Catfood Commission Update: Simpson on a Hot Tin Roof
by Bruce Webb
Those of us who follow the Obama Deficit Commission and its seeming hyper-focus on cutting Social Security were heartened last week by what turned into a veritable de-pantsing of Commission co-Chairman Alan Simpson in the course of an 8 minute video interview outside the (closed) doors of the Commission by Social Security Works Communications Director Alex Lawson. Alex’s video went viral and then some. Anyway you can read and hear my new buddy Alex speaking for himself: http://socialsecurity-works.org/author/alex-lawson/.
Plus Jane Hamsher and Firedoglake have been live streaming Alex’s and SSW’s film with the latest installment here: Livestreaming the Closed Door Fiscal Commission Pt. 5. Not real lively on a minute to minute basis, unless you are a big fan of tall polished wood doors, but I thought this little note from Jane was interesting.
[Ed. Note: After Alex’s encounter with Alan Simpson, the committee has apparently moved the meeting location without notice. Alex is trying to find out where it is being held.]
Well it looks like somebody struck a nerve. Congrats to Alex and to his bosses at SSW, Nancy Altman and Eric Kingson (plus Policy Director Lori Hanson), who along with Roger Hickey and his people at CAF are keeping the heat beating on that tin roof.
So to those who have been wondering when someone, anyone besides Baker and Krugman were going to call out the Social Security ‘Reformers’ the answer is “right now”.
P.S. the original revised release date for the Annual Report of the Trustees of Social Security was for next Wednesday June 30th. There are rumors that that date might slip for reasons unstated (the Report by law is due April 1), but when it does come out you can fully expect Social Security Bears Bruce and Dale to come out of our caves and bring you the numbers, plus in due course an updated Northwest Plan for a Real Social Security Fix.
Bruce: After reading Rdan’s post (Millenial generation and SS), and comments, I wanted to ask you a question. How close was 2008’s actual performance to High Cost assumptions? I am anxious to read your take on the 2009 Report. I have to believe that 2009 was closer to High Cost assumtions and 2010 may be damn close. I am wondering what 3-5 years of actual economic performance close to High Cost assumptions would do to the long-term numbers, especially if there is no “classic” recovery in the next decade.
little john
essentially all it would do is advance the depletion of the trust fund a few years. and the depletion date of the trust fund really doesn’t matter very much. all it means is that the system will return to pay as you go a little bit sooner than otherwise.
because of increasing life expectancy, the pay as you go tax rate might need to be a little bit higher. but that little bit is on the order of one tenth of one percent at first. it grows a little reaching about 2% some 70 years from now. most of us will never see that much of a raise, and those who do will also have had their incomes rise about 100% over the same time. so all that will have happened to them is they will have had a big increase in their standard of living, and part of that increased standard of living will be a longer, healthier retirement. for which, of course, they will have to pay. but no sane person will even notice the increased payroll tax.
you really have to get it out of your head that the Trust Fund was left to you by your rich granddaddy so you would never have to work. It’s just a surplus that grows or declines according to the fortunes of the economy. It’s only purpose is to smooth things out. Ultimately SS HAS to be pay as you go. And the pay as you go rate HAS to reflect a compromise between money you need while young with a family, but working, and money you need when old without a job. The current compormise (12% tax, 40% benefit) works pretty well, but is a bit on the skinny side for my taste. even when i was dirt poor i would not have noticed a 5% difference in my take home pay. But a 5% difference in the tax rate translates into a 20% difference in a pension which is already barely enoug to live on. You would notice that.
Any bit of sunshine is a help. When a game is rigged (that’s what commissions are for, ain’t it?), it is worth letting the public know.
Do we have any idea, though, whether this means a change in the debate, such as it is? I enjoy a good pantsing as the next guy, but is this worth more than giggles for the good guys and the need to relocate for some embarassed insiders?
kharris
the problem is that game IS rigged. by some very determined players. ol Peterson has been outed time after time and he knows that if he keeps on repeating his message gradually enough idiots will believe it that even the people who ought not to be idiots will think “everyone believes it so it must be true.”
we on the other hand seem to have to way to get heard by so many so often. and the part that has be gnashing my teeth is that even when you get heard, the people prefer the lies.
One hopes…but given how incessant the advertising is, and the known leanings of this admin. economic team, better to be noisy and pro-active.
The secret weapon is the scoring.
The battle over Social Security has been almost entirely conceptual with the only numbers being deployed being ones over the Infinite Future Horizon or more prosaically over the long term 75 year window.
But CBO on a daily basis doesn’t score things that way. When actual legislation comes down it is scored on a ten year timeline with occasional peaks over into the next ten years (due to gaming with the ten year window by both sides). And the problem for reformers is that none of their plans moves the ten year number.
Once you concede that the Special Treasuries are in fact backed by Full Faith and Credit, and Simpson did that, and that the interest owed on them is also, the pure numbers show Social Security contributing to a ‘Unified Budget’ surplus for more than the entire 10 year scoring window. That is to the extent that Republicans want to frame all this in terms of ‘Obama’s deficit’ they are faced with the problem that none of their Social Security ‘reforms’ move the deficit number by a penny prior to 2016. How they wiggle out of this bind is beyond me but in any event getting Simpson to concede that both principal and interest are in fact backed by Full Faith is a big step.
http://www.ssa.gov/OACT/TR/2009/III_cyoper.html#154952
Table III.A4.—Comparison of Actual Calendar Year 2008 Trust Fund Operations
With Estimates Made in Prior Reports
2008 actual was within $10 bn of 2008 IC projections
http://www.ssa.gov/OACT/TR/2009/IV_SRest.html#271967
Table IV.A3.—Operations of the Combined OASI and DI Trust Funds,
Calendar Years 2004-18
High cost projected a year end 2009 balance in the Combined Trust Funds of $2.552 trillion. Actual assets were $2.540 trillion or $12 bn less than ‘worse case’. In the context of $1.5 trillion dollar deficits and a $2.5 trillion TF balance $12 bn is barely above the level of rounding error. It is important to understand that SS is largely responsive to the overall economy in normal circumstances, losses due to high unemployment are offset by savings due to benefits not having to be adjusted for higher inflation. Now if you get a return to 70’s and 80s era stagflation with high unemployment AND high inflation, then you get the kind of bleeding that made the 1977 reforms ineffective.
So in answer to your question 3-5 years would do some serious damage if unemployment is allowed to linger at 9.7%, about 3 points above High Cost projections, which is all the more reason to do a new round of stimulus focused on job creation. This absurd deferral to totally theoretical revolts in the bond market with accompanying inflation is what is doing the harm to Social Security. Put people to work in an environment of restrained inflation and the numbers for SS turn around in a hurry.
Bruce
maybe not so big. these folks know they can tell any lie however outrageous and what people remember is how they felt when they heard it. so they can also admit the truth and know that it won’t have any long term effect on what people feel… which is more important than what they think.
i would like to point out that if there was NO social security at all, and workers just saved for their retirements by buying Savings Bonds, the Congress would face exactly the same situation as it faces today with Social Security: a large number of people are retiring, or maybe just out of work, and they want to cash in their bonds. The Congress has to come up with the money. If they tried to reneg, all hell would break loose. But because the people have been taught to believe that Social Security is just some sort of ponzi scheme, and the SS bonds are “worthless iou’s” the Congress may get away with mooting them (they won’t default) by cutting benefits so the bonds are not called. And the Bond Market will just feel relief that the Congress is showing “fiscal responsibility.”
Thanks for your insight. I eagerly await your (and Dale’s) review of the Report.
Thnaks for your comments. I wish I had a rich grandfather and didn’t have to work! I am well aware of your thoughts about increasing the “premium”, so to speak, but I am starting to think the powers that be would rather turn this into a welfare program.