John McCain Thinks Social Security Is a Disgrace

It seems that the candidate decided that peeing on the third rail was a good idea:

Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace.

Of course in their day, present-day retirees were working and their tax dollars were paying folks who were retired back then. And in exchange for that service when they were workers, today's retirees get to enjoy a secure retirement. Yes, on my dime. And in exchange I expect that when I retire, ensuing generations will be there for me. I call it generations looking after each other, so that those who built the present with labors in the past get to enjoy some of the fruits of their labor. The federal government calls it Social Security. John McCain calls it a disgrace.

Comments

Matthew is lying.

If you click through the link, you will note that immediately before the portion Matthew misleadingly excerpted, McCain said "Under the present set-up, because we've mortgaged our children's futures, you will not have Social Security benefits that present-day retirees have unless we fix it."

The disgrace to which McCain was referring is that today's kids will not have the Social Security benefits that present-day retirees have. Which, BTW, is completely correct - today's kids will have, what, something like 76% of promised benefits?

Matthew's doing a yeoman's job in smearing McCain today. First saying he's a "gambling addict" and now this. Yikes.

Posted by Al | July 8, 2008 9:25 PM

Really?

I expect that I won't ever see a dime.

Ever.

Posted by Jaybird | July 8, 2008 9:25 PM

Seriously -- you could cut this whole piece and use it as a commercial. Just find one or two suitable on-screen narrators to mouth Matt's dialog, and, done. I'd change the ending sentence to the positive windup: "John McCain calls it a disgrace. We call it Social Security."

But, then, John McCain is older than Social Security, so maybe he knows best.

Posted by El Cid | July 8, 2008 9:25 PM

Between this and his position on Medicare funding, McCain seems intent on losing elderly voters by November.

Posted by Helter | July 8, 2008 9:29 PM

It's Matt's fault that McCain can't make the same argument for two straight paragraphs? How does that work?

Posted by Gabriel | July 8, 2008 9:31 PM

And in exchange for that service when they were workers, today's retirees get to enjoy a secure retirement. Yes, on my dime. And in exchange I expect that when I retire, ensuing generations will be there for me. I call it generations looking after each other, so that those who built the present with labors in the past get to enjoy some of the fruits of their labor. The federal government calls it Social Security. John McCain calls it a disgrace.

Uh huh. Say, I have this list of five names. Send a dollar to each person on the list, then cross the fifth name off and put your name there. Then, send the list to everybody you know! Hey! PYRAMID SCHEMES ARE FUN!

Posted by American Hawk | July 8, 2008 9:36 PM

Don't worry, Matt: McCain's going to use the savings from Victory In Iraq to create enough millionaire heiresses to go round.

Posted by pseudonymous in nc | July 8, 2008 9:37 PM

Al:

The disgrace to which McCain was referring is that today's kids will not have the Social Security benefits that present-day retirees have. Which, BTW, is completely correct - today's kids will have, what, something like 76% of promised benefits?

I assume this is known to everyone already, but of course McCain was not correct. If the Social Security Administration's intermediate projections are accurate, and no changes are made to Social Security when the trust fund is exhausted, today's kids will receive more than current retirees. They just won't (at least for the first few years after the trust fund's exhaustion) receive the promised benefits, which are much more than current retirees receive.

In any case, McCain has a long, long history of lying about Social Security. Or at least saying things about it that are completely false -- I guess it's possible he has no understanding of it whatsoever, and actually believes what he says.

American Hawk:

Hey! PYRAMID SCHEMES ARE FUN!

Social Security isn't a pyramid scheme, unless you define all forms of saving for the future that have ever existed in human history as pyramid schemes.

Posted by Jonathan Schwarz | July 8, 2008 9:44 PM

Schwarz-- Saving your own money is not a pyramid scheme. Giving your money to current recruits with the promise that later recruits will give you money, who will in turn be paid by still later recruits, is the very definition of a pyramid scheme.

Posted by American Hawk | July 8, 2008 9:48 PM

Re: I expect that I won't ever see a dime.
Ever.

Unless you have good reason to believe that you will not live till retirement age, you are seriously misinformed.

Posted by JonF | July 8, 2008 9:49 PM

I think this fits with the idea that McCain needs to take some bold risks that could pay off big or backfire spectacularly--a safe respectable second place doesn't do anything for him that a blowout loss can't deliver just as well.

Posted by Deborah | July 8, 2008 9:50 PM

JonF: One might fear that Social Security retirement funds will not be available by one's retirement, and it might not be a fear rooted in a currently perceived 'crisis' in future funding, however wrong -- after all, a lot of people feel that one day these privatization idiots will have their way, and after Wall Street throws its party, little might remain.

Posted by El Cid | July 8, 2008 9:54 PM

Those who claim that they will never see a dime should immediately commit harakiri to prove themselves right.

Posted by gregor | July 8, 2008 9:55 PM

McCain=
Box. of. rocks.
Sack. of. hammers.

Posted by steve duncan | July 8, 2008 10:03 PM

Saving your own money is not a pyramid scheme. Giving your money to current recruits with the promise that later recruits will give you money, who will in turn be paid by still later recruits, is the very definition of a pyramid scheme.

I hate to break it to you, but when you open a savings account, the bank doesn't keep a bunch of dollar bills with your name on them in their vault. Nor does the bank pay you interest by hoping the dollar bills will breed and create more.

Instead, they give your money to current recruits with the promise that later recruits will give you money, who will in turn be paid by still later recruits. That's the very definition of saving for the future.

Posted by Jonathan Schwarz | July 8, 2008 10:05 PM

LOL, by American Hawk's definition, any investment plan more complex than "I stuffs the money in my mattress" is going to be a pyramid scheme.

And yup, it makes no sense. Why is it a problem that workers' taxes pay for retirees? Was it a disgrace 50 years ago when they were the workers paying for other retirees?

And, uh, isn't it MORE of a disgrace to talk about privatization? Today's workers are supposed to happily pay for their parents' retirement, while saving for their own? All so their children can have the privilege of going back to the 1920's, when the day you couldn't work anymore, you starved to death and died?

awesome plan.

Posted by anonymiss | July 8, 2008 10:15 PM

American Hawk - you do not understand pyramid schemes. A pyramid scheme is a species of fraud that requires that current participants receive far more in receipts than they pay in by continually recruiting new participants. New recruits pay their share upward and each is rewarded by payments that they themselves recruit.This scheme requires an ever-increasing number of participants, which is why it is called "pyramid" - the ever-increasing base provides funds that are directed upwards to a narrower group of recipients. Eventually the base grows too large to be increased any further, the last group of new recruits, loses their investment, and the scheme collapses.

Social Security doesn't work that way. The Social Security tax paid by you and your employer diverts value created by a productive economy from consumption by current workers to consumption by retirees. The tax rate was adjusted twenty-five years ago to provide sufficient income to pay benefits to retirees for the indefinite future. People who paid for the retirement of their parents' generation in the 1980's are retiring now and receiving benefits paid for by their own children's generation. In my own lifetime, my grandparents paid social security tax that provided my great-grandparents with benefits; my parents paid social security tax that provided my grandparents with benefits; for thirty years I've paid social security tax that is now providing my parents with benefits; and I expect to retire in 20 years or so with benefits paid for by my own children's generation. A program that has worked to provide income security for over seventy years is no pyramid scheme.

And Jaybird- the reason you believe that you won't receive any benefits is because you're a dupe and you've been prepped to be robbed blind. The easiest way to steal something is to pursuade its owner that it's not worth anything. Bush and his lying, cheating accomplices at the AP and the Washington Post obviously have your number. There's nothing clever in being cynical about the most successful social program in American history. Sometimes cynicism is a product of stupidity.

Posted by Bloix | July 8, 2008 10:17 PM

In that case, can you send me $1000?

In 40 years, I promise to pay you back 76% - and you'll be happy to get it!

Posted by Eric Lindholm | July 8, 2008 10:18 PM

American Hawk,

For an economics lesson, recall "Its a Wonderful Life". Remember the 1929 bank run, where Jimmy Stewart explains to people who put money in his bank that its not there; he lent it to Homer to build his house.

Are you accusing Jimmy Stewart of running a pyramid scheme?

Posted by cube | July 8, 2008 10:22 PM

Social Security is not a retirement plan.
There are three parts to social security:

(1) an payment on an income annunity
(2) a disabilty insurance. Not a very rich one I admit but has anyone priced private disability lately? and remember there's no medical underwriting.
(3) support income for minors if a participant dies or becomes disabled. Again no medical underwriting.

Social Security is a good program. Try pricing out the above benefits from private insurance carriers.

Has you looked at your social security benefits statement lately and actually calculated what your return on the payments you have made into the system? My ROI will be within ten years based on my current and project contributions and that's not even factoring what benefits (2) and (3) provide.

Posted by gearguy | July 8, 2008 10:27 PM

Social Security is not a retirement plan.
There are three parts to social security:

(1) an payment on an income annunity
(2) a disabilty insurance. Not a very rich one I admit but has anyone priced private disability lately? and remember there's no medical underwriting.
(3) support income for minors if a participant dies or becomes disabled. Again no medical underwriting.

Social Security is a good program. Try pricing out the above benefits from private insurance carriers.

Has you looked at your social security benefits statement lately and actually calculated what your return on the payments you have made into the system? My ROI will be within ten years based on my current and project contributions and that's not even factoring what benefits (2) and (3) provide.

Posted by gearguy | July 8, 2008 10:28 PM

Damn straight, Matt. It's a compact between generations, and it is one of the most successful government programs in history. Just as I was educated on the money of the generations before me, and today I pay to educate the generations to come--and I pay gladly.

And you smug folks who want to talk about saving your own money...you're not going to collect the government insurance on your deposits if your banks fail? Get over yourselves.

Posted by craig | July 8, 2008 10:29 PM

EL:
In that case, can you send me $1000?
In 40 years, I promise to pay you back 76% - and you'll be happy to get it!

No, the 76% is of the promised future benefits, not current ones. Its as though I loan a bank $1000 @ 5%, but they end up only accruing interest @ 4.5%. Or something like that. Of course, if you think that your bank will keep paying 5% interest, then there's little reason to think that SS won't.

Posted by malraux | July 8, 2008 10:32 PM

Back when Ronald Reagan was president he signed a law that "saved" Social Security by ensuring that current workers put more into SSI than current retirees were taking out, so that there would be a big surplus to draw down when baby boomers retired.

What happened to that surplus? Easy, the GOP-led government of Ronald Reagan and, later, George W. Bush "borrowed" from that surplus.

Having created the piggy bank, Reagan and his pals then used that money to cover their supply-side losses. Now that the debt is coming due, they're being clear that they have no ability to actually create policies that would repay those losses, so working folk better just suck up the fact that the GOP stole them blind and are leaving them high-and-dry.

W. famously told us that the SSI debt is "just paper" and McCain is following his lead with his "it's broken" jargon. They're just covering for a massive embezzlement, courtesy of the GOP.

Posted by west coast | July 8, 2008 10:37 PM

i do get a kick out of conservatives and their conception of the U.S. Gov as some sort of shady payday lender. They seem to expect to wake up one day and find the United States has disapperared, leaving behind an empty office and disconnected phone number.

Posted by cletus | July 8, 2008 10:41 PM

i do get a kick out of conservatives and their conception of the U.S. Gov as some sort of shady payday lender. They seem to expect to wake up one day and find the United States has disappeared, leaving behind an empty office and disconnected phone number.

Posted by cletus | July 8, 2008 10:41 PM

Social Security isn't the problem. Medicare is the problem.

Posted by Tony Adams | July 8, 2008 10:42 PM

Yglesias forgets the fact that when Social Security began, the ratio of workers to retirees was 15 to 1, it is now 2 to 1. This isn't hard math, and it does add up to disgrace.

Posted by Yglesias Watcher | July 8, 2008 10:44 PM

Al shits: "The disgrace to which McCain was referring is that today's kids will not have the Social Security benefits that present-day retirees have. Which, BTW, is completely correct - today's kids will have, what, something like 76% of promised benefits?"

It's funny how there's always a trillion or two to toss at a pointless adventure like Iraq, but the Social Security scaremongers still scream doom and gloom about a program that will continue long after all of us are dead.

They're lying. Al's a liar. McCain is a liar. the rarest thing in America is a conservative who tells the truth on a regular basis.

This is what will happen in America, inevitably. The gap between the hyper-wealthy and the middle class will close again, as it did during the New Deal. If it doesn't, there will be a great deal of violence in the streets - after which the gay will close anyway. Pat Buchanan had one thing right - King George was the enemy. He just didn't know that the second American King George would be the ultimate atrocity.

Posted by MoeLarryAndJesus | July 8, 2008 11:04 PM

Yes, Eric Lindholm, I for one will be happy to send you $1,000 on a promise of future returns -- assuming, of course, that you are the government / taxing authority of a powerful, politically stable nation, that you issue a currency that the world has been using as a benchmark for the last several decades, and that you have a record of not defaulting on your debts in the past 200-plus years. You meet all those criteria, right? Because the outfit I send my payroll taxes to does.

Posted by Jefferson Smith | July 8, 2008 11:04 PM

Well, 2 to 1 ain't quite right, but you've got the spirit of the thing correct. And why is the system capable of working with fewer workers supporting each retiree? Because of the magnificent American economy, which just gets more and more productive every year. --And we'll keep making productivity gains in the years to come.

Yglesias Watcher, why are you so mistrustful of the American Worker?

Posted by craig | July 8, 2008 11:07 PM

Yes, Eric Lindholm, I for one will be happy to send you $1,000 on a promise of future returns -- assuming, of course, that you are the government / taxing authority of a powerful, politically stable nation, that you issue a currency that the world has been using as a benchmark for the last several decades, and that you have a record of not defaulting on your debts in the past 200-plus years. You meet all those criteria, right? Because the outfit I send my payroll taxes to does.

Posted by Jefferson Smith | July 8, 2008 11:08 PM

Yglesias forgets the fact that when Social Security began, the ratio of workers to retirees was 15 to 1, it is now 2 to 1. This isn't hard math, and it does add up to disgrace.

Math is clearly not your forte, dear heart. The ratios are not a problem. Workers today are far more productive than they were 70 years ago when Social Security began.

Posted by Jeff S. | July 8, 2008 11:12 PM

Yglesias Watcher, your understanding of SS is inane. It's the amount of money that exists, and will continue to exist, that is the question, not the number of workers paying in per retiree.

It's currently good for full benefits for 40+ years, and the number of years it is good for goes up every year, despite the crap economy we have been subjected to by Bush.

By your logic, smaller families today mean that American families are poorer than they were in the 1920s and 30s.

Disgrace is a wonderful term when applicable, such as when used in reference to your understanding and logic.

Posted by abject funk | July 8, 2008 11:12 PM

social security explained:
http://www.youtube.com/watch?v=Tts2uTWt6e8

Posted by gearguy | July 8, 2008 11:38 PM

And I've been saying for months that Florida was a near impossibility for Obama (or any Democrat) against McCain.

Thanks, Johnny Mack.

Posted by Jim | July 8, 2008 11:38 PM

social security explained:
http://www.youtube.com/watch?v=Tts2uTWt6e8

bottom line, Don't Vote McSame.

Posted by gearguy | July 8, 2008 11:40 PM

Brilliant strategy. Glad to see he payed close attention to Bush's SS tour in 05.

His only recourse in a month or so will be to watch his poll numbers plummet or reverse course and squirm with the big flip-flop tag on his back...

Posted by WW85 | July 8, 2008 11:56 PM

What McCain also doesn't say is that SS is fully funded as is through about 2040. It does not need overhaul or to be privatized. It needs what was done back in the 80's. To simply increase the funding a few points.

Make no mistake, when a Republican brings up the subject, they are not talking about simple fixes, they are looking for excuses to privatize it.

And when a Republican says privatize they really mean profitize.

Americans aren't stupid, and young people aren't either when told the truth.

Posted by WW85 | July 9, 2008 12:10 AM

The first comment on this thread is a classic Al case study.

Here's McCain's full answer, with the part Matthew quoted in bold:

MCCAIN: Thank you very much. I’d like to start out by giving you a little straight talk. Under the present set-up, because we've mortgaged our children's futures, you will not have Social Security benefits that present-day retirees have unless we fix it. And Americans have got to understand that.

Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace. It's an absolute disgrace, and it's got to be fixed.

Now, how do you fix it? Now, how do you fix it? You fix it by reaching across the aisle, and you say to the Democrats, "Sit down with me at the table. Sit down with me, the way Ronald Reagan and Tip O'Neill did the last time that Social Security was in deep trouble, and that was way back in 1983."

Ronald Reagan, a conservative president from California, Tip O'Neill, the liberal Democrat from Massachusetts, sat down together, and they walked out of the White House together, and they said, "We're going to fix Social Security." And they did, for about 20, 30 years. Right, Hank?

And Hank Brown and I were in the Congress at the time. And we were proud. We were proud to see the kind of bipartisanship that was exhibited for future generations.

Well, now it's broken again. Now it's broken again. Nothing is forever in America. I want to promise you that I'll say to the Democrats and I'll say to the American people: “Here's a chart. Here's how much is coming in. Here's how much is going out. And here's where there's more money going out than coming in, and here's where there's no money left."

Now, are we going to hand it off to your generation to fix it? Or are we going to do the hard things? I want to be president to do the hard things. And I promise you that I'll do everything in my power to make sure that not only Social Security but Medicare is addressed, and it has to be done in a bipartisan fashion. And Washington is broke, and we're grid-locked by partisanship, and it's going to change, and it's got to change, and I will change it.

Now, there's a lot in there and a lot of it is substance-free or inconsistent. But the second paragraph, which Matthew quoted in full, is not difficult to interprest.

McCain first describes precisely how the Social Security System works and then calls "that" a disgrace. The disgrace is the system he described in the preceding sentence, not something in another paragraph. There is not another reasonable construction of those sentences. McCain's words mean precisely what Matthew says they do.

I'd also note that to the extent McCain's first and second paragraphs are meant to be read together, he seems to be saying that the way we "mortgaged our children's futures" was by setting up the Social Security system in the first place. This is at odds with the traditional view that Congressional borrowing against the assets of the Social Security trust fund is the source of whatever fiscal problems Social Security will face down the road.

Posted by southpaw | July 9, 2008 12:22 AM

Looks like the Overton window in operation to me. The GOP is obviously determined to make talk of dismantling SS acceptable. The idea that a supposedly mainstream GOP presidential candidate is talking like this may speak to how far they've already come.

Posted by Steve V | July 9, 2008 12:40 AM

The Bush Admin is a pyramid scheme. They wanted to privatize Social Security to prop up stocks and bonds for a few more years, just enough to get out of office.

But it didn't work. The scheme collapsed, or is in the process. McCain just wants to try to step in and try one more time.

The reason that Republicans are interested in Social Security is because that is where the money is, one of the few self-sustaining programs in government, with nearly 100% trickle down effect on the economy.

Posted by tomj | July 9, 2008 1:08 AM

Not really sure where I read this, but one comment about the 'when social security started there was 15 workers supporting one retiree' is that,

a) That was at the very beginning of the program and simple logic says of course you will have very few retirees for the first few years.

b) At the same time for every retiree on SS, there were _three_ old people on state welfare. So for every 15 workers, they were paying for one guy on SS and three guys on welfare. Thats 3.75:1, which makes todays 3:1 much less scary.

c) A good summary is that what happened was that SS was a success, in that it cleared the welfare roles of much of the elderly. Either way it seems far more noble to be drawing SS than to be on the dole.

Posted by gibbon1 | July 9, 2008 2:15 AM

Now, there's a lot in there and a lot of it is substance-free or inconsistent. But the second paragraph, which Matthew quoted in full, is not difficult to interprest.

McCain first describes precisely how the Social Security System works and then calls "that" a disgrace. The disgrace is the system he described in the preceding sentence, not something in another paragraph. There is not another reasonable construction of those sentences. McCain's words mean precisely what Matthew says they do.

But of course people don't speak in paragraphs - they were added by the person writing down the words as an artificial convenience for the reader. So to base your argument on something added for the convenience of the reader is odd.

Only someone being completely dishonest - such as Matthew - could ever interpret he "disgrace" as being Social Security itself. Any person reading the words at all honestly wold have to admit that the disgrace involved here is that kids today will only get 76% of what seniors today will get (indexed for wage growth, as Social Security is).

But Democrats in general are not interested in honest arguments over policy. They ar interested in demagoguery and smears - as perfectly evidenced by Matthew's earlier post smearing McCain as a gambling addict.

Posted by Al | July 9, 2008 8:01 AM

Looks like the Overton window in operation to me. The GOP is obviously determined to make talk of dismantling SS acceptable. The idea that a supposedly mainstream GOP presidential candidate is talking like this may speak to how far they've already come.

Looks like a failure of the Overton window to me -- the GOP started really proposing dismantling SS in 2005, and got schooled in the next election, and are about to get schooled just as bad again.

Posted by Matt Weiner | July 9, 2008 8:05 AM

There's a pattern we've been seeing during this election, in which John McCain says something preposterous, like "social security is a disgrace," or "I'll balance the budget by 2013 while expanding military spending and cutting taxes," and then the true believers in the Republican party and their enablers in the media try desperately to spin it into something that sounds less absurd. It isn't working. Face it, Al & Co., McCain simply talks nonsense much of the time.

Posted by rea | July 9, 2008 8:30 AM

when Social Security began, the ratio of workers to retirees was 15 to 1, it is now 2 to 1.

Well, it's not 2:1, but the founders of social security did plan for the fact that the ratio would narrow, and in 1982-1983, reforms in SS were made to ensure that the baby boomers would be able to have their SS obligations met.

So I'm not sure how your statement is relevant to what went on when SS was founded. Changes were built into the system, and further changes were made to the system since then.

Posted by Tyro | July 9, 2008 8:38 AM

If anyone loudly and persistently calls McCain on this, it's game over. No one is going to loudly and persistently call McCain on this.

Posted by aleks | July 9, 2008 8:40 AM

"Only someone being completely dishonest - such as Matthew - could ever interpret he "disgrace" as being Social Security itself."

I read the whole thing, and I agree with Matt. McCain said ". . . that we are paying present-day retirees with the taxes paid by young workers in America today. . ." and then immediately after that sentence, McCain said "That's a disgrace." One could imagine that he meant the disgrace to refer to earlier sentences about lower payments, but that's not the most natural interpretation.

I can understand why Al feels like turning up the rhetorical heat over this, though -- it's a very damaging thing for McCain to say.

Posted by BarryG | July 9, 2008 8:46 AM

"Only someone being completely dishonest - such as Matthew - could ever interpret he "disgrace" as being Social Security itself."

I read the whole thing, and I agree with Matt. McCain said ". . . that we are paying present-day retirees with the taxes paid by young workers in America today. . ." and then immediately after that sentence, McCain said "That's a disgrace." One could imagine that he meant the disgrace to refer to earlier sentences about lower payments, but that's not the most natural interpretation.

I can understand why Al feels like turning up the rhetorical heat over this, though -- it's a very damaging thing for McCain to say.

Posted by BarryG | July 9, 2008 8:46 AM

Yep, Al is the one being dishonest. The context doesn't change the most obvious interpretation of what McCain said--the "and that's a disgrace" obviously refers to the sentence immediately prior, which is a simple description of how Social Security works.

Moreover, Al knows darn well that when out of the sight of the likes of the AARP, people like Al and McCain do in fact talk about Social Security being the equivalent of a "pyramid scheme". So what happened here is McCain inadvertently let a little of his true feelings about Social Security slip out, and Al is trying (but failing) to cover up McCain's unfortunate moment of honesty.

Posted by DTM | July 9, 2008 8:52 AM

John McCain doesn't know what Social Security is or how it works.

And he wants to be President?

Posted by An Outhouse | July 9, 2008 8:55 AM

McCain and Al share in the dishonesty. McCain makes several arguments so that listeners will hear the one he wants them to hear and provide a sound bite rebuttal when called on it. It's how Saddam got yoked into 9/11.

The new Gingrich/Rove Republican Party. Dishonesty you can count on.

Posted by Jeffrey Davis | July 9, 2008 9:01 AM

i do get a kick out of conservatives and their conception of the U.S. Gov as some sort of shady payday lender. They seem to expect to wake up one day and find the United States has disapperared, leaving behind an empty office and disconnected phone number.

Posted by cletus

I don't think it's so much an illusion by conservatives, but an honest admission that that is exactly what they'd like to see happen and what they keep trying to make happen.

Posted by El Cid | July 9, 2008 9:01 AM

Al:

Any person reading the words at all honestly wold have to admit that the disgrace involved here is that kids today will only get 76% of what seniors today will get (indexed for wage growth, as Social Security is).

This statement—"kids today will only get 76% of what seniors today will get (indexed for wage growth, as Social Security is)"—actually is accurate, although impenetrably confusing to people who don't understand how Social Security works. If the SSA's intermediate projections are accurate, and nothing is changed about Social Security for the next forty years, today's young workers will indeed have a lower percentage of their wages replaced than today's retirees—although the growth in wages will mean they'll get more than today's retirees in real dollars.

It's interesting to me that people like Al (and McCain, of course) never describe the situation accurately unless challenged, as I did above.

Also interesting is this statement of McCain's:

MCCAIN: Under the present set-up, because we've mortgaged our children's futures, you will not have Social Security benefits that present-day retirees have unless we fix it.

In a certain sense that's true—if the SSA's intermediate projections are correct, and nothing is done, today's young workers "will not have [wage-indexed] Social Security benefits that present-day retirees have." But if McCain were honest, he would emphasize that he has never proposed anything that would "fix it" so that today's young workers would have have the same wage-indexed benefits as today's retirees. A more accurate statement by him would have been "you will not have Social Security benefits that present-day retirees have unless we fix it, and I have no plans to fix it."

Posted by Jonathan Schwarz | July 9, 2008 9:01 AM

Not long after the Bush tax cuts and the bru-ha-ha over SS in '05, my mother told me over coffee one day that "The Republicans will not be happy until they have the middle class on their knees."

She certainly looks prescient now. And from this post, you can just imagine McCain saying "Knees, Meet Floor."

Posted by Leaking Geek | July 9, 2008 9:04 AM

Al is the one being dishonest.

You don't say.

Posted by Gregory | July 9, 2008 9:08 AM

Switch the plan from wage-indexed to inflation-indexed. Voila! Fixed. No tax increase. No default on the bonds.

Next problem.

What McCain and his elk are afraid of, of course, is that the wealthy should be asked to live up to the bargain struck back in 1986. The specter for defaulting on an obligation is simply GOP projection. No only lying swine. They're cheap lying swine.

Posted by Jeffrey Davis | July 9, 2008 9:08 AM

The problem with arguing with Social Security deniers is that eventually, after weeks of arguing, you can get them to admit that if Social Security works, they still think it ought to be abolished. Like the right's fervent belief that the minimum wage causes unemployment, there is no set of facts that can debunk the belief because the belief is just a justification for their own conscience, so that they don't have to look themselves in the mirror and say "I'm a parsimonious and spiteful person who doesn't want my tax money to help people."

APS

Posted by Ape Man | July 9, 2008 9:18 AM

I think it's pretty clear from the 2-paragraph context that McCain thinks that the Social Security Trust Fund is literally supposed to be like a savings account. There has been a lot of rhetoric to this effect: You set aside money now for your retirement later. And the Social Security statements we receive can reinforce this impression. It reads as if he didn't realize that the trust fund was a relatively recent addition to Social Security, and that the system he describes -- with today's taxpayers paying immediately for today's retirees -- is exactly how Social Security was designed in the first place.

Read it again -- I swear that's what it reads like he is saying. Given the generally shallow nature of discussion surrounding Social Security, this kind of ignorance would be understandable for anyone whose political memory only goes back into the 1990s... but McCain was in Congress when the Trust Fund was established. That makes it a bit more difficult to forgive. Well, that and the fact that he's running for President and we should expect Presidents to know something about government.

Posted by Chuck | July 9, 2008 10:02 AM

Actually, in the absence of means-testing, it means we're taking money from people struggling and getting started out, and giving it to a demographic that's generally much better off. And so I agree with McCain: it _is_ a disgrace. Means-testing, please.

Posted by Sanjay | July 9, 2008 10:05 AM

If you believe that the United States will be much wealthier than it is today, then all of your retirement investments should do very well, and you can retire in peace. At the same time, such economic conditions will also ensure that the US will have no problem paying its SS obligations.

But as Ape Man points out, it's not the issue of whether SS "works" or not: Republicans dislike the idea on principle, and they always have. Always. The very concept aggravates them.

Posted by Tyro | July 9, 2008 10:10 AM

Actually, in the absence of means-testing, it means we're taking money from people struggling and getting started out, and giving it to a demographic that's generally much better off. And so I agree with McCain: it _is_ a disgrace. Means-testing, please.

If it is means-tested, it ceases to be a social insurance program and becomes an entitlement program... at which point, it's easier to kill.

Tyro is correct to say that Republicans loathe it on principle.

Posted by SavageView | July 9, 2008 10:16 AM

Actually, in the absence of means-testing, it means we're taking money from people struggling and getting started out, and giving it to a demographic that's generally much better off. And so I agree with McCain: it _is_ a disgrace. Means-testing, please.

True in a certain sense, but our entire society is built on taking money from people struggling and getting started out, and giving it to a demographic that's generally much better off. It's called "profit."

If we want more means testing, it would be better to raise the capital gains tax to the same rate as actual work and devout that revenue to Social Security.

Posted by Jonathan Schwarz | July 9, 2008 10:20 AM

John McCain doesn't know what Social Security is or how it works.

I can't imagine that this surprises anybody. McCain is the guy who said that changes to the capital gains tax would impact 100 million people with mutual funds and 401(k)'s. Leaving aside that the two are apples and oranges (or, more accurately, apples and baskets), it shows that McCain does not even understand the tax treatment of the single biggest private retirement savings instrument in the nation.

Dear John. A 401(k) is taxed as ORDINARY INCOME. Do you understand the difference between ordinary income and capital gains? Maybe you should ask your close friend Phil Gramm who will tell you the former should be taxed heavily and the latter not at all.

This is what happens when you have a kept man trying to talk about the economy.

Posted by LFC | July 9, 2008 10:23 AM

just don't stuff your money into a pyramid...

Posted by bdbd | July 9, 2008 10:36 AM

If it is means-tested, it ceases to be a social insurance program and becomes an entitlement program... at which point, it's easier to kill.

Not to mention it gives the current workers no incentive to save for their own retirement. Unless you can save enough to have more income then SS gives out, you should just blow it all on crap now.

Posted by JordanT | July 9, 2008 10:40 AM

If it is means-tested, it ceases to be a social insurance program and becomes an entitlement program

It's not a social insurance program, it's welfare for old people.

Posted by Just Dropping By | July 9, 2008 10:47 AM

John McCain Will Reform Social Security.

He will fight to save the future of Social Security while meeting our obligations to the retirees of today and the future without raising taxes. John McCain supports supplementing the current Social Security system with personal accounts – but not as a substitute for addressing benefit promises that cannot be kept. He will reach across the aisle, but if the Democrats do not act, he will. John McCain will not leave office without fixing the problems that threatens our future prosperity.

Can anybody explain what the heck this sentence actually means? I've pasted in the entire context from McCain's web site.

If he's talking about supplemental accounts above and beyond Social Security, then maybe he shuld look up little known and esoteric financial vehicles like an IRA, Roth IRA, 401(k), 403(b), etc.

If he's talking about actually taking payroll taxes and putting them into a new type of supplemental account, then just how does he plan on keeping "benefit promises".

Tokyo's ultra-high speed rail has nuffin' on "The Straight Babble Express".

Posted by LFC | July 9, 2008 10:49 AM

Just dropping by - You use the word "welfare" as a slur, as if retirees should be ashamed to take Social Security benefits and should eat dog food instead. Four generations of American workers - my parents and grandparents included - have been able to live in dignity in retirement because of Social Security and assholes like you want them to live in fear of the poorhouse. Go fuck yourself.

Posted by Bloix | July 9, 2008 10:57 AM

Yglesias Watcher needs to come back when he learns what the term 'economic growth' means. Also, when he learns to read. It's not '76% of your money' dumbass, it's '76% of promised benefits.' By the way, that 76% would be true if we had pessimistic growth projections, we did nothing at all to the program. And oh yeah, that 76% will be higher in REAL DOLLAR TERMS than today. Standard of living.

Eric Lindholm, right now SS, while having only a 3-1 ratio, is throwing off a MASSIVE SURPLUS, so citing fear mongering ratios isn't gonna get the job done. You're probably one of those guys that points only to GDP growth and national unemployment rates as indicators of a strong economy.

"Switch the plan from wage-indexed to inflation-indexed. Voila! Fixed. No tax increase. No default on the bonds."

Jeff Davis, I'm not a big fan of that, since the oldsters don't get to participate in the rise in living standards under that plan.

I'd prefer a tiny rise in the retirement age and a very small tax increase (like Obama's proposing).

Voila. Fixed.

Posted by mike | July 9, 2008 11:11 AM

Eric Lindholm said:

In that case, can you send me $1000?
In 40 years, I promise to pay you back 76% - and you'll be happy to get it!

That sounds like a horrible deal if you treat the scenario like one family member or friend loaning money to one another where in most cases things like interest and inflation don't come into play like they do with Social Security.

However, for fun let's assume I sent you $1000 in 1967 and as promised you paid me back. $1000 in 1967 is equivalent to $6325.10 in 2007, which is 40 years later. 76% of that is $4807.08. Admittedly that is still 76% of what I should be paid so the reduced benefit point remains, but how bombastic does your point sound if worded this way:

In that case, can you send me $1000?
In 40 years, I promise to pay you back $4807.08 - and you'll be happy to get it!

Posted by james | July 9, 2008 11:27 AM

Mike,

Retirement age is tricky; in many fields, it's entirely possible to keep working at a desk to 70 or beyond. But manual laborers may not do as well. Agreed that a strict conversion from wage to inflation basis is not desirable, but we may find it necessary to back off somewhat from the past generosity of wage indexing, while seeking to maintain a level of benefits that supports dignity and comfort.

The key point, though, and I'm sure we agree on this, is that what we need is tinkering and adjustment--there is no "crisis," and the program does not need to be "saved." Even with no increases in revenue, the program will continue to pay out benefits as far as the eye can see, and those benefits will be more generous in the future than they are today.

Posted by craig | July 9, 2008 11:29 AM

I'm sorry but Liberal Social Security Denial is like Conservative Climate Change Denial.

It doesn't f-ing matter that it worked in the past - demographics are changing and our society is older than it has ever been before and its going to get older still. We are approaching a time when there will NOT be enough young people to pay for the benefits promised/owed to the people old enough to collect.

Posted by libarbarian | July 9, 2008 11:38 AM

libarbarian,

We're also "approaching a time" in which the Sun will swell into a Red Giant and reduce the Earth to a charred cinder. As you must be perfectly aware, SSA will be able to pay out a level of benefits higher in real terms than they are today, for as far as it is possible to plan. Don't you have anything more urgent to worry about?

Posted by craig | July 9, 2008 11:59 AM

"Retirement age is tricky; in many fields, it's entirely possible to keep working at a desk to 70 or beyond. But manual laborers may not do as well"

If or when we need to adjust the SS tax and benefit formulae, I think we should raise the retirement age somewhat for higher-income workers. Manual laborers won't be common among those with higher incomes, and those that are (Tiger Woods?)will have enough warning to put a little extra money by to finance a couple of extra years of waiting for full eligibility.

Posted by BarryG | July 9, 2008 12:13 PM

James: well, not as bombastic.

However, if I were allowed to keep the $1000 and invest it myself, I could have the whole $6325. And that's just adjusted for inflation. If I were allowed to invest the $1000 at a modest 6% return rate, I would have >$10000 in 40 years.

A lot of people claim that people like me will still be getting a reasonable return even with a 76% cut. IIRC, this "reasonable" return is somewhere around 2% and that's before the 76% automatic cut slated around 2041.

The citizens of Galveston, Texas (somehow) opted out of the Social Security system and the 12.4% payroll tax in exchange for something like the personal accounts that have been proposed. Want to take a guess how many Galvestonians want to opt back into the system? (Answer: none)

Posted by Eric Lindholm | July 9, 2008 12:16 PM

Al's take is not possible to square with the video
(at http://www.youtube.com/watch?v=ugN8Rn5baqM&eurl=http://www.talkingpointsmemo.com/)

Matt's interpretation is completely reasonable.

I concede that it's a bit difficult to know just what McCain's point is here - as pointed out by LFC at 10:49, McCain's straight talk is a bit too incoherent and non-specific for me to figure this out.

Posted by Steve | July 9, 2008 12:23 PM

What McCain and his elk are afraid of, of course, is that the wealthy should be asked to live up to the bargain struck back in 1986.

McCain has an elk farm? I don't see anything about that on his tax returns! Perhaps he's covering up an improper relationship with the elk lobby?

Posted by TooManyDans | July 9, 2008 12:23 PM

Al's take is not possible to square with the video
(at http://www.youtube.com/watch?v=ugN8Rn5baqM&eurl=http://www.talkingpointsmemo.com/)

Matt's interpretation is completely reasonable.

I concede that it's a bit difficult to know just what McCain's point is here - as pointed out by LFC at 10:49, McCain's straight talk is a bit too incoherent and non-specific for me to figure this out.

Posted by Steve | July 9, 2008 12:25 PM

If it is means-tested, it ceases to be a social insurance program and becomes an entitlement program

Obama's plan does that very thing, since very high income earners would have to pay unlimited amounts of taxes for no new benefits.

Posted by Al | July 9, 2008 12:31 PM

It doesn't f-ing matter that it worked in the past - demographics are changing and our society is older than it has ever been before and its going to get older still. We are approaching a time when there will NOT be enough young people to pay for the benefits promised/owed to the people old enough to collect.

Well, but that's exactly why I've been paying more into the system since '83 than is needed to fund current benefits. What you're telling me is that you took my money, and don't propose to pay me back.

You know, it used to be that conservatives believed in principles like honor, and keeping one's word, and respecting one's elders. What ever happened to those guys?

Posted by rea | July 9, 2008 12:38 PM

However, if I were allowed to keep the $1000 and invest it myself, I could have the whole $6325. And that's just adjusted for inflation. If I were allowed to invest the $1000 at a modest 6% return rate, I would have >$10000 in 40 years.

...with which you could never, ever buy an inflation-adjusted annuity with a rock-solid guarantee equivalent to SS.

On the other hand, if you died early, your heirs would really come out ahead.

Posted by Jonathan Schwarz | July 9, 2008 12:40 PM

Apologies for previous double post.

Eric says no Galveston County employees would want to switch back, but the GAO found that social security was actually a better than the alternate system for many.
(see http://www.gao.gov/archive/1999/he99031.pdf)

Posted by Steve | July 9, 2008 12:44 PM

Eric: I wasn't arguing the point that the 76% is less, just suggesting that the language used initially was representing a flawed scenario. On this it appears we agree.

With respect to Galveston, it's plan and Social Security differ in a number of areas in how contributions are paid and benefits are received as detailed here. One aspects of the the report that jumped out at me is:

under the Galveston Plan contribution rates (payroll taxes) are higher than under Social Security;

So the community of Galveston opted out of Social Security and its 12.4% payroll tax (6.2% by employer, 6.2% by worker) and replaced it with a 13.9% contribution rate (7.8% by employer, 6.1% by worker). The rest of the report details how the two plans differ and they do differ by quite a bit, but payroll tax is not one of those areas once you opt in.
Galveston Contribution rate: 13.9% total (employer pays 7.8%, worker pays 6.1% )

Posted by james | July 9, 2008 12:47 PM

If I died early: Social Security for my heirs = $0

Inheritance for my heirs = $10,000

Thanks for helping to make my point.

Posted by Eric Lindholm | July 9, 2008 12:49 PM

You know, I thought Al actually was correct about McCain's meaning -- particularly since the meaning Matthew Y. was assigning to him was so bone-chillingly stupid.

But it turns out Al and I were completely wrong. As McCain demonstrated yesterday on CNN, he truly does believe that the problem with Social Security is retirees being paid from the taxes of today's workers:

ROBERTS: Senator, I'm sure you're also hearing from them about social security. Because you say that part of this plan, if you're going to balance the budget, is to reform social security. You've talked about the idea of private accounts, as President Bush tried to get through and couldn't. What else would you do to reform social security?...

MCCAIN: On the privatization of accounts, which you just mentioned, I would like to respond to that. I want young workers to be able to, if they choose, to take part of their own money which is their taxes and put it in an account which has their name on it. Now, that's a voluntary thing, it's for younger people, it would not affect any present-day retirees or the system as necessary. So let's describe it for what it is. They pay their taxes and right now their taxes are going to pay the retirement of present-day retirees. That's why it's broken, that's why we can fix it.

It's stunning. He genuinely has no understanding whatsoever of what Social Security is.

Posted by Jonathan Schwarz | July 9, 2008 12:54 PM

Eric, actually, if you died early, your heirs would receive survivor benefits. If you were disabled early, you would receive disability benefits.

Under the bush plan for social security, the only way your survivors would be better off would be if you died just before retirement AND your had no eligible spouse AND your children were over 21. Then your heirs would get something that they wouldn't normally get without SS. But I suspect it would be cheaper to just take out a very, very inexpensive life insurance plan.

Posted by Tyro | July 9, 2008 12:57 PM

Instead of bickering about mathematics, why aren't each and every one of us emailing this post to every newsite we know of?

I AM.

Posted by renegademom3 | July 9, 2008 1:43 PM

But Democrats in general are not interested in honest arguments over policy. They ar interested in demagoguery and smears - as perfectly evidenced by Matthew's earlier post smearing McCain as a gambling addict. --Al

Holy shit ... I damn near had a stroke from laughing so hard.

If Al projected any more, he'd be a PowerPoint presentation.

Not much to add on-topic, other than to reiterate what west coast posted above -- The reason SS isn't as solvent as it should be is because the GOP took it. They made sure it had enough money, and then used it to cover up the failure of their economic ideology.

It's really is that simple, as is the fix: Raise the limit from $90K to $200K.

Not sure why so many want to make it more complicated than it need be ... especially when the likes of McCain and Al are too stupid to understand the way it works already.

Posted by Mark D | July 9, 2008 1:48 PM

"demographics are changing ... We are approaching a time when there will NOT be enough young people to pay for the benefits promised/owed to the people old enough to collect."

Demographics are one of the few things that can be accurately predicted decades into the future. Birth and death rates change slowly and predictably. The current demographic changes were accounted for by the actuaries who structured the 1983 reform that greatly increased payroll taxes precisely in order to make sure that there WILL be enough young people to pay the benefits owed to current and future retirees.

The idea that actuaries in 1983 didn't understand that then-25-year-olds would be retiring in 2023 is too stupid for words.

Posted by Bloix | July 9, 2008 2:22 PM

James: thanks for the link to the Galveston SSA report, I had not seen that before.

A couple points: yes, it appears that Galveston workers pay a larger payroll tax into what is essentially a government-managed 403(b) account. They also receive higher benefits and greater control over their money, along with survivor and disability benefits.

But most importantly, and this is my fundamental point, workers provide for their own financial security. I don't want to take 12.4% of my kids' income at the very time they're trying to raise my grandkids (I hope!). Social Security was once supposed to help destitute seniors coming out of the Depression who couldn't do the manual labor required of that age. Now seniors are healthier, most work is no longer "labor", and seniors on the whole are much, much wealthier than 70 years ago.

In its current state, we're going to take payroll taxes from workers (and almost 80% pay more in FICA tax than federal tax) for 40 years and pay for green fees in Florida. Then, when it's time for those workers to retire, we're going to say: "Remember what we promised you? Well, here's 75 cents on the dollar." That's a recipe for generational conflict and in that sense McCain is right: it's a disgrace.

Posted by Eric Lindholm | July 9, 2008 2:22 PM

If I died early: Social Security for my heirs = $0

Inheritance for my heirs = $10,000

Thanks for helping to make my point.

Well, okay, as long as your point also is that if you lived longer than expected you'd be destitute and dependent on your heirs.

Posted by Jonathan Schwarz | July 9, 2008 2:23 PM

pay for green fees in Florida

This is, ultimately, your problem with SS: even though you know it does its job, you don't like the principle of the thing. Those seniors paid into it, and they chose to move to florida. Who am I to say what they should do with the benefits they've earned?

I'm woefully uninterested in whether some people under some circumstances might be able to get a better return on SS. What I do want is to continue a system where everyone is assured of SS after they retire, regardless of the circumstances of the market returns they received and what their employment situation and retirement program they had was.

Most people, however, manage their retirement using the multitude of tax deferred private account programs available. I'm not really sure what another set of private accounts which are funded with money that is taken out of social security, resulting in larger budget deficits, is supposed to accomplish, especially for most Americans.

Posted by Tyro | July 9, 2008 2:31 PM

I don't want to take 12.4% of my kids' income at the very time they're trying to raise my grandkids (I hope!)

Yet of course that's exactly what you'd be doing if Social Security didn't exist and you retired on your private savings. The only difference is that the transfer mechanism would be called "profit" or "capital gains" rather than "FICA."

I'm sorry to be snotty about it, but this is a very, very, very basic fact about the reality of saving and consumption. If you don't understand it, you can't even begin to make sense. Retired people will be exactly the same burden on the young, creating exactly the same kind of potential for generational conflict, no matter how they provide for their retirement. If you think American society is out of balance and we generally should retire later and/or retire poorer, then say so. That's a fair point. But Social Security has nothing to do with it.

Posted by Jonathan Schwarz | July 9, 2008 2:42 PM

Eric, no one is taking 12.4% of your kids' income. Their share of the tax is 6.2%. If SS were repealed tomorrow, you think their employers would raise their salaries by 6.2%? Dream on.

And no, in 2041 we're not going to say "here's 78% [NOT 75%] of what we promised you." Since the 1990's the SS administration has been consistently over-conservative in predicting when the funds will be inadequate to pay the full amount. The day of reckoning has been receding into the future for years now. In 1998, for example, the SSA said that the day of reckoning would be in 2032, and that beginning in that year SS would be able to pay "almost 3/4" of the promised amounts - that is, less than 75%. http://www.ssa.gov/OACT/TR/TR98/tr98.pdf

Miraculously, the date has been receding by almost one year per year - so that, ten years later, the day of reckoning is now in 2041, nine years further out!

Was there is crisis in 1998? The predictions of future performance are much better now than then. So why is there a crisis now?

The thing to do with SS is to leave it alone for fifteen years. If in 2023, it appears that there won't be enough money for retirees in 2043, there will be plenty of time to push the retirement age out, raise the cap on contributions, cut the size of the inflation increases, or a combination of all three. On the other hand, maybe the date will continue to recede and the system will appear to be fine until 2058. Either way, there is no reason to do anything at all right now.

Posted by Bloix | July 9, 2008 2:45 PM

Eric, no one is taking 12.4% of your kids' income. Their share of the tax is 6.2%. If SS were repealed tomorrow, you think their employers would raise their salaries by 6.2%? Dream on.

And no, in 2041 we're not going to say "here's 78% [NOT 75%] of what we promised you." Since the 1990's the SS administration has been consistently over-conservative in predicting when the funds will be inadequate to pay the full amount. The day of reckoning has been receding into the future for years now. In 1998, for example, the SSA said that the day of reckoning would be in 2032, and that beginning in that year SS would be able to pay "almost 3/4" of the promised amounts - that is, less than 75%. http://www.ssa.gov/OACT/TR/TR98/tr98.pdf

Miraculously, the date has been receding by almost one year per year - so that, ten years later, the day of reckoning is now in 2041, nine years further out!

Was there is crisis in 1998? The predictions of future performance are much better now than then. So why is there a crisis now?

The thing to do with SS is to leave it alone for fifteen years. If in 2023, it appears that there won't be enough money for retirees in 2043, there will be plenty of time to push the retirement age out, raise the cap on contributions, cut the size of the inflation increases, or a combination of all three. On the other hand, maybe the date will continue to recede and the system will appear to be fine until 2058. Either way, there is no reason to do anything at all right now.

Posted by Bloix | July 9, 2008 2:47 PM

Eric and Al say that the disgrace is that, under current projections, future retirees will receive around 3/4 of their formula benefits.

It's not so clear what McCain thinks is the disgrace, but he does say that he will make 'hard' choices to 'fix it' like they fixed it in 1983. What they did in 1983, of course, was to raise taxes. Raising taxes or cutting benefits are, fundamentally, the two choices to rectifying the projected imbalance.

I'm going to go out on a limb here, however, and presume that just like Bush, neither McCain, Al or Eric would support increasing taxes, for example by increasing the wage base. Nor would it make sense to propose cutting benefits, if you think that failing to meet promised benefits is a disgrace. Instead, what Bush, McCain and Eric are proposing is to discontinue social security and move to private accounts, presumably borrowing the money to pay for the transition.

This is the fundamental dishonesty: while they talk about fixing social security, they really want to make it go away, and while they go on and on about the actuarial imbalance, they have no qualms about piling the (very large) transition cost onto the existing national debt.

Posted by Steve | July 9, 2008 3:36 PM

McCain saying ". . . that we are paying present-day retirees with the taxes paid by young workers in America today. . ." shows he knows nothing. Almost all boomers are still working and paying into Social Security and many have been for over 45 years. There are the first boomers that were eligible to retire this year for the first time.

What has McCain been doing? He doesn't seem to know much about the programs that he votes on.

When a man pays into Social Security and dies before he draws, his wife can draw his Social Security if she has been a stay at home wife. If she has worked, but he earned more than her, she could get the amount he would have gotten.

The good thing about Social Security is that it is fair. 6.2% is taken out of each paycheck of anyone who works. So the more you make, the more is taken out. The more you pay in the more you get when you retire. A little extra is paid to the lower paid worker and they also get an earned income credit refund on their income taxes for getting low pay.

Posted by Jo | July 9, 2008 4:43 PM

So, if a man dies after paying SS for 35 years, and his wife worked also, one of them must forfeit their SS benefits? So somebody must give up the fruits of their labors?

That's "fair"? That sounds more like "tough titties".

Posted by DDP | July 9, 2008 5:39 PM

Steve - Yes, it's true, I'm dead set against raising FICA taxes. When Social Security started, Americans had to pay 2% of income (1%+1%), and now they pay 12.4% (6.2%+6.2%). The regressive payroll tax is so high now that >70% of Americans pay more in payroll taxes than federal income tax.

One solution offered by Obama and others on this thread is to raise the cap on wages taxes. However, this irreversibly alters the "universality" of Social Security that has made it a popular program. Instead, it becomes yet another way to redistribute income.

To the person who thinks the seniors can spend their SS money on green fees: I think FDR would be mortified if he saw what's happened to his program. It was intended to be a helping hand for destitute seniors who lost everything in the Depression. Today, it's morphed into a massive cash-transfer from young and poor(er) workers to old and rich voters.

Posted by Eric Lindholm | July 9, 2008 8:03 PM

No, if a man does like he is told by his broker, buys index funds, which they say are going up, but really aren't beating inflation and are really worth less because of the falling dollar and the market crashes and he loses 50% of it. THAT is tough tittie.

There are less losers in Social Security, than in the stock market.

The spouse gets to draw the higher benefit. Would you have her draw both?

Social Security is an insurance. Those who work contribute 6.2% out of their pay to FICA, which stands for Federal Insurance Contribution Act. It pays disability for the rest of your life, not 2 years, like most disability insurance does. It pays your children a benefit, if you die, until they are nineteen. It pays benefits until you die. If you live until you are one hundred, you will get more than someone who dies at 70. That is life.

If nothing else it beats most annuities because they keep your money and pay you a lot less.

Some people buy life insurance one day and have an accident that kills them the same month. Another person takes out life insurance and pays on it for 60 years before they die. That is life.

Posted by Jo | July 9, 2008 8:08 PM

No, if a man does like he is told by his broker, buys index funds, which they say are going up, but really aren't beating inflation and are really worth less because of the falling dollar and the market crashes and he loses 50% of it. THAT is tough tittie.

There are less losers in Social Security, than in the stock market.

The spouse gets to draw the higher benefit. Would you have her draw both?

Social Security is an insurance. Those who work contribute 6.2% out of their pay to FICA, which stands for Federal Insurance Contribution Act. It pays disability for the rest of your life, not 2 years, like most disability insurance does. It pays your children a benefit, if you die, until they are nineteen. It pays benefits until you die. If you live until you are one hundred, you will get more than someone who dies at 70. That is life.

If nothing else it beats most annuities because they keep your money and pay you a lot less.

Some people buy life insurance one day and have an accident that kills them the same month. Another person takes out life insurance and pays on it for 60 years before they die. That is life.

Posted by Jo | July 9, 2008 8:08 PM

No, if a man does like he is told by his broker, buys index funds, which they say are going up, but really aren't beating inflation and are really worth less because of the falling dollar and the market crashes and he loses 50% of it. THAT is tough tittie.

There are less losers in Social Security, than in the stock market.

The spouse gets to draw the higher benefit. Would you have her draw both?

Social Security is an insurance. Those who work contribute 6.2% out of their pay to FICA, which stands for Federal Insurance Contribution Act. It pays disability for the rest of your life, not 2 years, like most disability insurance does. It pays your children a benefit, if you die, until they are nineteen. It pays benefits until you die. If you live until you are one hundred, you will get more than someone who dies at 70. That is life.

If nothing else it beats most annuities because they keep your money and pay you a lot less.

Some people buy life insurance one day and have an accident that kills them the same month. Another person takes out life insurance and pays on it for 60 years before they die. That is life.

Posted by Jo | July 9, 2008 8:08 PM

and if that man died 10 years after he married with two kids, his wife and his minor children would get payments till the kids reach maturity.

Or if he became disabled.

It's insurance. Do you complain after paying years on a disability policy or a term-life because you didn't get to use the benefit?

It amazes how little understanding there is about the basics of insurance.

In regards to the retirement benefit, consider an income annunity. Let's say I buy an income annunity and pay into year after year and when I retire I select a lifetime benefit with right of surviorship for my spouse..then we both die while trying scuba diving for the first time...the insurance annunity company keeps the money.

The retirement portion of social security is similiar to an income annuity and it's the best program the government ever put in place for middle-class people.

Posted by gearguy | July 9, 2008 8:14 PM

and if that man died 10 years after he married with two kids, his wife and his minor children would get payments till the kids reach maturity.

Or if he became disabled.

It's insurance. Do you complain after paying years on a disability policy or a term-life because you didn't get to use the benefit?

It amazes how little understanding there is about the basics of insurance.

In regards to the retirement benefit, consider an income annunity. Let's say I buy an income annunity and pay into year after year and when I retire I select a lifetime benefit with right of surviorship for my spouse..then we both die while trying scuba diving for the first time...the insurance annunity company keeps the money.

The retirement portion of social security is similiar to an income annuity and it's the best program the government ever put in place for middle-class people.

Posted by gearguy | July 9, 2008 8:16 PM

Eric-

I’ll be damned if I can make sense of your arguments. You say:

1. It is an indictment of the system that after 2040 retirees will only receive about 3/4 of their promised benefits;
2. It is unacceptable to raise taxes to improve funding of future benefits;
3. Given point 1., it is (presumably) unacceptable to simply reduce promised benefits so that they can be paid with available funds.

Though existing system’s weakness is your primary complaint, no step to shore up the system is acceptable to you. Should rich retirees see a benefit reduction so they have to cover their own green fees, or would that amount to a disgraceful promise-breaking?

4. It is an indictment of the system that returns through Social Security are significantly lower than what could be achieved through private investment;
5. Accordingly, what we should do instead is allow workers to retain the money they would have paid in taxes in their own private accounts, as these would get a better return.

What this neglects is that the low effective return is primarily a consequence of the fact that the FICA taxes that you propose to redirect are needed to pay current and future retirees. If you allow workers to retain the money they would have paid, you will have to borrow money from elsewhere to pay these retirees. Once you include this in the calculation the difference in effective return largely disappears.

6. Raising the wage base (maximum wage on which FICA is levied) would irreversibly change the program from a popular universal program to just another redistribution of income from rich to poor.

Are you saying that you value the universal aspect of the program, or just that other people do? If the latter, I would think you would support increasing the wage base so as to make the program unpopular and thus more susceptible to repeal. If the former, how am I to reconcile this with your disdain (in the very next paragraph!) for greens fees and your assertion that FDR would be mortified to know that payments are not just going to destitute seniors?

Posted by Steve | July 10, 2008 8:26 AM

I wonder if either Al or Eric think it a shame to renege on the 1986 Social Security agreement which saved Reagan's face?

Posted by Jeffrey Davis | July 10, 2008 8:45 AM

Many of these projections on Social Securities solvency are predicated on the notion on the Social Security Trust fund being there. But it's not. It's a pile of IOU's for government borrowing. To fund Social Security in the future, they will have to pay money out of general funds to redeem those IOU's.

So either way, we're screwed.

And, contra the Democratic cheerleaders on this site, it wasn't just the eeevil Ronald Reagan who plundered the SS Trust Fund. Everyone has done it since it was created. If Clinton hadn't raided the trust fund, the budget would never have been "balanced".

I still don't think anything can surpass Al Gore's stupidity on this issue. He proposed to invest the projected budget surplus into Social Security. Which means the government would have borrowed from the SS Trust Fund to get a budget surplus, put the money into SS again and then borrowed it again. So instead of pretending to have $4 trillion in the SS Fund, we would have pretended to have a $5 trillion. I always wondered why he didn't propose doing that over and over again, shuffling debts from one ledger to another until we had $100 trillion in the SS Fund.

Posted by Mike | July 11, 2008 12:13 AM

Mike sorry but, if you are going to lie to people, you should stick to people less well informed or pick a topic in which you can bamboozle them.

There were no systemic overpayments to Social Security until the evil Ronald Wilson Reagan got together with uber-hack Alan Greenspan and gave the working class the biggest tax raise in history.

It turns out that the board is also not going to believe your lie about Clinton. Sure, before he managed to balance the budget he claimed that he had, and used the Social Security overpayments as a way to mask the debt. But in his final year there was, excluding the Social Security system, no deficit. You could look it up, but why would you - you are trying to sell a bundle of bullshit that claims Reagan didn't create the Trust Fund and that anyway there is no Trust Fund and besides liberals said mean things about the hero of the revolution, or whatever.

As for your using the lie about the deficit as the basis for your idiotic fairytale about Gore, the less said the better. In fact, given your 0 for 3 track record in a single post, probably the less you say the better.

I will point out that, unlike the General Fund, Social Security is still in surplus. Were you truly concerned that those IOUs weren't going to be repaid you would be demanding an increase in the collection of income taxes (which can only be done by raising the rates) so as to offset the massive debt owed Social Security and then proposing some investment vehicle for the money in Social Security.

But, as I say, you aren't interested in solutions - only in destroying a perfectly workable, and well functioning, program.

Posted by Not as stupid as Will Allen | July 11, 2008 12:38 AM

Mike, you have just surpassed Al Gore's stupidity on this issue:

"So instead of pretending to have $4 trillion in the SS Fund, we would have pretended to have a $5 trillion."

There is no truth to this whatsoever.

May I suggest that you consider, the next time you find a proposal surpassingly stupid, the possibility that you don't actually understand it.

Posted by Steve | July 11, 2008 8:04 AM

"There were no systemic overpayments to Social Security until the evil Ronald Wilson Reagan got together with uber-hack Alan Greenspan and gave the working class the biggest tax raise in history."

Well, you can't simultaneously claim that SS is in good fiscal health and condemn the overpayments. It was a stupid accounting gimick to create the SS trust fund. And you're agreeing with me that is a back door tax hike. The point remains: Everyone -- Democrat and Republican -- has been willing to buy this lie of the SS trust fund for 25 years.

If I create a college fund for my kids whose "assets" consists entirely of loans to myself, how is their future secure?

"It turns out that the board is also not going to believe your lie about Clinton. Sure, before he managed to balance the budget he claimed that he had, and used the Social Security overpayments as a way to mask the debt. But in his final year there was, excluding the Social Security system, no deficit. "

In other words, Clinton played the Deficit Game every year but his last. And in fact, you are wrong. Clinton claimed a surplus and projected a surplus based on borrowing from the SS trust fund. He was more responsible than Bush with budgeting. Duh, we knew that. But he didn't subtract the SS trust fund borrowing when he made his budget projections, did he?

"As for your using the lie about the deficit as the basis for your idiotic fairytale about Gore, the less said the better."

So Al Gore didn't propose to invest the budget surplus back into social security?

"would be demanding an increase in the collection of income taxes (which can only be done by raising the rates) so as to offset the massive debt owed Social Security and then proposing some investment vehicle for the money in Social Security."

So you agree with me. We *are* going to get a big tax hike when the IOUs come due. Actually, what I would prefer instead is a rise in retirement age and moving of the benefit growth closer to inflation than wage growth so that it keeps with future SS tax revenue. Means testing wouldn't be a bad idea either, although it would change SS into more of a wealth transfer system (which is what Obama is proposing anyway since he wants to raise the cap on SS taxes but not SS benefits).

And I'm curious about the "investment vehicle"? Is it the statist idea (proposed by Clinton actually) that the feds should invest the surplus in the stock market? Yeah, that will go well. No influence peddling there.

"There is no truth to this whatsoever."

Apparently, borrowing money from a trust fund, loaning it back and borrowing it again sounds like good fiscal policy.

Posted by Mike | July 11, 2008 3:50 PM

The Social Security "crisis" is our domestic WMD threat. The astounding ignorance on this subject demonstrated by Al, Jaybird, American Hawk et al shows what an effective job the Cato Institute and other Wall Street-funded think tanks have done in brainwashing much of the public. If comments like these are made by readers of The Atlantic, I shudder to think what must be going on in the minds of the Fox News audience.

Posted by Frank | July 12, 2008 8:56 AM

The Social Security "crisis" is our domestic WMD threat. The astounding ignorance on this subject demonstrated by Al, Jaybird, American Hawk et al shows what an effective job the Cato Institute and other Wall Street-funded think tanks have done in brainwashing much of the public. If comments like these are made by readers of The Atlantic, I shudder to think what must be going on in the minds of the Fox News audience.

Posted by Frank R | July 12, 2008 10:14 AM

Mike, you simpleminded twit, I have agreed with you on almost nothing. There is no crisis because of the massive overpayments you fucking moron. If there is a need to cut things it isn't the program that is already in surplus, it is the general fund that has used artificially low tax rates allowed by the surpluses in Social Security.

It may surprise you to know this, but 401(k) programs allow you to borrow from yourself - with the promise that you will pay the money back with interest. This is exactly saving for your retirement with IOUs. And do you know why this works? Because you cut back on your other expenses to pay back the loan.

Idiots like you, Mike, keep pretending that the rest of us are as stupid as you are - the fact that the general fund owes money to Social Security means that the money should come from the general fund. What kind of fucked up world do you live in where you borrow money from me, and then insist that it means that I have to cut my spending?

Posted by Not as stupid as Will Allen | July 12, 2008 10:48 AM