What Matters

Via Paul Krugman, Low Tech Cyclist explains what matters to the Post editorial page:

The WaPo has a subset of its unsigned editorials where it comments on what it calls “the ideas primary.”

Five of the last seven Ideas Primary editorials have been on the Social Security ‘crisis.’ There have been 15 editorials in this series. One has been on global warming - the greatest crisis of our era - and two have been on our greatest domestic crisis, the lack of universal health care and the upcoming crisis in the Medicare trust fund.

Yes, but you see ... well ... er ... decades from now ... trust fund ... something.

Comments

The WaPo and General Electric have both been effective propagandists in raising false alarms about the threat of entitlement programs for quite a while now.

Posted by Petey | November 29, 2007 3:10 AM

"The WaPo and General Electric have both been effective propagandists in raising false alarms about the threat of entitlement programs for quite a while now."

General Electric would seem to have a bigger stake in raising false alarms about global warming. It helps them sell more of these, these, etc.

Posted by Fred | November 29, 2007 7:23 AM

huh? Okay, I'll admit the social security crisis is not the greatest issue (I'll put dollar and medicare on the top spots) -- but our inability to deal with a relatively less complex (in systems terms) but surely more palpable crisis than global warming is frightening. Again "decades from now" ... our inability to structure the debate with facts will have us eating dog food (if still available from china) in our later years.

Posted by mike c | November 29, 2007 9:33 AM

Why is it that no one seems to understand the definition of crisis:

"A crucial or decisive point or situation; a turning point."

All of these are gradual and growing problems, not sudden turning points! Stop throwing around the word crisis!

Posted by Wilson | November 29, 2007 10:05 AM

abject crises they are not -- but reducing the pain of future fixes -- which will certainly merit the longer label "crisis without solution" -- make the present time label merely "crisis" -- as an aside, I freudianly typed circus just now.

Posted by mike c | November 29, 2007 10:14 AM

Circus was the right choice, mike.

Storm of the Century! America Held Hostage Day Eleventy-seven! Global War on (fill in the blank)! US Military Broken! World Melt-Down Tomorrow!

Leaders of political parties and major media outlets, who so resemble each other in class, education, and outlook, share a vested interest in spreading panic. It sells units, and turns out voters. It would be nice to get a little perspective, but that's bad for business. You've got to look for it on your own.

Posted by Robert Powell | November 29, 2007 11:07 AM

abject crises they are not -- but reducing the pain of future fixes -- which will certainly merit the longer label "crisis without solution" -- make the present time label merely "crisis" -- as an aside, I freudianly typed circus just now.

Mike c, this comment indicates that you completely misunderstand the issues associated with social security.

If the bonds that the social security dept holds mean anything, ss will not be in trouble for decades. If those bonds don't mean anything, why should we change taxes or benefits now when those surpluses aren't going to help down the road.

The only thing that changing social security now would amount to is either taking more money from middle-class americans or taking money away from seniors so the rich can keep their tax cuts.

In the long term view the ability of a society to support its senior citizens is closely tied to the productive output of the society and the ratio of seniors to working people. At that point, the rules regarding social security today are totally irrelevant to what will be happening 50 years from now. Instead, we should focus on growing a more productive economy, which is what everyone is generally trying to do anyhow (or at least claiming to try).

Posted by mpowell | November 29, 2007 11:15 AM

If you disregard the truly bizarre manner in which the government does it's accounting, all of these "crisis" are really symptoms of a single problem. We all want more from our government than we're willing to pay for.

Liberals (by and large) think we should be spending more on health care (most of their other desires are small change by comparison). Conservatives (by and large) think we should be paying less (though the politicians aren't averse to a little extra health care now and then too).

Neither of these agendas will actually make the amount the government takes in any closer to the amount it spends, so we argue about how the deficit should be accounted for, rather than arguing about how to make it smaller.

It isn't significant whether the trust fund is an accounting fiction (which I tend to think it is) or if it is as secure as Gore's lockbox. The money for soc. sec. and medicare/medicaid has to come from somewhere, which means either substantial tax increases or benefit cuts, or both. The only arguments that matter are over which, when, and how much.

The rest of it is just blowing smoke.

Posted by heedless | November 29, 2007 12:01 PM

mpowell asserts we shouldn't care about the "bonds" the US holds in trust (I paraphrase appropriately I hope). It doesn't matter only if you don't care about inflation. The "bonds" are IOUS that will be paid off by running the printing press, exacerbating the current inflationary run (which is substantially higher than the fictional CPI numbers via BLS). You, as a senior citizen, will be concerned with having enough food to eat, basic healthcare, and living in a decent shelter. This inflation, at the rates now projected (and using a senior-citizen basket of goods) would render social security payouts nearly meaningless.
Growing the economy makes sense (bring on productive immigration!) but the fact remains that retirement ages are too low given the average lifespan of an american (too many retire and are not producing). That one simple change implemented over the next 15 years (call it retirement age of 72) would dramatically change the sustainability of social security.

Posted by mike c | November 29, 2007 12:10 PM

It's all a complete lack of perspective.

Somewhere, some blonde has gone missing - now that's a crisis

Posted by ethel-to-tilly | November 29, 2007 12:23 PM

Zombie lies about Social Security just keep rising from their graves.

Fellow reality-based folks: is there any point to arguing with people like Mike C and Heedless, or -- given that everything they say has been refuted over and over again -- is it better to just ignore and/or mock them?

Posted by lemuel pitkin | November 29, 2007 12:23 PM

LP does not produce any facts -- please refute my facts -- I can take it. really.

Recall that this thread began with coming to a solution to a recognizable problem that comes to head decades in the future --like global warming, medicare etc. I use Social Security as a relatively low-complexity system (compared to global warming which has very high complexity; i.e., sensitivity to input parameters) that will contribute to a fiscal if not constitutional crisis. If we cannot agree on the facts with social security -- how comfortable are you with your facts in the global warming debate?

Posted by mike c | November 29, 2007 12:34 PM

Well, I'd certainly agree that everyone in the Reality-Based Community should admit that the "Social Security Crisis" is a serious problem. On the other hand, it's probably down around 137th on the list of current crises facing America.

That's not to say that it mightn't dramatically rise in immediate importance if we somehow fixed many of our more pressing concerns. For example, I'd suspect that during the national idyll of the late 1990s, the "Social Security crisis" was then probably 29th on the list, clearly much, much more pressing than today...

Posted by RKU | November 29, 2007 12:34 PM

Mike C-

Reasonable people already have come to a conclusion on Social Security. Remember 2006?

Facts:

- The future shortfall is based on predictions of historically low rates of economic growth in the future. Every year, when the Trustees issue their report, the date of the shortfall gets pushed further into the future.

- The predicted shortfall (which, again, may well not materialize at all) is modest. Over the history of the Social Security program, adjustments in taxes and/or benefits have been made every decade which are larger than those needed to close the predicted shortfall. So fixing the problem when/if it actually occurs will not be a crisis.

- The only way you can solve a shortfall years or decades in the future by actions right now is by increasing the amount of money in the Social Security trust fund. But, those claiming a crisis say either that the trust fund doesn't exist (Heedless) or should not be paid in full (Mike C). So by their own arguments, changes to SS today do nothing to address any future problem.

- The proposed changes would mean real hardship for millions of people. My dad, to pick a non-random example, retired at 65. He was TIRED. I really don't know if he physically was capable of working another 7 years. Someone who suggests denying people a well-earned retirement in order to implement a non-solution to a non-problem is either confused or, let's say, not a nice person.

Posted by lemuel pitkin | November 29, 2007 1:46 PM

Lemuel,

I'm actually not sure that you and I disagree about how social security spending is likely change over the next few decades.
My point about the trust fund is that whether you think it's real (in which case we need to pay off the bonds out of general funds), or if you think it's not real (in which case we will have to pay the benefits out of general funds) doesn't change how Social Security will interact with the rest of the budget. And you're 100% right - changes to SS taxes now won't have any effect on future problems. They will simply provide extra money for the rest of the government to spend now.

And as I said, I believe that health care will be the budget buster, even if we don't expand on our current crop of programs. Medicine is expensive, is going to get much more so as we continue to develop new treatments, and there's really no way that can be changed.

The Post is producing useless noise when they worry about the relationship of SS to its trust fund, and on that you and I can agree. I also believe that worrying about any particular program in isolation is equally useless. The issue that matters is how (a) total government revenue compares to (b) total government spending. So it doesn't matter whether SS is internally solvent or not - the savings from, say, making your dad retire at 67 as opposed to 65, (my dad is 65 too) simply get taken out of total spending. Not to address the (non) problem of SS, but to lessen the very real problem of an overlarge total deficit.

Clearly we disagree about what the government should do, but I think that we're arguing from the same set of facts. Please let me know if I've made some huge error.

Posted by heedless | November 29, 2007 2:36 PM

Heedless-

You're right, I don't see a factual dispute here. Sorry to have lumped you in with Mike C.

We probably do disagree about the appropriate size of government and the best way to solve the (genuine) problem of rising health costs, but unlike the "Social Security crisis" those are things we can debate on planet Earth.

Posted by lemuel pitkin | November 29, 2007 2:41 PM

ugh. I actually had to do some work for a few moments. Despite my intentions not to get involved in discussing SocSec but rather our abilities to form long-horizon problem solutions...

The fact that no one talks about it does not make it solved. The GDP is substantially overstated for a variety of reasons but the two that strike me are: methodological and political. The inverse of GDP is inflation (and I am speaking roughly of its deflator) -- it is politically expedient to minimize reported inflation. Thus, I assert (with other facts not stated here but the methodological issues are legion) that GDP is overstated and that the scenario you and the social security trustees point to is painfully rosy.

Additional money in the system without changing the trust structure (from its pay as you go scheme) will only go to more governmental spending and not to solving the long-term SS liability. By changing the benefit structure via full-benefit retirement date, particularly in a society where more work is desk-bound (assume: less physically taxing), we can find a better mix of productive vs. non-productive (in economic GDP senses). Clearly some adjustment for disability or "tiredness" should be established (I don't know what that should be), but there was nothing magical about 65 (or 62 or 68.5) except that in the beginning of social security is was close to if not beyond the life expectancy of a US worker.

Also, I maintain that the IOUs will be paid in full but in grossly inflated dollars -- you put in a dollar today but get paid back a dollar (roughly) in 20 years -- at a rough 3% inflation rate (lower than historical averages) you will have about 50% less spending power (equivalent to getting 50 cents on your dollar). A great deal for the government; bad for you.

Denying a problem in the face of well-established facts is not in our collective best interests.

Posted by mike c | November 29, 2007 2:49 PM

Um, Mike C, GDP growth and Social Security benefits are both adjusted for inflation. So whether the CPI overstates or understates "real" inflation has exactly zero bearing on Social Security's solvency. If we agree that real inflation is higher than the CPI, then yes, that means an unintended benefits cut for future retirees. The solution then is to raise benefits by using a more appropriate index, not cut them further by raising the retirement age.

And that bit of utter confusion around inflation is the closest you come to an actual argument. Other than that, you just hate the idea of people retiring while they're still physically capable of work. Like most of crisis brigade, you think the non-rich should be forced to continue working until they collapse. Luckily, the vast majority of Americans disagree with you.

Posted by lemuel pitkin | November 29, 2007 3:09 PM

"The money for soc. sec. and medicare/medicaid has to come from somewhere, which means either substantial tax increases or benefit cuts, or both. The only arguments that matter are over which, when, and how much."

There's one additional point: the longer we wait to make the necessary adjustments to the taxes or benefits, the more severe these will have to be. That's why it's so irresponsible for liberals to put off addressing this. Of course, they have an obvious political motivation: it would be harder for the Santa Claus party to propose new entitlements (e.g., Universal Health Care) if they were honest about how expensive our current entitlements are.

Posted by Fred | November 29, 2007 3:10 PM

LP - GDP's relationship to nominal growth is defined:
nominal GDP = real GDP + inflation. Understate (undermeasure, conspire to cheat, etc.) inflation and you overstate real GDP. agreed? The benefits increases are adjusted by inflation -- understated ones. The unintended benefits cut you so blithely pass by is substantial, particularly for younger workers (time value of money). The inflation for the real basket of goods that retirees buy is far understated -- think cost of health care, food, shelter/maint/etc., heating oil etc, all of which have had double digit increases over multiple years.

I will dignify the remarks about the "vast majority of Americans disagree with you" with "so what?". 3 years ago a majority re-elected bush and 4 years before that .... I am unpersuaded by your majority's factual awareness and abilities to judge the financial risks.

As far as the "hate the idea of people retiring" comment, what kind of benefits adjustment WILL occur without changes to the SS system? People will have to work anyway because their SS benefits will be too small to matter. Let's at least warn people before they get there. Don't presume to know my mind on this topic (and whether I "hate" the idea).

In retrospect, it isn't hard to imagine that we cannot even agree on SS. Medicare as I pointed out in my first post has gotten to be considerably more problematic it is conceptually more complex as medical technology (and practice and delivery) evolve. However, many of the economic assumptions that go into Medicare are contained in the Social Security Debate. Maybe our GDP growth rates will fix Medicare as well. (probably not, right?)

Why don't we discuss global warming in a sense of urgency either? Part of the global warming story contains assumptions of GDP growth (energy demand, population growth, industrial output and mix, etc) -- which assumptions do we want to work with there? If you can apply the same assumptions to all scenarios, we'll have the basis of a realistic debate.

Posted by mike c | November 29, 2007 3:47 PM

Since you can't pay future benefits out of current tax proceeds, what sense could it make to adjust taxes in any way for this purpose? (there may of course be other reasons to consider reforming this funding mechanism.) And current workers/future retirees are surely on notice that their benefits are not certain, so why bother reducing benefits now when the system is in surplus?

Posted by henry evans | November 29, 2007 3:48 PM

"Since you can't pay future benefits out of current tax proceeds, what sense could it make to adjust taxes in any way for this purpose?"

You could put the temporary surplus into assets which you could draw upon later to pay future benefits (i.e., not Treasury bonds which are liabilities for the federal government and not assets). This is what prudent states and countries do when they have current surpluses in funding but probable deficits in the future.

Posted by Fred | November 29, 2007 4:00 PM

But we don't really have a current surplus. Overall our budget is in the red. If we didn't use the nominal social security surplus to buy treasury bills, we'd either have to borrow more money in real credit markets or raise taxes.

Posted by henry evans | November 29, 2007 4:10 PM

So then let's raise taxes so we have a real current surplus to invest. Let's do the same thing with Medicare. If people think the taxes are too high, then we can talk about reducing them in exchange for slowing the growth in spending.

Posted by Fred | November 29, 2007 4:23 PM

I guess I'd rather cut payroll taxes so we don't run a nominal surplus. Then people can decide for themselves if they'd rather save for retirement or buy a widescreen. And we could decide how to reduce the gap between spending and tax revenues without the free money from overtaxing people making less than $95k.

Posted by henry evans | November 29, 2007 4:31 PM

maybe if our government confronted the impact of their decisions by, gasp, requiring a modicum of the planning and disclosure required by private pension plans/heath-welfare plans AND by putting everything back onto the books, we'll see what our real deficit is and what our projected liability shortfall might be. Then we can all start to make changes. I would imagine there are some things we can recommend that we'd like to cut from the budget.

BTW, what do increased taxes do to real GDP?

Posted by mike c | November 29, 2007 4:33 PM

If you think of social security as a pension program, it's probably significantly underfunded. But if you think of it as a transfer mechanism, it's not. I don't see the political will to make it sound on an accounting basis as a pension program, so why bother to think of it that way? So I see it as a program to transfer resources from most current workers to some former workers (the ones who haven't died yet).

Posted by henry evans | November 29, 2007 4:41 PM

Seconding Fred, you can also pay off the deficit, leading to lower interest payments down the road (and thus more money available for everything else). I'm not sure whether the benefits outweigh the costs at our current rates of interest and inflation, but we're not that far from the point at which they would.

That said, payroll taxes are a highly regressive means of raising funds, and they cause more economic distortion than an equivalent increase in the income tax. So bad news all around.

Posted by heedless | November 29, 2007 4:49 PM

Mike C., you really don't have the slightest idea what you're talking about.

Posted by lemuel pitkin | November 29, 2007 4:58 PM

LP - love the literary reference by the way (unless some cruel joke perpetrated by your parents...in which case I apologize bringing up your name in this post). I can't love, however, your manner of debate which is half-fact followed by unsubstantiated "you don't have the slightest idea what you're talking about".

I will make you a deal, I won't respond to this post anymore but I will give you a free unanswered post to tell me where I am wrong. You can even lay down a barrage of ad hominem attacks, if that is your desire. I won't respond.

Can I be fairer than that?

Directly, sincerely and without facetiousness, I have spent some considerable time and research effort on this important topic (since 1991 and I remember the day as well) and would prefer that you let me in on the facts that have eluded me.

Also, I need to get home and won't check this post until tomorrow.

Posted by mike c | November 29, 2007 5:33 PM