show deficit.

[BzaDem]

40. Hint: The average of a set of numbers is EQUAL to the weighted average of subset averages.

For example, for the numbers 1, 2, 3, 4, 5, 6, the total average is 3.5. The average of each pair is 1.5, 3.5, and 5.5, whose average itself is 3.5. They are equal.

If you would like, you can actually prove it for any set of numbers divided into any set of subsets (weighted by the size of the subsets).

Or more specifically, if you divide a 40 year period into 4 10 year periods, taking the average of the average of the 4 10 year periods is always IDENTICAL to taking the average of all 40 years.

[Hannah Bell]

41. ...

However, productivity growth can vary substantially within economic cycles. Therefore, it is more useful to consider historical average growth rates for complete economic cycles. The annual increase in total productivity averaged 1.6 percent over the last four complete economic cycles (measured from peak to peak), covering the 34-year period from 1966 to 2000. The annual increase in total productivity averaged 2.2, 1.2, 1.3, and 1.6 percent over the business cycles 1966-73, 1973-78, 1978-89, 1989-2000, respectively. The ultimate annual increases in productivity are assumed to be 1.9, 1.6, and 1.3 percent for the low cost, intermediate, and high cost assumptions, respectively. These are the same as the ultimate rates assumed for the 2004 report.


This "1.6" (1.575) figure is gotten by averaging peak to peak for a 7 year period, a 5 year period, and two 11 year periods, adding the 4 averages & dividing by 4.

[BzaDem]

42. Yes, the 1.6 figure is not equal to the average, which is why I was referring to the 1.8 figure.

As I said, the 1.8 figure projected into the future would result in a shortfall in a few decades, resulting to massive cuts in benefits for Social Security beneficiaries if nothing is done. The 1.8 figure is a reasonable projection, since it is precisely equal to the average of the year over year productivity growth over the 40 year period in question. You asserted this was false, and when I pointed out you were wrong, you changed the subject back to the 1.6 figure.

The truth is that in order to eliminate the shortfall, we would have to assume unprecedented, ahistorical productivity growth year over year than the past long run average (well higher than the 1.8 long run average).

[Hannah Bell]

43. and i was referring to the 1.8 figure n. the 1.6 figure v. the various time frames used in various

reports.

but mostly, i was referring to this:

"The long-term assumptions in the trustees' reports are all below trend."

which they are. for the supposedly "intermediate" assumptions.

you think that .1% doesn't matter; however, it actually does matter rather a lot as one can get a sense of by comparing the "low-cost" projection.

[BzaDem]

44. I didn't say .1% doesn't matter. I said even at 1.8%, there is a shortfall that would need to be

filled within a few decades to prevent sizable cuts in benefits. A tenth of a percent would change the deadline -- it would not remove the deadline. It is not the case that we can avoid passing any legislation to fill the gap, unless productivity growth goes WELL above its long run average.

[dkf]

14. You really think our economy is going to do so much better?

We still haven't transitioned away from oil. I don't see a booming economy any time soon.

[dkf]

13. But they originally designed it to run on 1% taxation on employees and employers.

You can't tell me that was done with any great foresight on long term viability. And it was based on actuarial rates way back when. If we had to design a payout that was meant for modest taxation, what would it look like? Probably not what we have today with so many beneficiaries living for quite a long time.

[Mariana]

31. That is not true. 1% was the introductory rate only.

From the text of the 1935 Social Security Act:

INCOME TAX ON EMPLOYEES

SECTION 801. In addition to other taxes, there shall be levied, collected, and paid upon the income of every individual a tax equal to the following percentages of the wages (as defined in section 811) received by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:
(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum.
(2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall 1 1/2 per centum.
(3) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum.
(4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2 1/2 per centum.
(5) With respect to employment after December 31, 1948, the rate shall be 3 per centum.

EXCISE TAX ON EMPLOYERS

SEC. 804. In addition to other taxes, every employer shall pay an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 811) paid by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:
(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum.
(2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall be 1 1/2 per centum.
(3) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum.
(4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2 1/2 per centum.
(5) With respect to employment after December 31, 1948, the rate shall be 3 per centum.

RESERVATION OF POWER

SEC. 1104. The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.

http://www.ssa.gov/history/35act.html

So, the original planned rate was 3%, and provision was made to CHANGE it if necessary. That is how it was designed to run.

[Hannah Bell]

33. thank you for stomping out *that* particular bullshit meme.

[Mariana]

34. In case we see it again

I'll keep that link handy.

I have to say this is the first time I've seen this particular lie - that SS was originally written to have a 1% tax indefinitely.

[JVS]

8. It wasn't intended as a regressive tax to bail out the general fund, but I didn't hear the rich...

motherfuckers say peep about that when they doubled the rate to fund top-bracket tax cuts.

[MannyGoldstein]

16. Everything that's happening now was predicted and planned for many years ago:

See here: http://fdrdemocrats.org/the-common-sense-guide-to-social-security/3/

[WinkyDink]

20. And you got this little "fact" from where? ....I thought so.

[leftstreet]

3. Well, Obama said it was originally started for widows and orphans

:-(

[WinkyDink]

21. And FDR put off things.

Obama is not a history scholar by a long shot.

[MannyGoldstein]

25. But Obama's said the same thing multiple times

You think that nobody ever corrected him?

[eridani]

4. So what? Productivity has increased by a factor of four since 1947

And life expectancy from birth is just bullshit. The only relevant number is life expectancy at age 65--and lower income women have had downturns here.

[jtuck004]

6. Erskine Bowles on why interest rates aren't higher...

"Because we're the best-looking horse in the glue factory".

Simpson said "Social security was for ditch-diggers, not retirees" or something like that. Do you think he has had one too many colonoscopies, and someone nicked his brain? Did he get SSI confused with WPA?

Why would he say something like that, when the original act mentions retirees as well as aged?

"...The Act is formally cited as the Social Security Act, ch. 531, 49 Stat. 620, now codified as 42 U.S.C. ch.7. The Act provided benefits to retirees and the unemployed, and a lump-sum benefit at death. Payments to current retirees are financed by a payroll tax on current workers' wages, half directly as a payroll tax and half paid by the employer. The act also gave money to states to provide assistance to aged individuals (Title I), for unemployment insurance (Title III), Aid to Families with Dependent Children (Title IV), Maternal and Child Welfare (Title V), public health services (Title VI), and the blind (Title X).<11>..."

He may be correct that we live longer, but we are poorer as a people too, and ignoring those who would be most hurt is cold-blooded. A third of Americans retire with nothing - nothing - except SSI as an income until they die. They don't always retire by choice, and since the banks Ponzi scheme collapsed that figure might be higher.

Under this scheme 1 of every 3 retirees would have no income, no prospects for work, likely no other assets for an additional 3 or more years before they could get relief. Until then shelters, food stamps, cat food.


8,000 people a day turning 65 for the next few years...

[B Calm]

12. Alan Simpson should be directing his message to the employers who

did away with our pension plans.

[MannyGoldstein]

15. Astonishingly, Obama is parroting that fringe-right lie

Obama's said that Social Security was not originally intended for retirees, e.g.:

“Look: when Social Security was passed, it applied to widows and orphans, and it was a very restricted program“

“This is why FDR, when he started Social Security, it only affected widows and orphans”

which is an outright lie.

see: http://fdrdemocrats.org/the-common-sense-guide-to-social-security/5/

[WinkyDink]

22. The President has an affinity for certain R-W canards.

He also prefers charter schools to as-we-know-them public.

[Vinca]

18. Well, then, we'll need to hire Dr. Kavorkian to run the death panel

that does away with the disabled and children. Jeeeeeez - what's with these people?

[WinkyDink]

23. A Republican is LYING? I'm shocked. SHOCKED.

[tsuki]

28. It amazes me that no one ever asks this a$$hole why he

feels that sucking on the government tit for three generations is okay for the Roopublicon political elite.