Later On

A blog written for those whose interests more or less match mine.

Posts Tagged ‘Social Security

The usual Social Security scare tactics

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Michael Lind summarizes them in Salon:

Last Tuesday, just before the release of the annual Social Security trustees report, I predicted that no matter what the report contained the perennial enemies of America’s most effective and efficient universal social insurance program would cite it as proof that Social Security needs to be means-tested, privatized or both. The report is in, and its contents are far from dramatic. The (dubiously) estimated date at which, absent changes, the trust fund dries up and Social Security shifts to a pay-as-you-go program paying most, but not all, promised benefits has moved up slightly from 2041 to 2037. But to listen to the critics of Social Security on the right you would think that Godzilla was blocks away from the Fulton Fish Market.

Posting at the libertarian Cato Institute’s Cato@Liberty blog, Michael Tanner claims to be alarmed that Social Security’s “unfunded liabilities — the amount it has paid beyond what it can actually pay — now total $17.5 trillion. Yes, that’s trillion with a ‘T.’ That’s $1.7 trillion worse than last year.”

Is the government really going to have to come up with $17.5 trillion in the next year or two to pay for Social Security, as more baby boomers retire? Undoubtedly that is what some opponents of Social Security want to frighten their fellow Americans into thinking. What Tanner neglects to tell his readers is that this big, scary number purports to measure Social Security’s unfunded liabilities over an infinite time horizon and assumes there are no changes made between now and eternity. Any number of relatively minor changes, from lifting the cap on the Social Security payroll tax to infusing general revenues, could preserve the program in its present form into the 22nd century without insolvency or harm to the U.S. economy.

The “unfunded liabilities” argument is misleading for another reason. It is only applied to programs that, like Social Security and Medicare, are paid for by a dedicated tax like a payroll tax. The projected gap between future revenues and future outlays from this special-purpose tax is the “unfunded liability.” Why do we never hear of the “unfunded liabilities” of Pentagon spending — the third of the big three spending programs (Social Security, Medicare, defense) that take up most of the federal budget? Defense spending comes out of general revenues, not a dedicated tax.

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Written by Leisureguy

19 May 2009 at 9:32 am

Posted in Daily life, GOP, Government

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There is NO Social Security Crisis

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Over and over it’s necessary to demonstrate that Social Security is not in crisis. It’s good as it is until 2040, and after that it can continue to work with minor adjustments. Paul Waldman in the American Prospect:

There’s a time-tested way to curry favor with the permanent Washington establishment. That is, having David Broder praise you for being "responsible" and being considered a Very Serious Person by the Sunday shows. All you need to do is proclaim ominously that entitlements are a ticking time bomb, a looming storm on the horizon, a hungry beast ready to devour our nation’s finances, or whatever metaphor you find most frightening. The more unpleasant the solution you propose — tax increases are good, but benefit cuts are even better — the more the Beltway Brahmins will approve.

So yesterday’s White House entitlement’s summit, which appeared, when announced, to repeat the conventional doomsday wisdom, wasn’t too much of a surprise. And indeed, at various times over the past couple of years, President Obama has seemed to suggest that he will be addressing this thorny long-term problem, leading to no end of heartburn among progressives who view Social Security as one of the cornerstones of the American social contract.

But as he has made clear, Obama is not unsheathing his blade to begin hacking away at our government pensions. Nonetheless, because conservatives will continue to conflate issues that should be separate and to further the assault on Social Security launched at the program’s enactment in 1935, it’s an opportune time to get a few things straight. The most important is this: There is no Social Security crisis.

If there is an "entitlement crisis," it’s a crisis in Medicare. But as Ezra Klein explains so well, there really isn’t a Medicare crisis, either. Medicare’s funding problem is a problem of the ballooning cost of health care in general; fix that, and you’ve fixed the Medicare problem.

The myth of the "Social Security crisis" is so pervasive and so pernicious that it’s necessary for those of us who actually believe in the program to respond to the crisis-mongers whenever we can. And they’ve got muscle — witness the recent round of full-page newspaper ads featuring a looming iceberg and screaming headlines about the $56 TRILLION!!! we’re supposedly in the red (these are funded by hedge-fund billionaire Pete Peterson, the Daddy Warbucks of the entitlement fear factory). So let’s examine what the crisis-mongers say, and what the truth is.

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Written by Leisureguy

24 February 2009 at 11:27 am

Why is Obama tinkering with Social Security?

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Social Security is in great shape for the next 40 years, so why would the current administration be tinkering with it? Dean Baker wonders, too:

Word has it that President Obama intends to appoint a task force the week after next which will be charged with "reforming" Social Security. According to inside gossip, the task force will be led entirely by economists who were not able to see the $8 trillion housing bubble, the collapse of which is giving the country its sharpest downturn since the Great Depression.

This effort is bizarre for several reasons. First, the economy is sinking rapidly. While President Obama’s stimulus package is a good first step towards counteracting the decline, there is probably not a single economists in the country who believes that is adequate to the task. President Obama would be advised to focus his attention on getting the economy back in order instead of attacking the country’s most important social program.

The second reason why this task force is strange is that Social Security doesn’t need reforming. According to the Congressional Budget Office, it can pay all scheduled benefits for the next 40 years with no changes whatsoever.

The third reason that this effort is pernicious is

Continue reading.

Written by Leisureguy

15 February 2009 at 7:21 am

Social Security & Medicare graph from CBO

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SS and Medicare

This via Political Animal. As you see, Social Security is not a problem. Medicare and Medicaid is a problem. The Congressional Budget Office is a non-partisan group of analysts.

Written by Leisureguy

14 December 2007 at 11:03 am

Posted in Daily life

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More on the non-crisis of Social Security

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Thanks to Sean for pointing out this article:

Presidential candidate Barack Obama got himself into hot water with some in his own party when he recently said that Social Security faces a “crisis.”

Senator Obama’s problem is that the nation’s most popular social safety net program is actually in pretty good shape.

“The whole problem is exaggerated,” says Mark Weisbrot, codirector of the left-leaning Center for Economic and Policy Research (CEPR) in Washington. “Nobody needs to talk about it.”

The Trustees of the Social Security system, in their report last spring, calculated that the system’s income would be inadequate to pay the full benefits promised to seniors in 2042. By then, 35 years hence, many baby boomers will be gone. For those still living, the payroll revenues that provide the basic income for the system will be sufficient to pay 75 percent of promised benefits. The next generation of retirees will also get 75 percent – not zero, as so many of them believe because of the false talk about the system being “bankrupt.” And unless the nation’s productivity stalls for decades (Social Security benefits are linked to wage levels), that 75 percent will have a buying power perhaps 30 percent greater than the Social Security benefits received by seniors today.

An analysis of the Congressional Budget Office puts the shortfall – not bankruptcy – at 2046, a few years later, when the Social Security Trust Fund runs out of the Treasury bonds it has been stockpiling because current payroll revenues each year exceed benefits paid.

A professional actuary, David Langer in New York, sees a brighter picture. He figures Social Security’s finances are actuarially sound and able to pay full benefits for the next 75 years.

Mr. Langer reaches his conclusion after examining a decade’s worth of 75-year projections made by the trustees. He found that the most optimistic of the three annual projections has been most accurate. Those more cheerful predictions show Social Security completely sound, with even a small surplus at the end of 75 years. “There is no problem, actuarially,” Langer says.

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Written by Leisureguy

3 December 2007 at 4:15 pm

Posted in Daily life, Government

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Social Security from Kevin Drum’s view

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Good post:

Why are Ruth Marcus and the Washington Post so obsessed with demanding that we all address Social Security’s long-term problems right this instant? It’s a mystery. Truly a mystery.

Here’s what they need to think about. The most common solutions to Social Security’s eventual shortfall are (a) a small tax increase, (b) a small reduction in the rate of growth of benefits, and (c) a small increase in the retirement age. Question: are there any advantages to implementing any of these solutions right now, rather than, say, ten years from now?

I’d say no. The advantage to waiting is obvious: projections of Social Security’s solvency are uncertain, and waiting gives us more data. Why try to project 40 years in the future if you don’t have to? Better to wait and see what direction the economy actually heads.

Balanced against that, there really aren’t any advantages to acting sooner. Social Security is currently running a surplus, so increasing payroll taxes today does nothing except increase the size of the trust fund — a meaningless exercise at best, and a positively harmful one at worst. We might need to raise taxes in the future once Social Security starts running a deficit, but raising them now does nothing at all to change either Social Security’s future obligations or the source of its future funding.

As for ideas (b) and (c), what’s the point of locking ourselves into them now? If we wait ten years, not only will we know more about the real shape of the future funding problem, but we’ll still have 25 years or more to gradually introduce any changes we think we need. Do we really need to give beneficiaries more than 25 years notice that they might have to retire one year later than they think? Or that after they retire their benefits are going to increase at a slightly slower rate than the law currently requires? I don’t see the point. 25 years is plenty of warning for changes as small as the ones we’re talking about.

Bottom line: 2017 is a better time to deal with Social Security than 2007. Raising taxes now doesn’t accomplish anything, and if it turns out that we need to reduce benefits we can do it in 2017 just as well as we can do it today. For now, we should put Social Security on the back burner and instead spend time worrying about healthcare costs, nuclear proliferation, and global warming. Those are problems that really do need to be addressed right away.

Written by Leisureguy

28 November 2007 at 9:31 am

More on Social Security from Krugman

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A commenter had a detailed objection to Krugman’s previous defense of Social Security. I wonder how he will view this new post by Krugman:

By any reasonable standard, Social Security is at most a second-tier policy issue.

There are various ways to make this point. One is to compare the fiscal problems of Social Security, such as they are, with those of the rest of the federal government. The Social Security trustees estimate the 75-year financial shortfall of the program at 0.7% of GDP. That compares with a general fund deficit – the federal deficit outside of Social Security – of 3.3% of GDP last year (that is, not even taking into account future demands on Medicare and Medicaid.) Social Security, in other words, is in much better financial shape than the rest of the government.

Another illuminating comparison is to look at the sources of projected growth in entitlements spending. The last Congressional Budget Office long-term budget projection had Social Security spending rising from 4.2 percent of GDP now to 6.4 percent by 2050, a 2.2 percentage point increase – and Social Security, remember, is currently running a surplus to prepare for that eventuality. Meanwhile, Medicare and Medicaid spending are projected to rise from 4.5 percent of GDP to 12.6 percent, three times the Social Security increase – with negligible pre-funding.

As a result, Social Security fades to insignificance in any realistic discussion of entitlements problems. Medicare’s unfunded liabilities, as estimated in the trustees’ reports, are seven times those of Social Security. The unfunded liabilities of Medicare Part D alone are twice those of Social Security.

If you’re seriously worried about America’s long-run fiscal prospects, then, you should talk a lot about the general fund deficit and the problem of rising health care costs, and hardly at all about Social Security. But that’s not how it works in DC these days.

How obsessed are Beltway types with what is really a minor problem? Here are two snapshots:

First, from commenter “Low-Tech Cyclist” at Brad DeLong’s place:

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

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

Second, from Jon Chait:

One of the oddities of the entitlement hysterics is that they are far more obsessed with the minor problems of Social Security than with the massive problems of Medicare. Indeed, if you look closely at their dire proclamations, they inevitably follow the same pattern: They begin with an ominous summation about entitlements–thus lumping together Medicare with Social Security–then swiftly proceed to demand that Social Security be shored up forthwith.

Russert’s recent harangue at the Democratic presidential debate was a classic example. He began by warning of the crisis faced by “Social Security and Medicare” but proceeded to ask no fewer than 14 questions about Social Security, and zero about Medicare. It’s as if he began fulminating against crime in the greater New York area and then immediately began demanding a large new police deployment in Chappaqua.

Look, I know this is very embarrassing to those who have been walking around thinking that hyping the Social Security issue makes them Very Serious People. But the facts are the facts – and the Beltway obsession with Social Security reflects ideology and fashion, not the real problems facing America.

Written by Leisureguy

28 November 2007 at 8:41 am

Posted in GOP, Government

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More stupid remarks about Social Security

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Kevin Drum sees Andrew Sullivan making a fool of himself:

Andrew Sullivan is worried that Social Security is just too damn generous:

Amity Shlaes does us all a favor by reminding us of the actual purpose of social security: in FDR’s words, to provide “some measure of protection to the average citizen and to his family.” That’s it. Not total security. Not a total guarantee that the gold-plated benefits of the late-century will keep growing and growing. And not a peg to wages rather than prices, linking retirees to current wage-earners rather than actual needs.

Gold plated? The average Social Security benefit last year was $12,024. Medicare premiums of $1,454 are automatically deducted, leaving a net benefit of $10,570.

That’s $881 per month. There are lots of things you can call that, but “gold plated” isn’t one of them.

Oh, and one other thing. The average benefit in 1960 was $981. If benefits had increased since then only at the rate of price inflation, today’s benefit would be $6,680. Subtract the Medicare premium and divide by 12 and the monthly benefit works out to $435. I think I’ll stick with the current formula.

Maybe Andrew Sullivan, in looking at his own income, thinks that $10,570 per year is actually pretty plush. Maybe from his point of view, $881 per month income is indeed “gold-plated.” Or maybe he’s just talking out his ass.

Written by Leisureguy

26 November 2007 at 12:21 pm

Posted in GOP, Government

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Social Security: in trouble or not?

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Interesting exchange of columns: Ruth Marcus at The Washington Post saying that Paul Krugman’s head is in a place where it does no good regarding the Social Security crisis (she said “head in the sand,” but we all know what she was thinking), and Paul Krugman responding to point out the flaws in her quotations, etc. Interesting exchange.

Written by Leisureguy

21 November 2007 at 10:10 am

More complete explanation of Social Security

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And why its finances are in good shape. Paul Krugman:

Some commenters have asked for more about Social Security’s role in the long-run budget problem, and in particular an explanation of my assertion that the Beltway obsession with Social Security reflects ignorance. So here’s a quick, informal explanation.

Start with the current position. Last year, federal spending on Social Security, Medicare, and Medicaid was 8.5 percent of GDP, equally divided between Social Security and the health care programs. Dismal long-run projections, like those of the GAO, have this total rising by 10 percentage points of GDP by mid-century.

So, how much of this is a Social Security problem? Pundits like Tim Russert love to point out that in its early days Social Security had 16 workers paying in for every retiree receiving benefits. But this is irrelevant; looking forward, we’ll see the worker-beneficiary ratio fall from about 3 to 2 as the baby boomers retire. This will raise the percentage of GDP spent on Social Security from about 4 to 6 — that is, a rise of about 2 percentage points of GDP, which is a small fraction of the entitlements problem. See, for example, this chart from my NY Review of Books piece on the subject.

What’s more, Social Security has already been strengthened to deal with this rise. In 1983 the payroll tax was increased and adjustments made to the retirement age, so as to build up a trust fund. According to the “intermediate” projection of the Social Security trustees, this trust fund will be exhausted in 2041 — but they also present a more optimistic scenario, based on economic assumptions that don’t seem at all outlandish, in which the trust fund goes on forever.

This brings us to the claim that the trust fund doesn’t exist, because it’s invested in government bonds. The full explanation of why this is sophistry is here.

The bottom line is that Social Security is just not the major problem.

Now, part of the projected rise in Medicare and Medicaid costs represents the effects of an aging population. But as a new report from the CBO explains, demography is only a minor factor — mainly it’s rising health care costs. What’s more, the proposed “solutions” for the Social Security problem have no relevance to the issue of rising Medicare costs — even if privatization were a good idea, which it isn’t, it would do nothing to solve the problem of rising medical bills.

The Beltway obsession with Social Security is a classic case of a little knowledge being a dangerous thing. People have picked up a few facts about demography, and think they understand the long run budget problem. They don’t.

PS: OK, from some communications I see that 2017 — the projected date at which payroll taxes no longer cover benefit payments — has raised its ugly head. But there is no interpretation under which 2017 matters. Social Security legally has its own dedicated funding; if you believe the government will honor the law, the surpluses the system is now running are building up a trust fund, which will finance the system for decades after 2017, and maybe forever. If you think the law will be ignored, then Social Security doesn’t really have its own budget — the payroll tax is just one of many taxes, and SS benefits are just one of many government costs. In that case the relationship between payroll taxes and benefits is irrelevant.

The only way to make 2017 matter is to change the rules midway: when SS runs surpluses they don’t count, but when it runs deficits they do.

Written by Leisureguy

17 November 2007 at 12:37 pm

Posted in Government

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The Social Security non-crisis

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Paul Krugman addresses the issue once more, since Barack Obama was suckered into saying Social Security is in crisis:

Lately, Barack Obama has been saying that major action is needed to avert what he keeps calling a “crisis” in Social Security — most recently in an interview with The National Journal. Progressives who fought hard and successfully against the Bush administration’s attempt to panic America into privatizing the New Deal’s crown jewel are outraged, and rightly so.

But Mr. Obama’s Social Security mistake was, in fact, exactly what you’d expect from a candidate who promises to transcend partisanship in an age when that’s neither possible nor desirable.

To understand the nature of Mr. Obama’s mistake, you need to know something about the special role of Social Security in American political discourse.

Inside the Beltway, doomsaying about Social Security — declaring that the program as we know it can’t survive the onslaught of retiring baby boomers — is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are.

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Written by Leisureguy

16 November 2007 at 8:41 am

Posted in GOP

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Good post and good report on US finances

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From Paul Krugman’s blog:

Two important articles co-authored by Peter Orszag, the director of the Congressional Budget Office.

The first emphasizes a point I’ve also tried to get at:

The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.

In other words, Social Security is not the big problem (and it’s not in “crisis,” Sen. Obama); it’s Medicare and Medicaid, and their problems are wrapped up in a general health-care crisis.

The second has a lot to say about controlling costs, and also explains succinctly, albeit in slightly obscure terms, why “consumer-directed” care, which is at the core of all the Republican plans, won’t work:

On the consumer side, higher deductibles would encourage patients to be more prudent in their use of services, but they also raise concerns about the financial burden on persons with major health problems. Furthermore, the concentration of health care spending among a relatively small percentage of the population with very high costs limits the effect on total spending of increased cost sharing for initial charges.

In short, making people pay more for things like doctors’ visits is going where the money isn’t. The big bucks go for big expenses like cardiac surgery — and either these things are paid for by insurance, or not at all.

Written by Leisureguy

9 November 2007 at 6:16 pm

Social Security propaganda

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The propaganda seems to be working: Tim Russert and Chris Matthews have been brainwashed (though for them, a light rinse would probably be enough—line stolen from Eugene McCarthy, who used it after Mitt Romney’s father said he had been brainwashed). Look:

Tim “Pumpkin Head” Russert said this Monday on the Hardball show:

“Everyone knows Social Security as it’s constructed is not going to be in the same place it’s gonna be for the next generation.”

He means that Social Security will have to be somehow restructured. Chris “Tweety” Matthews piped in to say:

“It’s a bad Ponzi scheme at this point, yeah.”

They went on to talk about politicians needing to make “tough choices.” “Tough choices” in this context usually means cutting promised retirement benefits instead of restoring the money that was taken from the Social Security Trust Fund and used for tax cuts. Never mind that Social Security has sufficient funds invested in its Trust Fund to cover almost any projected shortfall — tax cuts and corporate welfare mean government is going to have trouble finding the money it owes to its citizens. So to head off the idea of getting the money from where the money went, the moneyed interests have launched a campaign to make people think this is somehow Social Security’s problem — the ones owed the money — instead of the problem of the ones who got the money.

Why does “everyone know” that Social Security will need to be restructured? Because it has been repeated so often that people believe it is true. Something that “everyone knows” is also called “conventional wisdom.” Once something becomes “conventional wisdom” it is extraordinarily difficult to shake people from believing it, true or not.

This is done because on Election Day it doesn’t matter if something is actually true, it only matters what people think is true. This is the basis of the divide between the “reality-based community” and those who believe “we can create our own reality.” (It is instructive to follow the link and learn where those terms originated. )

Such is the power of propaganda.

Written by Leisureguy

7 November 2007 at 2:00 pm

Posted in Media

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Social Security is in good shape

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Why is this fact so hard to grasp by so many on the Right? A former commissioner explains again:

In the Oct. 19 editorial ” Mr. Giuliani’s No-Tax Pledge,” The [Washington] Post stated: “It’s no more responsible for Republicans to rule out tax increases [to strengthen Social Security] than it is for Democrats to insist on no benefit cuts.” The Post praised, as a “bipartisan blend,” President Ronald Reagan’s acceptance of a 1983 fix that included both.

I take exception. It’s the essence of responsibility, in my view, to insist on no benefit cuts.

In 1983, I served on the National Commission on Social Security Reform (better known as the Greenspan Commission) and represented House Speaker Tip O’Neill in negotiations with the White House. What was right in 1983 — a balanced package of benefit cuts and tax increases as part, roughly half, of the final agreement — would be wrong today.

Social Security benefits are modest by any measure and are already being cut — by raising the age of eligibility for full benefits and by deducting ever-rising Medicare premiums from benefit checks. So the benefits provided for under present law will replace, on average, a lower percentage of prior earnings than in the past. To cut them further would undermine all that Social Security has achieved — exposing millions of vulnerable people, both elderly and disabled, to needless economic hardship.

Social Security has never been more important to more Americans than it is now. Private pension plans continue to dwindle — currently covering only about 20 percent of private-sector employees — and the national rate of savings hovers around zero. We just can’t afford to cut Social Security benefits further. There’s no way to make up for the loss.

Social Security benefits are vital to nearly all recipients. About a third of the elderly rely on Social Security for 90 percent or more of their income; two-thirds count on it to supply at least half of their income. The program lifts 13 million elderly beneficiaries above poverty.

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Written by Leisureguy

29 October 2007 at 11:40 am

Posted in Government, Washington Post

Tagged with

Social Security’s doing fine

with 3 comments

Paul Krugman:

Sloppy doomsaying on Social Security seems to be making a comeback. During the great 2005 debate over privatization, I thought people like Dean and myself had managed to get across the points that there is no such program as Socialsecuritymedicareandmedicaid; that Social Security is in pretty good shape, so that projections of huge future spending on Socialsecuritymedicareandmedicaid are mainly about the Medicareandmedicaid part of it; and that in general, what we have is a health care crisis, with the costs of an aging population much smaller and more manageable.

But now casual talk about the need to “fix” Social Security is creeping back into the discourse. Folks, Social Security is in pretty good shape; it’s not clear that there even is a long-run shortfall, and if there is it’s a much less pressing problem than many others. The only reason we hear so much about Social Security is that there are powerful political forces that want to kill it, for ideological reasons.

Written by Leisureguy

11 October 2007 at 3:06 pm

Posted in Government

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