It would seem that through deception and diversion, the anti-"entitlement" crowd is intent on transforming payroll taxes into the most regressive income collection device in history.

By slicing benefits, they would in effect be transferring part of the revenues collected from the SS tax into the general fund. As Social Security currently is paid on only the first $90,000 in income, this new tax would disproportionally effect everyone making below that amount.

Heck, why not just call a spade a spade and propose a new additional income tax levy: 6% on all income from dollar one, capped at the first $90,000 of income, with no deductions or exemptions allowed, as this is what they are truly calling for by cutting or "restructuring" SS payments.

The specific suggestions on SS in the editorial are actually reasonable and could well be seriously considered if and when it becomes necessary to change SS. But the editorial gives no figure at all for reducing benefits to higher-income recipients, and the $10B/year for raising the age falls under the category of the insufficient measures which the editorial is supposedly objecting to. Whatever happened to raising the cap? This would be like a 6% (or 13%) increase in income tax on upper brackets and would raise much more money than cutting benefits for the same people (presuming that benefits remain capped).

But most of the talk about how to balance the budget is nonsense anyway - what a balanced budget really depends on is the state of the economy and projections 10 years in the future are worthless. Also on income (and capital gains and dividend) tax rates on middle and upper brackets where most of the money comes from. Has the WaPo talked about bigger rate increases for upper brackets?

Dean,

You write:
the Social Security trust fund has accumulated enough bonds to cover benefit payments through 2049

That assertion is at best misleading and at worst a deliberate lie. The SSTF (in which there is no cash, marketable securities, or anything else other than a claim against future non-SS tax revenues -- i.e., Treasuries*) has about $2.4 trillion. You know that $2.4 trillion wouldn't come anywhere close to even a substantial portion of projected SS spending through 2049. It is the amount of the SSTF plus ongoing SS FICA taxation per current SS FICA tax rates to which you are referring. But you apparently don't want to state that, because you'd rather paint the fundamentally, grossly misleading picture that we already have the money to cover all that spending. The truth is that we don't already have those future SS FICA revenues, nor do we even have "money" in the SSTF (we only have those special issue Treasuries -- i.e., a claim against future non-SS tax revenues).

Moreover, you miss the point in two ways. First, related to my paragraph above, you avoid the real overall conceptual -- and decision-making -- framework, which is that we have an unsustainably large projected OVERALL long-term fiscal imbalance (including Social Security and everything else), and that we have to find ways to substantially reduce this overall imbalance. Spending less than the projected amounts on SS obviously could help reduce this imbalance, either (1) by reducing SS spending just enough to make it fully "solvent" (i.e., to bring projected long-term spending in line with the SSTF balance plus revenues of SS FICA as currently structured), to eliminate the future need to use non-SS (general fund) revenues to fund SS, or (2) by reducing it even further and, in conjunction with the latter, lowering SS FICA taxation, offsetting that tax cut with increases in other taxes, thus reducing projected overall spending, keeping projected overall revenues unchanged, and thus reducing projected deficits.

Second, you argue essentially that the people in question have lost a lot of wealth and it would be morally wrong to make them suffer more as opposed to spreading out that suffering to everyone. OK, Dean, sounds like you would favor some degree of means testing. After all, which would you consider "better": A wealthy retiree getting his full SS benefits even though it means that some poor working mom has to pay more in taxes than she otherwise would, or means testing through which that wealthy retiree loses some or all of his SS benefit so that that poor working mom can have higher take-home pay (after taxes) for her kids? (Oh yeah, I know, you'll say that no such choice between SS spending and taxation need be made, because supposedly if we just establish universal healthcare coverage and other "reforms", and perhaps cut Defense and raise taxes a bit, our long-term fiscal imbalance problem disappears, right?)

I forgot to add the note for the asterisk in my prior comment.

It was not central to my point, just that the bonds in the SSTF are "special issue" treasuries that are intragovernmental debt. Although I assume that these bonds are "backed by the full faith and credit of the USA" like other Treasuries, and that they represent an inviolable commitment of a minimum amount that must be eventually spent on SS benefits, some (1) seem to have reasonable challenges to the assumption that defaulting on them is even technically possible or that doing so would have the same impact on our credit-worthiness as would default on other (regular) Treasuries, and (2) do not view intragovernmental debt as inviolable from a legal or moral standpoint. See comments from Jim Glass in my exchange with him starting here http://economistmom.com/2009/03/another-debt-documentary-ten-trillion-and-counting/#comment-2704

In any case, for practical and decision-making purposes, the question is moot, because it is inconceivable that we will spend anywhere near as little as $2.4 trillion on SS cumulatively over the years and decades to come.

Brooks:
Your first paragraph makes two wild assumptions: (1) that the US Gov will default on its obligation to repay its debt (Treasuries), and (2) that the US Gov will default on its obligation to collect its taxes (FICA from current workers).
Your second paragraph makes some sense, but so little that you should have omitted it. Yes, the US Gov needs fiscal restraint in the long run (particularly after the economy recovers and tax revenues rise without a rise in tax brackets), but there are much better ways to restrain government spending than by withholding promised payments from its citizens.
Your third paragraph shows that you know how to solve the problems in your first two paragraphs.

Ethan,

Your first paragraph makes two wild assumptions: (1) that the US Gov will default on its obligation to repay its debt (Treasuries), and (2) that the US Gov will default on its obligation to collect its taxes (FICA from current workers).

Ethan,

Your first paragraph makes two wild assumptions: (1) that the US Gov will default on its obligation to repay its debt (Treasuries), and (2) that the US Gov will default on its obligation to collect its taxes (FICA from current workers).

Nope and nope. First, I don’t even see why you think I said #1. I assume the opposite (I assume that we will NOT default on the bonds in the SSTF). Re: your #2, first of all, “default on its obligation to collect its taxes” is conceptually-confused (at best). Needless to say, a government reducing tax rates does not constitute any sort of default, so you may wish to clarify.

Your second paragraph makes some sense, but so little that you should have omitted it. Yes, the US Gov needs fiscal restraint in the long run (particularly after the economy recovers and tax revenues rise without a rise in tax brackets), but there are much better ways to restrain government spending than by from its citizens.

That comment of your is a non sequitur (speaking of making sense). First, I was making a conceptual point in that paragraph, not advocating anything. My comment asserted nothing about what we should do, about which options are better than others. I was just presenting a rational framework for making such choices, and I was doing so to correct a misleading, fundamentally flawed conceptual framework that Dean’s post implied. Read that paragraph of mine again, and read what’s really there rather than trying to see between the lines (and then focusing on) some policy advocacy that isn’t really there. Second, as another conceptual note, we could reduce projected SS spending without “withholding promised payments”. How? Very simple, if you actually think about it for a second. Even if we assume, arguendo, that such “promises” have been made in exchange for payments of past SS FICA taxes, obviously promises have not been made in exchange for future SS FICA tax payments that have not yet occurred. We could simply reduce the promised benefits per dollar of future SS FICA taxes paid and/or reduce the level of SS FICA taxation, and projected spending would decrease without reneging on any promises.

Your third paragraph shows that you know how to solve the problems in your first two paragraphs.

I do favor means testing for Social Security, but that’s beside the point, which was to ask Dean if, in light of his own argument regarding relative economic need, he favors some degree of such means testing?

Do you favor means testing Social Security?

Do you think Dean Baker does?

The propaganda campaign against Social Security carried on by the WaPo and others is evidently succeeding when people are seriously considering ways of using SS to cover shortfalls in general revenue, as well as the hypothetical shortfall in SS itself 40 years in the future.

Brooks,
I don't see means-testing mentioned or implied in Dean's post at all. What he does suggest is the possibility of a partial default (90%) on all government bonds. But really, the point is that a program solvent until 2049 is not our most pressing fiscal problem.

Brooks wrote, Spending less than the projected amounts on SS obviously could help reduce this imbalance...

Yes. Many things reduce the imbalance, and your silly calculus has no hope of differentiating between them:
(1) Eliminate all SS benefits, and at the same time double the SS tax; lend the proceeds to the general fund;
(2) Entirely eliminate the DOD

Brooks wrote, See comments from Jim Glass in my exchange with him starting here...

Jim Glass? Hahahahahaha...

mayorofmayberry,

I don't see means-testing mentioned or implied in Dean's post at all.

Try to follow my argument. I was applying a principle that he seems to be applying (considering economic need in our spending choices) and asking how applying that same principle wouldn't lead one to preferring means testing that took benefits away from the wealthy so that less money would have to be taken from the poor (or middle class, for that matter).

But really, the point is that a program solvent until 2049 is not our most pressing fiscal problem.

Don't get me started on the huge, fundamental conceptual error that that comment reflects. See http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2009&base_name=mora_liason_comes_out_for_cutt#comment-6257372 If you have questions about it, let me know, but pleeeeease read it reasonably carefully and think about it before doing so.

Another convenient fiction implied by Dean Baker's argument is that the excess SS FICA taxes have been paid (above current spending) were a entirely a transfer of wealth from them to others.

What really happened? The SS surpluses reduced the size of the unified budget deficit and thus reduced the need for higher taxes, lower spending, and/or more borrowing -- so excess SS FICA tax payments reduced other costs and increased benefits for those same people.

I'm not belittling the fact that there was a political deal (at least implicit and perhaps to some extent explicit) that the excess SS FICA taxes were funding future SS benefits that would otherwise have to be cut. But we should not pretend that this cohort saw no significant immediate benefit in return for paying those excess SS FICA taxes.

Brooks

Give it a rest.

Ack, I was out sick Wed and Thurs so I missed the prime opportunity to ask this:

>> It would be far more reasonable to suggest a partial default on the government debt, say a payment of 90 cents on the dollar.

Wouldn't that action violate section 4 of the 14th Amendment?

I'm with you on sharing the pain, particularly at a time when it's available in such abundance. But I'd assumed that defaulting on US gov't bonds, even if constitutional, would have global, economic repercussions to an extent far beyond robbing our older citizen and kicking some of them to the curb.

"News of the housing crash and stock plunge has not yet reached the Washington Post."

Hahaha! Oh, such withering sarcasm.

Excellent point about a partial default on government debt. Recall that the British economist David Ricardo in the early 19th century proposed a one-time levy on capital in order to retire the public debt brought about by the Napoleonic Wars. Ricardo was then one of the wealthiest persons in Britain and stood to pay more than most. I wonder if the flag-wavers in this country would be willing to part with some of their economic rents in this fashion?

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