Excellent point

Yes, you are right to point out that the 7 to 1 statistic needs to be interpreted. First, that is a Federal Government estimate, and omits the local government school expenditure.

Second, you are right that there are designated taxes for Social Security and Medicare.

Third, "seniors paid for these benefits." is not accurate, because the taxes paid were not high enough to cover the programs.

If those programs were in fact fully paid for, there should be enough money in their trust funds to meet their future obligations.

In 2008, the Medicare trust fund was only 381.6 billion while expenditures were
468.1 billion. That means without new taxes coming in, Medicare could not meet its obligations even for one year.

Social Security was better off in 2008 with a 2,366 billion trust fund and expenditures of 617 billion per year. (Only 4 years)

Hence the seniors have not paid in full for their benefits.

Why did this happen? A good example is the prescription drug benefit which applied to the current seniors with no change to their historic payroll tax deductions.

Mr Perlstein objects to the "proposal to shower Social Security recipients with a $250 cost-of-living increase this year even though their cost of living has actually declined." If the government decided to pay an extra $250 dollars to everyone who held treasury bonds, you would not argue that they paid for it by partially buying the bond.

ttp://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2009.

http://www.ssa.gov/OACT/ProgData/fyOps.html

Besides being dishonest or incorrect, the arguments made by Perlstein and AndrewDover are not germaine economically. In a recession the idea is to supply money. This can theoretically be done through the Federal Reserve and banks, but banks have the option of using the money for financial speculation and also just sitting on it - at least they obviously have these options the way things are done at present. Most SS recipients spend all their income, so these payments would get into the economy immediately. This is why this option is favored by non-supply-side economists.

Apart from any additional stimulus payments most SS money is just taken from workers (not capitalists - interest, dividends and capital gains are not taxed) and immediately handed over to retirees, who probably spend more of it than the workers, who have to save for their own retirement (unless they want to get along only on SS). If the objective is spending, SS is a stimulative program. The SS Trust Fund has nothing to do with it, particularly at the moment when it is essentially revenue neutral. In the future, as the Trust Fund is paid out to baby boomers, the money will be taken from general revenue (all kinds of income and other taxes), which again will foster spending, although this may not be the best thing to do at that time.

SS will not be bankrupt when the Trust Fund is gone, whenever that occurs - it will continue just as it has since the beginning - that is taking money from workers and giving it to retirees.

Which argument did I make that was dishonest or incorrect?

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AndrewDover:

I did not mean to imply that your arguments are dishonest, but saying that seniors have not paid for the programs is incorrect. You appear to be making the common mistake of confusing SS with private retirement savings plans (every time Dean discusses SS it seems that at least one commenter does this).

It is true that SS recipients get more than they paid in, but this has nothing to do with the Trust Fund. The basic idea of SS is to take money from workers and immediately give it to retirees. Retirees actually get more than they paid in because the population is growing and some people die after having paid in but before retiring, so there are more workers compared to retirees. Also real wages have grown during some parts of U.S. history, though at the moment non-supervisory wages are at a level first passed around 1959:

www.skeptometrics.org/WeeklyWages/WeeklyWages.htm

(Those at the SS limit have probably done better, but still have probably not improved much in the last 50 years.)

The Trust Fund is just an adjustment for temporary population and economic fluctuations, above all for the baby boom. Its current surplus of about $2T is designed to be paid out by the time all boomers are dead. The boomers actually have paid in that $2T and they should get it back. When the Trust Fund is back to near zero SS will be back to the original design - money in from workers, money out to retirees. The Trust Fund is *not* a savings plan and not like a 401k or other retirement savings plans - in no way does it represent the total amount paid in by workers, and in no way are future benefits to retirees beyond about 2040 dependent on its existence. If SS payments are reduced to stretch out the Trust Fund, boomers will be cheated; if SS taxes are increased, later generations may be cheated.

To return to SS retirees only the amount that they paid in (corrected for inflation and/or interest) would deny them any benefits of an expanded economy and expanded population. In any case, as long as SS tax rates remain reasonably constant, they get will get more than they paid in, and every generation gets the same deal.

Medicare is more complex because benefits are not fixed and medical costs have been increasing much faster than wages, but the basic idea is the same; workers pay now for those over 65 and when they in turn reach that age they will be paid for by the next generations. From an economic point of view there is no reason why medicare taxes could not be adjusted every year to keep its budget within a reasonable balance.

> This sort of comparison is dishonest.

Comparing how much government spend in total on children and on seniors is not dishonest, but a useful exercise in the philosophy of justice and to study how voting power has skewed the payments in seniors' favor. The seniors might believe that their SS is paid by their contributions, but as others have pointed out the general fund has to chip in soon, and seniors have voted themselves clearly the better end of the bargain. Children don't vote yet and are regularly disfavored by public payment balances. Children will have to choose to pay the taxes that their elders voted on them or to reject the payments together with the AARP state and live on the black market for workers and goods. Currently, the second choice is the worse one, but there will likely be a time when it is the better one for today's children, and it will express itself in massive inflation.

AndrewDover wrote, Third, "seniors paid for these benefits." is not accurate, because the taxes paid were not high enough to cover the programs.

False.

The taxes paid by the average senior are certainly enough to cover his/her benefits.

Furthermore, taxes paid in general are enough to cover benefits.

While some (most?) of the benefits being paid out currently are paid for by taxes paid currently---by people other than current recipients, IOW---that doesn't mean the contributions paid by a given senior don't in principle cover his benefits.

Where'd the missing money go? The "implicit debt"---i.e., there were certainly people awhile back who paid in far less than they received.

But that doesn't mean people who are getting money now on average have an unjustly high rate of return.

skeptonomist wrote, Retirees actually get more than they paid in because the population is growing and some people die after having paid in but before retiring, so there are more workers compared to retirees.

Right. Though the notional rate of return is probably not unjustly high.

I think skeptonomist agrees that seniors have not fully paid for the programs.

Either the seniors fully funded their benefits or there are unfunded liabilities.

And if your program is dependent on the concepts of a "growing population",
"workers pay now for those over 65" and "adjusting medicare taxes" as skeptonomist writes, then it is obvious that there are unfunded liabilities.

If you want more evidence about the state of Medicare and Social Security, see
http://www.socialsecurity.gov/OACT/TRSUM/index.html

Check out chart D for example.

Some things pop out at me.

1) Business columnists are almost always nutty right wing, most being drooling knucklewalkers.

2) The "research" and the comparison comes from Brookings. I remember when they were center-left, but they turned wingnut in the Clinton era.

3) The right fringe is always trying to pit groups of ordinary Americans against each other so they won't go after the banksters (as you mentioned), Big Oil, Big Coal, the HMOs, the mercenary corporations, and the arms merchants.

Skeptonomist,

You seem to be acknowledging that SS is essentially not an investment program (designed to provide a return based on invested funds and performance of the investment) but rather is a pay-as-you-go transfer payment system that, although related substantially to the support one gave seniors while he was working, to a large extent reflects a general societal value/priority that some generations will, at any given time, support others, and at other times in a given cohort's life will be on the receiving end of support from other generations.

Well, in the case of SS, seniors comprise the supported generations. In the case of education, it's children. Yes, one's SS benefit level is related to one's prior contributions and yes, as Dean suggests, there is a merit component (paying seniors back), but to a significant extent, the essence of SS, as with funding of education, is inter-generational support based on our values and priorities and the benefits provided are de-coupled from the concept of merit and "fairness" in the sense of paying them back. And viewed from that perspective, people can certainly have legitimate disagreement with the amount of support given to seniors vs. to children (and in the case of more affluent seniors, "support" seems like a misnomer).

The above is not commentary on with whom I agree as a matter of "fairness", values and priorities, just my two cents on the principles involved in the debate.

The main message I would try to get across is that SS is not going to be bankrupt when the Trust Fund expires, and that it should be paid out in the coming 30 years or so. There are really no unfunded liabilities in SS. This does not mean that some major changes will not have to be made. I was just looking at the Census projections - currently there are about 4 people of working age per retiree, but by 2030 there will only be about 2. Either SS tax rates will have to go up or benefits relative to wages will have to go down. If real wages increase over the next 30 years increased taxes would be affordable (or decreased benefits would go further), but they have not really gone up in the last 50 years for the low-income people who depend on SS. Privatizers rarely mention that inequality has increased to such an extent that low-income people may not be able to pay for retirement no matter what the plan is.

As for government expenditures on children, this comes mostly from cities, counties and states and is funded with sales and real-estate taxes. If Perlstein or anyone else wants the federal government to be responsible for spending on children they should be campaigning for schools to be completely taken over by the federal government, and for it to collect those taxes.

Most of Perlstein's piece is sensible - he agrees with Dean and most other economists that the housing credit is ridiculous. But he does say that "government cannot -- and does not -- control our market economy". Actually government is almost a third of the economy (more in a recession) and this may a main reason why we have not had any more Great Depressions - yet. But as government has been captured by big business the stabilizing effect has decreased. Even Greenspan has realized that big business can't control itself.

The "seniors" are the wealthiest class of people that ever lived on the earth. Yet they pay no taxes and recieve government subsidized healthcare and more social security income than they ever payed in.

The baby boomers actually will recive a fair rate of return on their SS dollars.

It is a national disgrace that the rate of poverty among children is at least 4 times that of "seniors".

Repeal the tax cuts on passive income and capital gains as opposed to wage income. In addition, the tax on unearned income transfer by estates has to be reinstated to levels before Bush. If you win the lottery, the tax is paid.

"The "seniors" are the wealthiest class of people that ever lived on the earth. Yet they pay no taxes and recieve government subsidized healthcare and more social security income than they ever payed in."

Pay no taxes? Since when? My spouse and I are middle-income retirees and we not only pay the usual - property and sales plus a host of hidden taxes - but we also pay state and federal income taxes. The only taxes we don't pay are FICA because we are retired. Our house is paid for so no mortgage deduction for us.

My spouse gets SS and Medicare after paying into the system for about 40 years (longer on SS) and I can't collect full SS until I'm 66 about 4 years in the future. The last 20 years or so that I worked, I maxed out on FICA. No kids so we didn't use public schools past childhood. About the only government benefit other than SS and Medicare for my spouse - which we paid into for decades - that we get that isn't available across the board is a slightly cheaper local bus fare (50 cents as opposed to a dollar).

Where did you get the idea that seniors don't pay taxes?!

For most people retiring in the near future the projected return on SS is around 2.0 percent. This is hardly a bonanza.

As I said before, the important shortfall is in Medicare which took $184.1 billion dollars from General Revenue in 2008, not Social Security which has yet to exhaust its trust fund.

https://www.socialsecurity.gov/OACT/NOTES/ran5/an2004-5.html

shows higher real rates for lower income, substantial advantages to 1 earner married couples, and historically declining rates of return.

Andrew,

Re: As I said before, the important shortfall is in Medicare which took $184.1 billion dollars from General Revenue in 2008, not Social Security which has yet to exhaust its trust fund.

That statement makes it sound as if general fund revenues aren't spent on such programs until their respective "trust funds" are "exhausted", which of course is not the case. These "trust funds" don't have a pile of cash or marketable securities, just a type of Treasuries, which means that funds go from the general fund (what you're calling "General Revenue") to these programs (via their respective "trust funds") as soon as the dedicated tax revenues for these programs falls short of expenditures, not when the "trust funds" are "exhausted".

"It is a national disgrace that the rate of poverty among children is at least 4 times that of "seniors"."

This is in large part because we are currently importing poverty wholesale in our policies of (1) ignoring massive illegal immigration of low-skilled and poorly educated workers and (2) allowing extended family reunification. It will be even worse if we allow BHO, NP, and HR to ram through an amnesty that will not only allow quite possibly as many as 20 million illegal aliens to be put on a path to citizenship - if that's what they really want - but also to import not just their immediate families but also siblings, elderly parents, and grown children and THEIR immediate families.

We have a core group of very poor people in the US. With luck, we might be able to make their lives a little better and possibly move at least some of their children along the path to middle class lives. We don't have the resources to take in millions of poorly educated low-skilled workers from third-world countries EVERY YEAR and try to do the same for them, nor do we seem to know exactly HOW to do this even for our own.

Childhood poverty is bad, no doubt about it; but as long as we import poverty wholesale, we are going to have a boatload of it. At the same time, the extra competition for low-level jobs requiring few skills will increase unemployment and drive down the wages of our own unskilled workers, thereby increasing childhood poverty.

As the recession pushes more people into needing services such as Medicaid, it also lowers tax revenue causing states to have to cut Medicaid budgets. More people needing more services plus lower resources to spend equals fewer service for all of them. This unfortunately may be what we are going to see in the current health care reform bill.

This may not be a popular opinion on this blog but it reflects the facts on the ground.

And FWIW, poor seniors who can barely support themselves don't produce children which they also can't support.

"Anonymous" (11/9 6:33pm),

Your calling the president "BHO" indicates bigotry and bigotry-based partisanship on your part, whether correctly or not. And please don't bother saying "Uhhh, it's just da' guy's intials, man", because anyone with even an ounce of common sense knows that, in general, those who include "Hussein" or the initial "H" are seeking to trigger some bigoted reaction in people to alienate them from Obama on the basis of his middle name. So, unless you're some fairly rare exception, you (probably inadvertently) revealed more about yourself (and more to turn people off and limit your credibility) and than you wished.

"Your calling the president "BHO" indicates bigotry and bigotry-based partisanship on your part,"

Brooks, you're a giggle!

We have had JFK, LBJ, RMN, FDR, etc, etc, GWB, and now BHO. I have referred to the POTUS EXACTLY as I would have referred to these other POTUS's. Wouldn't I have been making a far more "bigotry-based" statement by NOT referring to BHO exactly as I would to other Presidents? Why treat him differently?

Should I have referred to him as BO - also an abreviation for body odor? Would that have pleased you? Give me a break. What nonsense!

As for my credibility, the facts are the facts.

Anonymous,

Most likely you are full of sh*t. Believe me, I've heard the "uuuhhh, there just his initials, man" line before. You could be a rare exception, but I strongly suspect that the vast majority of those who use "BHO" do so as a derivation of "Barack Hussein Obama" (which they probably use among their right-wing friends, online and otherwise), thinking that the initials version provides them plausible deniability.

To be perfectly honest, Brooks, I usually use simply Obama when I refer to, er, well, what's-his-name. I actually used BHO in type just as I have used JFK, LBJ, FDR etc for years. FWIW most of my friends are left-wing or middle-of-the-road as I am and none of them seem obsessed with Obama's middle name. It's a name, for Christ's sake - just like Baines, Fitzgerald, Delano, etc! Also FWIW, YOU seem to be the person with the hang-up. If JFK is good enough for JFK, LBJ is good enough for LBJ, and FRD is good enough for FDR, what the hell is wrong with BHO?

You don't know the first thing about me, Brooks, and I don't feel obligated to expound on the subject. And this still doesn't change the facts of my post! Which is what I thought this blog was supposed to be about....

It does not bother me how anon writes the name; President Obama or BHO.

There are two concepts that do bother me though:

1) The Nationalist concept that "we" are in country X. That "we" are harmed if peple move into "our" country. This is different from the Nazi racial theories only by geography rather than heritage. Tens of millions of people were killed in WW2 as the result of those politial approaches, and that is not the way to a better future.

2) The possibility of a sealed border mythology. The current policy is actually to spend over $14 billion per year on "Immigration and Customs Enforcement" and "Customs and Border Protection". That is up around 40% from 2007. However, many people just fly in on a tourism visa, and simply don't return. I think it is just unrealistic to do anything else with the current people with illegal status other than accept them as citizens. Dropping tariff barriers makes more sense than to keep people from moving across national boundaries.

AndrewDover

The Concept that 'we' are in nation 'x' is national sovereignty, and there is nothing wrong with it. All nations have the right to determine whom they allow into their respective nations. Nations that cannot do this tend to be called failed states. The nation with probably the strictest control on immigration is Japan, and it is hardly "Nazi". The country that accepts the most legal immigrants annually is the US. I'm not advocating that the US adopt laws as strict as Japan's. I'd settle for having the laws on the books now actually enforced as strictly as Mexico enforces theirs.

It would not be that difficult to remove those who are in the US illegally. Simply adopt E-Verify for both employment and for most benefits. It's highly accurate and we could start as many businesses have already done by clearing new hires, then work backward. We should also force the SSA and IRS to resolve multiple use of SS#. If the SSA has reason to believe that your SS# is being used illegally, they will not contact you. This is idiocy.

It is true that many illegal aliens arrive legally and simply overstay their visas. This can and should be solved by a tracking system, which is actually in the works. BTW some of the 9/11 terrorists, including Atta, fall into this category. He was actually stopped on a traffic violation while here illegally and was released without anybody checking his status.

Also, we tried the anmesty route in 1986, when the million or so illegal aliens in the country then were granted amnesty and we were promised strict enforcement. The million turned into nearly 3 million, not including family reunification. We are still waiting on enforcement but now there are 12-20 million illegal aliens in the US. Amnesty merely begets more illegal aliens.

AndrewDover

The Concept that 'we' are in nation 'x' is national sovereignty, and there is nothing wrong with it. All nations have the right to determine whom they allow into their respective nations. Nations that cannot do this tend to be called failed states. The nation with probably the strictest control on immigration is Japan, and it is hardly "Nazi". The country that accepts the most legal immigrants annually is the US. I'm not advocating that the US adopt laws as strict as Japan's. I'd settle for having the laws on the books now actually enforced as strictly as Mexico enforces theirs.

It would not be that difficult to remove those who are in the US illegally. Simply adopt E-Verify for both employment and for most benefits. It's highly accurate and we could start as many businesses have already done by clearing new hires, then work backward. We should also force the SSA and IRS to resolve multiple use of SS#. If the SSA has reason to believe that your SS# is being used illegally, they will not contact you. This is idiocy.

It is true that many illegal aliens arrive legally and simply overstay their visas. This can and should be solved by a tracking system, which is actually in the works. BTW some of the 9/11 terrorists, including Atta, fall into this category. He was actually stopped on a traffic violation while here illegally and was released without anybody checking his status.

Also, we tried the anmesty route in 1986, when the million or so illegal aliens in the country then were granted amnesty and we were promised strict enforcement. The million turned into nearly 3 million, not including family reunification. We are still waiting on enforcement but now there are 12-20 million illegal aliens in the US. Amnesty merely begets more illegal aliens.

Yes, it is possible to identify non-citizens in the US with e-verify, secure ID cards with biometrics etc.

But the US has not decided to deport millions of people who have been living in the country for years. And deciding that 2 or 6 years of residence prevents you from being deported is a delicate question. For example, you and I would disagree on that time. That is why the detection effort has lacked teeth.

The history of such efforts is scary:

From the Programme of the NSDAP:

4. Only members of the nation may be citizens of the State. Only those of German blood, whatever be their creed, may be members of the nation. Accordingly, no Jew may be a member of the nation.

7. We demand that the State shall make it its primary duty to provide a livelihood for its citizens. If it should prove impossible to feed the entire population, foreign nationals (non-citizens) must be deported from the Reich.

8. All non-German immigration must be prevented. We demand that all non-Germans who entered Germany after 2 August 1914 shall be required to leave the Reich forthwith."

"4. Only members of the nation may be citizens of the State. Only those of German blood, whatever be their creed, may be members of the nation. Accordingly, no Jew may be a member of the nation.

7. We demand that the State shall make it its primary duty to provide a livelihood for its citizens. If it should prove impossible to feed the entire population, foreign nationals (non-citizens) must be deported from the Reich.

8. All non-German immigration must be prevented. We demand that all non-Germans who entered Germany after 2 August 1914 shall be required to leave the Reich forthwith."

This has nothing whatsoever to do with US immigration policy, which is the most liberal in the world.

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