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03 April 2007

Social Security - Bulls and Bears

Randall Parker posts a most bearish take on Social Security and the upcoming Baby Boom retirements, quoting Fed Chairman Ben Bernanke and predictions that these entitlements will add up to 19% of GDP in coming decades.

Meanwhile, Dean Baker, the annoyingly liberal but generally level-headed economist, chides the Washington Post for scare mongering on Social Security, insisting that projected revenues along with the trust fund have us covered thru 2049.

So I don't know what to think. What's pretty clear is that tax increases for Social Security will be necessary once revenues dip below benefits. The trust fund is a bit of a sham. The T-Bills that are purchased on behalf of the trust can only be redeemed from general revenues, which means less money for everything else. Baker points out that the biggest fear - that Medicare payments will spiral out of control - is fundamentally a problem with our health care system, not medicare.

Drugs that can effectively treat heart disease are desperately needed. Unfortunately, the latest miracle drug crashed and burned in trials, so miracle drugs are still a bit off. We also need a miracle in our economy - I don't think legions of dry-wallers, food-preppers, and lawn-waterers are going to be able pay for 20 million baby boomers' bypass operations.

6 Comments:

Anonymous Anonymous said...

Ziel,

I practically preach this over and over as much as I can to younger folk I come in contact with. You are youre best health plan. Moderate daily excercise, a good healthy diet like we ate back before about 1970, when fast food became a staple, and a decent amount of rest (even though my insomniac self seldom benefits from that) is a man's best health plan. Drugs are expensive, and they are going to be expensive. I see no change in that, but eating veggies, fruits, nuts and lean cuts of meat with natural fruit juices and teas costs less that eating processed gunk out of boxes and paper sacks.

I think the incoming legions might be put to work in new factories in the future, at about 9-10 bucks an hour, thus perhaps bringing some production back to this country. When they are legal, and thus hirable directly by big corporations, and not mere outsourced janitorial/lawncare, the large companies will probably use them to break unions, and thus provide some very cheap factory labor. I think they might be suprised however a decade or two down the line when the new Americans want a larger share of the pie, but I have a feeling they are willing to take their chances. Who knows, maybe they have a plan.

Ive donated more money in this presidential election than I ever have before. 200 to Tancredo, 100 to Paul, 250 to Romney, and 250 to Edwards (Im terrified of Hillary and Obama), just basically because they seem to be more "right" on the illegals issue than the other candidates.

Im scared of how this is playing out however. I fear the smaller candidates like Tancredo, Thompson (both of em'), Paul will cancel each other out and leave us with a party hack like Guiliani, whom I will not vote for.

I hope if the Rep. nomination goes to McCain or Guiliani, that one of the candidates runs as an independent. Im perfectly willing to waste my vote again (Peroutka last time) than to vote for the lesser of two evils. Karl Rove is wrecking this party.

April 04, 2007 1:38 AM  
Anonymous james Francis (the other one) said...

20 million baby boomers bypass operations pale in comparison to the 80 million baby boomers needing some type of Long term care . You used the phrase "scare mongering" in your post- sounds like an insurance agent and not an economist.
Keep saving baby boomers- the 7.65% we put forth for SS may not pay us a dividend- no less a return of principle.

April 05, 2007 7:13 PM  
Anonymous Dano said...

THe Sunday Times had a front page article that heart disease has been conquered. Take your meds and follow a heart healthy diet and heart disease is a non-factor. Smoke, drink and generally enjoy life and die sooner. No magic pills
What we do with all the 90 year olds is a another question. Don't be too qick to downsize the grandparents are coming

April 09, 2007 9:11 PM  
Blogger FuturePundit said...

Ziel,

The crisis doesn't come when Medicare costs more than its tax generates in revenue. The crisis comes sooner as the consolidated US federal deficit swells.

Medicare and Social Security outlays will swell. That will reduce the extent to which their taxes finance the rest of government. As that happens the borrowing needs of the federal government will grow rapidly. That's when the crunch comes.

Then there is the make-up of the future labor force. The babies being born today aren't going to be able to work at the high skilled and high tax revenue generating jobs.

April 15, 2007 3:39 PM  
Anonymous Joe Populist said...

You exhibit a lot of ignorance on the "Social Security Trust Fund" issue.

First of all, SS was always a pay-as-you-go program. Meaning it comes out of general tax revenues. It's NOT a "investment" program, it's a social insurancek program, a way for the wealth of the economy to provide a safety net for the destitute and the less fortunate.

Secondly, the so-called "trust fund" is an invention by the free market fundamentalists ideologues as a talking point to con the electorate into eliminating this federal program.

The idea of a "trust fund" originates with Alan Greenspan came up with the idea of creating a "surplus" for the by increasing the Social Security Payroll tax above what was necessary to pay current SS outlays. It is this "surplus" which is paying approximately 23% of ALL current federal spending, as SS taxes were always part of the general fund.

Without the "surplus", the Federal Government's deficit from the 90's til today would be a LOT larger then it is now. It is this "surplus" from the Social Security Trust fund that Clinton and the Democrats used for for his much bragged about "balanced budget". It is the surplus which provides the tax increase that Bush2 brags about so much.

This in fact, the ugly little truth about the entire free market fundamentalist farce is that the so-called tax cuts aren't tax cuts at all, they are more deficit spending. "Supply side" economics isn't economics at all, it's the "free lunch" of the right-wing utopian nut cases that inhabit the Republican Party, the idea that you don't have to cut spending when you cut taxes, that the "magic"---an it is voodoo ecohnomics---of the tax cuts will create growth that not only replaces the lost revenue of the tax cut, but creates enough revenue to cover the DEFICITS that the US is running under the Republican Congress and President.

In fact, the "trust fund", if it exists at all, consists of federal debt, but the entire US economy is built on deficit...trade deficits, budget deficits. The "secret" that Alan Greenspan had was he could export the inflation because the US dollar is reserve currency for the world, something we have the Oil sheikdoms to thank as they are the ones who deal exclusively in dollars for their oil with China and Japan and Europe.

Social Security Payroll taxes, if they dip below outlays--which is unlikely for the next 40 years or so---is not really a problem for Social Security per se, it's a problem for the entire US economy, which under the fog of free market ideological utopians thinks that you don't have to pay for what you consume.

Medicare is a bigger problem then Social Security, but again only because of the invalid premises about the 'free market' in health care services, perpetuated by the same idiots that gave us supply side economics.

Free markets are all well and good, and so is private property. But when it's taken to the level of a utopian fantasy as it has been in the so-called "conservative" movement, it's as destructive and dangerous as Communism, it's mirror image.

May 03, 2007 5:05 PM  
Anonymous Joe Populist said...

Future pundit sed: "The crisis doesn't come when Medicare costs more than its tax generates in revenue. The crisis comes sooner as the consolidated US federal deficit swells. Medicare and Social Security outlays will swell. That will reduce the extent to which their taxes finance the rest of government. As that happens the borrowing needs of the federal government will grow rapidly. That's when the crunch comes."

In fact, no problem. Just increase the taxes on the top 20%...

The fraud is the right-wing ideologues trying to talk about SS and MC as it's a private insurance scheme. It's NOT, it's a social insurance scheme, which is entirely different. It doesn't have to make a "profit" or even break even, as long as the productivity of the economy can absorp it.

The fraud is on the working guy and gal, and it was a fraud perpetuated by the Republican Party and the free market utopian ideologues. That fraud was increasing the Social Security Payroll tax while cutting taxes on the top 20%, with most of the tax cutting going to the top 5%.

In effect, what the Republican Party has done, is transfer wealth from the middle class to the super rich, using a lot of completely discredited nonsense called "supplhy side economics".

SS economics is the Right-wing equivalent of the "Free Lunch", the idea that you can cut taxes without correspounding spending cuts, and the "magic" of the free market will act to grow the economy not only enought to replace the lost revenue from the tax cuts themselves, but cover the interest payments on the additional long term debt that the continuing deficits create.

Republican economics is not free market economics at all, but pure utopian fantasy, "faith" in the "magic" of the free market to do what common sense tells us is impossible.

Giving tax cuts the top 20% while trying to finance a permanent military occupation of Mesopotamia, and eventually Persia as well sounds more like British Imperialism then it does Adam Smith Capitalism.

May 03, 2007 5:24 PM  

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