I favor Social Security reform, but I have to say that SS has also lifted a whole lot of people out of poverty.

Democrats ought to recognize that all but a few die-hard conservatives have given up on abolishing SS outright, so we ought to put away our fears and our rantings and support reform that will allow for investment returns.

Here we go again with a fundamental misunderstanding of how Social Security works.

The government never "gives back" to you the money you pay into Social Security nor does it "hold onto" any cash (except the surplus of receipts over expenditures, which exists only because SS taxes aren't instantly adjusted to constantly adjust inflow to perfectly match outflow).

The money you pay, today, goes directly to supporting Social Security recipients today, minus the 1%, a staggeringly low figure, that's lost to administrative and overhead costs.

When you're old, feeble, and/or disabled the money that you receive won't come from some accumulated fund earmarked with all the money you paid in the past. It will come from Social Security payees THEN.

That's the fundamental underpinning of the SECURITY part of Social Security. It doesn't require investment in any instrument except that of society itself. It's not subject to the ebb and flow of the material economic cycle. There is no need to worry about "good" years and "bad" ones from an investment point of view. One generation takes care of the preceding one irrespective of the swings of the markets, etc.

I think that a large part of the reason that you don't see more pro-reform "blogging" is that nobody who waves their hands around about the "need" to reform SS has any idea whatsoever how the system actually works. It's far easier to complain while assuming parity between SS and dumping your hard-earned cash into Netscape futures, which we all know will earn 22% a year forever.

greg

From what I understand, blood transfusions are basically a losing proposition as well. For every pint of blood you give, people in need only get a percentage. Some of the blood is NEVER used! Also, there's no interest earned on the blood whatsoever.

Imagine an I.V. going from one arm to the other, with some blood spilling out in between. That's the basics of the blood donation industry. Keep your blood! You can use it yourself!

Greg, I hope that comment wasn't directed at me. I fully understand that SS is a pay-as-you-go system. This is a fun little analogy, and no analogy is perfect. And I don't agree with this statement at all: "I think that a large part of the reason that you don't see more pro-reform 'blogging' is that nobody who waves their hands around about the 'need' to reform SS has any idea whatsoever how the system actually works."

Joshua,

With all due respect, when you use phrases like "in hopes [that] the government will give it back to you" and "the government holds on to this massive amount of cash, we lose out on much of it because of inflation ...", you betray a fundamental misunderstanding of how Social Security was architected, how it works, and what the qualitative differences are between any pay-as-you-go system and a system of investment and why the two schemes are not antagonistic but actually complimentary.

A philosopher pointed out in another thread, you cannot really make comparative evaluations between a "paygo" system and an investment system -- it's apples and oranges.

If we do anything, I hope we can dispel the rhetorical notion that big-bad government is "taking" the money from you. Again, with the exception of its 1% administrative overhead (which is far lower than the overhead encountered in the private sector), the Social Security Administration does nothing more than to serve as a mediator between the payers (us) and the recipients (my mom, your parents (I'm assuming here), etc.).

It's a remarkably fair and equitable system that has served us very well for the past 75 years and that has absolutely no signs that it won't do the same for the next 75 years, with or without any adjustments.

I understand the viewpoint that, somehow, there's a free lunch and that we can divert the money that we now pay to support our parents, and our friend's parents, as well as the disabled into our own personal retirement funds without any downside whatsoever.

But I'm here to remind you, there's no free lunch, no matter what the supply-side charlatans are telling you and no matter how much we want to believe that "the market" can consistently deliver returns several times greater than that of the underlying economy (which are the returns that are internalized in Social Security -- namely the greater affluence of the next generation makes it possible for them to easily support the previous one).

greg

In general, Social Security favors caucasions over minorities and women over men. The "average" U.S. worker faces a rate of return on contributions less than 2% after adjusting for inflation. Then there's the unquantifiable aspects of government reliance and intrusion. I'm actually not in favor of Social Security reform of the nature Bush is proposing. I would ditch the system altogether.

We pay real dollars into it. They are immediately spent on any number of wastes and some good things. An IOU is put into the lockbox saying the fools in office will pay you when you retire-meanwhile we are long gone. Thanks from your elected officials in Congress.

They are immediately spent on any number of wastes and some good things.

What "wastes" and what is the total dollar figure?

An IOU is put into the lockbox

There's no IOU. Yet another fundamental misunderstanding of the Social Security system.

Then there's the unquantifiable aspects of government reliance and intrusion.

Which is somehow far worse than the alternative, namely private-sector reliance and intrusion?

I'll never be able to get over just how paranoid the right is about elected, representative, government and just how sanguine they are regarding their lot at the hand of unaccountable amoral transnational corporations.

greg

Greg, in practice SS is simply subsidizing citizens lucky enough to make it to old age. But it was sold as an IOU and its backers still sell it in those terms. For all intents and purposes, SS is an IOU in the eyes of citizens. Your refusal to see that betrays a fundamental misunderstanding of its nature.

Which is somehow far worse than the alternative, namely private-sector reliance and intrusion?

The alternative is neither reliance nor intrusion. The alternative gives me the freedom to choose the market if I want to. My alternative also permits me to stash money under my bed and rely on no one.

You also seem to ignore the fact that Bush's proposal does not force private investment. It simply offers you the choice to it. If you prefer to keep using the government, you're more than welcome to keep doing it.

In general, Social Security favors caucasions over minorities and women over men.

That's simply not true. Social Security benefits are highly progressive (those who earn less receive a much better "deal" from Social Security than do high wage earners). Since minorities are paid far less than whites, Social Security represents a much better deal for them, on average.

Now you may be referring to the flawed Heritage Foundation report which attempted to paint SS as a bad deal for African-American males due to their lower life expectancy. As columned in today's NYT, that's only true if you look at overall life expectancy -- which takes into account higher rates of childhood/infant birth.

Once they reach retirement age, however, African American's live a further 14.6 years on average, not materially different from that of whites at 16 years.

greg

There's no IOU.

Greg's right about this one. An IOU means you have a guaranteed right to receive money in the future. Flemming v. Nestor made it very clear that the gov't legally owes you and me *nothing* in return for taking our money. Congress could decide to totally halt all SS benefits effective immediately (while continuing to tax), and that would be perfectly legal.

The alternative gives me the freedom to choose the market if I want to. My alternative also permits me to stash money under my bed and rely on no one.

That's actually not a freedom of yours because, inevitably, you or someone else will either through your own fault or through circumstances beyond your control, boof-up your retirement.

That places the rest of us in the position of having to decide whether we want to either help you out even though you screwed up, or we want to put up with watching you die on the street. That's not a fair burden to place on us.

You also seem to ignore the fact that Bush's proposal does not force private investment. It simply offers you the choice to it.

You seem to ignore the fact that the presence of a Social Security system does not forbid private investment. I'm a proponent of the Social Security system (that much, at least, should be obvious by now). I also have about a million bucks parked in the market in various forms.

I hope the both of them will serve me, and my heirs, well in our sunset years. But in the unlikely-but-historically-possible case that the big one blows up, or is subsumed by something catastrophic in my life, it's good that there's a safety net in place.

Because that's what civilized societies do.

Rugged individualism is all well and good but rugged individuals sometimes falter and fall. I don't believe that 100,000 years of human social evolution (for those of you who believe in things like evolution, and gravity) hasn't taken us any farther than to turn our backs and when our bold, but suddenly dependent, ideologues die. Again, that's not what great societies do.

greg

I'm not referring to a Heritage Foundation report. Because minorities are more likely than whites to have lower lifetime earnings, they are advantaged by SS's progressive benefit formula. Moreover, blacks in particular are more likely to receive other important SS benefits, such as disability.

On the other hand, their time with those benefits is shorter. Even Krugman's NYT piece admits that at age 65, white men can expect to live 2.3 years longer than black men, and Hispanic men can expect to live 2.9 years longer than white men. (Also Krugman, like you ignored the longevity of women over men.) But Krugman only looks at life expenctancy from birth, and then from old age. He ignores the expectancy from ages in between.

Nevertheless, the progressivity of SS outweighs the negative effect of lower life expectancy for blacks in terms of what they receive from SS relative to what they contribute. On this point I agree with Krugman.

Also, I think it's important to take Krugman's SS writings in with a big picture. Krugman himself has argued — in shrill style — that the Social Security system is in crisis:

Where is the crisis? Just over the horizon, that’s where … In 2010 … the boomers will begin to retire. Every year thereafter, for the next quarter-century, several million 65-year-olds will leave the rolls of taxpayers and begin claiming their benefits. The budgetary effects of this demographic tidal wave are straightforward to compute, but so huge as almost to defy comprehension.

Krugman also once wrote in his Times column that "There is a case for reforming Social Security; there is even a case for privatization."

If we do anything, I hope we can dispel the rhetorical notion that big-bad government is "taking" the money from you. Again, with the exception of its 1% administrative overhead ... the Social Security Administration does nothing more than to serve as a mediator between the payers (us) and the recipients...

I do not see how your explanation supports your argument. Without the consent of the people who earned the money that is being mediated, isn't the government taking it whether or not it spends the money on Social Security?

Without the consent of the people who earned the money that is being mediated, isn't the government taking it whether or not it spends the money on Social Security?

Hinges on the word "consent." Personally, I feel that I've given my consent to pay my public bills both by the fact that I have a representative voice in government and I regularly exercise my right to vote as well as the fact that I don't vote with my feet by expatriating.

greg

Because that's what civilized societies do.

Is this a conclusion to an argument that I did not notice, or were we just supposed to accept this claim on your word? (The paragraph following that sentence did elaborate a little, but only by adding that it is also what 1) evolved people and 2) great societies do.) Why is forcing people into a questionable retirement system, or any retirement system, a necessary element of being in a civilized society, or an evolved society, or a great society?

If we Democrats allow ourselves to be left behind on social security reform we may find ourselves abandoned by younger voters. That in itself isn't a reason to support reform perhaps, but it is something to ponder.

The Krugman pieces don't even begin to make the point that JC cites them to make (if I'm right in my inference that JC is trying to indicate that Krugman has somehow been hypocritical on the SS crisis issue, and that's just not true). In fact, the only way they even seem to make that point is through some rather artful editing.

For, follow the link to piece the big quote is from. The part that says "Where is the crisis? Just over the horizon, that's where" is a full 15 lines away from the discussion about 2010. And the reason why the omission is necessary to make the anti-SS point is clear once you look at the whole text: his actual claim about the crisis is that the U.S. government on the whole -- and not S.S. per se -- will be facing a crisis. The reason that this distinction is very important here is that, as us Dems keep saying and the GOP keeps profoundly ignoring, privatization will hurt, not help, the budget crisis. The larger budget problem is that the government has been borrowing against the SS surplus all this time, and so things will get real dicey real fast, budget-wise, when SS has to start calling in that debt. So to use that Krugman quote as evidence that he's changed his tune on privatization is beyond bogus.

Moreover, I cannot fathom why you think there's any tension between Krugman's current views and his once having noted that there might be a case to be made for privatization. Krugman's a scientist, and like most scientists he's happy with the idea that, even if some claim p is false, there might be some out there evidence in p's favor, and one should always consider that evidence. But the point of that column was to debunk one of the dominant arguments for the existence of a SS crisis at that time. Oh, and it's important to note what time that was: July 2001. The budget & political situations might legitimately seem rather different now than they did then, and in particular what looked like a looming budget crisis then is a current budget crisis now. So what could even have seemed like an interesting-but-refutable case to be made then might be a complete non-starter today.

Joel: I do think we need to be politically sensitive to that issue -- especially in terms of making clear to younger voters that SS is basically ok, that they should be much, much more worried about the deficit than they are about SS, etc. But I would also note (though acknowledging some small concerns over the source of the poll) that worries about younger voters here may be slightly overblown:
"The [AARP] poll found that 66 percent of respondents over the age of 30 favored keeping Social Security "as is." Despite concerns about the viability of Social Security, 62 percent of the so-called "Gen X-ers" (ages 30-39), frequently identified as a key constituency for President Bush's privatization scheme, agreed."
http://www.emergingdemocraticmajorityweblog.com/donkeyrising/archives/001031.php

if I'm right in my inference that JC is trying to indicate that Krugman has somehow been hypocritical on the SS crisis issue

I hate to be a wet blanket, but you wasted a bit of energy there. I'm not trying to indicate Krugman was a hypocrit at all.

No decent person would allow their mother/grandmother/aunt/etc to starve to death on the streets. Prior to SS, it was accepted that the younger generations would help the older generations out if they needed it, just as they have helped us out in the past. Even if your children turned out to not be such decent people (which may be partially your own fault!) or if you weren't blessed with children at all, there were always neighbors, friends, extended family, the church, etc... I somehow think that the number of elderly people who starved to death pre-SS was rather low. And I, personally, would *far* rather take the hundreds of dollars that the feds are taking from me & distribute it, myself (or via an organization that I trust, such as the church), to elderly people that truly do need it, the old-fashioned way.

In that case, I have no clue what on earth you were trying to accomplish by selective Krugman quotation.

Bull shit IRA's and 401Ks have yet to work and after 4 years od Bush's failed ideas you think you people would learn. If you want to live on dog food good for you but leave the rest of us out.

The argument against minorities is a false one. Why? Because what matters in terms of whether you get a fair "return" (An inaccurate phrase, I know.) on what you've put in is lifespan as of when you reach retirement age. Since most of what shortens minority life span is in youth and young adulthood the claim is pretty much false. The difference when looked at in terms of lifespan after age 65 is only two years.

The problem with the conservatives who say we should just go back to the good old days pre-SS and all social programs is that they completely ignore that the good old days weren't that good and they also ignore the multitude of other social changes that make their fantasy unrealistic. There doesn't appear to be any recognition of what social structures used to exist that don't any longer. They don't recognize how the reduction in family size has largely eliminated the extended family structures that used to exist. They don't listen to the people running the private charities that they assume will take the place of those evil government programs when they say that they don't have nearly the resources that would be required should those programs be eliminated.

The argument against minorities is a false one. Why? Because what matters in terms of whether you get a fair "return" (An inaccurate phrase, I know.) on what you've put in is lifespan as of when you reach retirement age.

But lifespan is also important before retirement age, because people who die at 62 still pay taxes for four decades, but receive no benefit from it.

That is money that could have gone towards a mortgage, or towards their children's college education, or merely towards retiring their own debt faster (thus paying less interest). It's money that they could have passed on to their children and grandchildren, or nephews and nieces, and improved the quality of living for the family that survives them.

But because they died before retirement age (and minorities do have a greater likelihood of doing so), they reap no SS benefits, and the taxes paid over all those years represents a massive opportunity cost.

The main factor which causes minorities to have lower life expectancies in this country as compared to caucasians is actually infant mortality. Like you say, minorities have a greater chance of dying before they are SS eligible, but almost all of that is due to infant mortality.

On the other hand, since SS also helps disabled folks, and minorities are more likely to become disabled, that group actually does still receive a fairly even slice of SS benefits.

This of course begs the question; when is Mr. Bush going to get serious and do something about infant mortality amongst the African American (and other minority) communities? The difference is almost certainly due to quality of health care available.

If he's bringing it up in speeches, it's worth asking about.

The main factor...is actually infant mortality.

http://tinyurl.com/5tk87

At birth, a white male baby can expect to live about 6.6 years longer than a black male baby. At age 1, it's 6 years. At age 20, a white man can expect to live 5.8 years longer than a black man. At age 40, halfway through one's SS-paying years, the white man can still expect to live 4.8 years longer than his black counterpart.

Infant mortality does have an effect, as seen in the drop from birth to age 1, but a sizable difference remains well after.

On the other hand, since SS also helps disabled folks, and minorities are more likely to become disabled,

True, but SS Disability Taxes are distinct from SS Retirement taxes, and they are paid into a separate trust fund. None of the proposals for private accounts have mentioned touching SS Disability (at least, none that I've heard of). Unfortunately, the Disability Trust Fund is estimated to be exhausted in less than 25 years from now.

The argument against minorities is a false one. Why? Because what matters in terms of whether you get a fair "return" (An inaccurate phrase, I know.) on what you've put in is lifespan as of when you reach retirement age.

Jim S. is right about this. We are actually weakening the case for reform by comparing the benefits received by the average man to the benefits received by the average woman or comparing the benefits received by the average members of different races. Social Security's impact on individuals is what matters, so what we should be pointing out is that any individual who dies before or soon after retirement age is forced to pay for Social Security for a long time for nothing.