Welcome Eric Laursen (interview) and Host Ellen Schultz (TheRetirementHeist)

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

The People’s Pension: The Struggle to Defend Social Security Since Reagan

Social Security is one of those topics that most people think they know about. Everyone“knows” Social Security is “going bankrupt,” that the government “raided the trust fund,” and that “it won’t be there when we retire.” These folks include both the ideologues determined to dismember the program and the casual consumers of mainstream media, which has been largely content to write he-said, she-said stories giving equal weight to the chief actuary of the Social Security Administration and“experts” wearing tin-foil hats.

But there’s a potentially more dangerous cohort than the Fox-educated crowd out there, says Eric Laursen, an independent financial and political journalist. In his timely new book, The People’s Pension, Laursen makes a strong case that Social Security is also imperiled by the very people who claim they want to save the program. Their prescription—most of which comes down to cutting benefits– would undermine the most successful retirement program and social safety net in the nation’s history.

That’s just one of the insights in Laursen’s meticulously researched book on the history of Social Security. To many, the so-called Social Security crisis may seem like a relatively recent phenomenon, but campaigns to destroy the system have emerged in one form or another since the early 1980s. Laursen, who was co-founder and former managing editor of Plan Sponsor, a magazine for pensions professionals, chronicles the unflagging attacks on the Social Security system, from the Reagan Administration to the Obama White House. The architects of these often stealthy efforts include the reclusive Koch brothers, who bankrolled the Cato Institute, and Pete Peterson, the billionaire founder of the Blackstone Group, who also has underwritten campaigns to destroy social safety nets, claiming that they have promoted dependency and fueled the deficit. Laursen lucidly explains the complexity of the accounting, and shows how overly-conservative calculations enabled critics to whip up fear and mislead the public and the media.

In the 1990s, Laursen writes, the ideologues were joined by State Street, Fidelity, and other financial institutions, which recognized that privatization would funnel billions into investment accounts they’d manage, for lucrative fees.

A real eye-opener to me was Laursen’s material on how right leaning Democrats in Congress and the Obama Administration are an unrecognized threat, given their willingness to reduce the deficit by taking an axe to Social Security. In the guise of preserving the system, they’ve called for reducing benefits by raising the retirement age, introducing means testing, and reducing cost-of-living increases. At the same time, many staunchly oppose raising payroll taxes, or raising the cap on income subject to payroll tax, which is currently $110,000. Raising, or eliminating the cap Laursen writes, would close a lot of the funding gap, and he points out, without pulling the rug out from under those who need it the most.

I’d like to start by asking Eric: What else could improve the system, and whether these moves –as well as raising the income cap—are being seriously considered?

119 Responses to “FDL Book Salon Welcomes Eric Laursen, The People’s Pension: The Struggle to Defend Social Security Since Reagan”

BevW May 12th, 2012 at 1:49 pm

Eric, Ellen, Welcome back to the Lake.

Ellen, Thank you for Hosting today.

Eric Laursen May 12th, 2012 at 1:50 pm

Thanks for having me on, Bev!

Eric Laursen May 12th, 2012 at 2:03 pm

I’ll get right to Ellen’s first question. But first, thanks for hosting me, Ellen – it’s a great privilege to have one of the very best journalists in America running the show today.

There are quite a few other good ideas for improving Social Security’s funded status besides raising the cap. Another is to dedicated another levy – perhaps a financial transactions tax or a revived estate tax – to Social Security alongside the payroll tax. Flexible benefit programs aren’t taxed. They ought to be, since they’re an increasingly large part of workers’ compensation – and the proceeds could also be used to support Social Security. The simplest thing would be to raise payroll taxes for everyone – but very gradually, over a period of decades, such that it doesn’t affect people’s purchasing power. The common denominator here, of course, is that all of these ideas involve raising taxes on some one. But that’s no reason they – or some combination of them – shouldn’t at least be considered. America is getting older. We will have more elderly to provide for. There’s no getting around the fact that it’ll cost us more than it has in the past if we don’t want to send the elderly to the poorhouse – or their children’s guest rooms.

If we want to minimize the tax burden from Social Security, however, there’s one way to do it – give America a raise! Real wages have stagnated in this country since the mid-1970s, except for a brief spurt at the end of the 1990s. This is the main cause of the shortfall in Social Security’s 75-year funding. Social Security depends on payroll tax receipts. If real wages aren’t going up,payroll tax receipts stagnate too. I think Washington could do us a lot more good if stops obsessing over the alleged “insolvency” of Social Security and starts considering how to create well-paying jobs – jobs with a future to replace the hollowing out of American manufacturing. That means spending money on education, training, infrastructure, revisiting job-killing deals like NAFTA. But it’s essential. Finding creative ways to raise money from different sources for Social Security is fine, but it’s basically bailing out a leaky boat. In the end, Social Security depends on payroll tax receipts that rise at a healthy pace. The way to plug the leak for the long run is to get wages growing at a healthy pace again. If we don’t, this country will have a hard time in the future paying for any of the things we collectively provide ourselves with. Not just Social Security.

Are these things being seriously considered on Planet Washington? Not much, unfortunately. If they’re to be addressed, the Progressive Caucus needs to grow considerably larger.

BooRadley May 12th, 2012 at 2:04 pm

Eric, Ellen, thank you so much for being here on this important topic.

Are there any studies on the “multiplier” impact from Social Security?

IMHO, so much of military spending, as just one example, has a much lower economic multiplier.

Ellen Schultz May 12th, 2012 at 2:06 pm

Eric, it’s a pleasure to have you here today to discuss your book. EWHat sort of pushback have you seen to the idea of raising the cap?

Eric Laursen May 12th, 2012 at 2:07 pm

There are some, for example by the Center on two very good think-tanks, the Center on Budget and Policy Priorities (cbpp.org) and Center on Economic and Policy Research (CEPR.net). But just look at the effect that Social Security has had during the post-housing bubble recession 0- the elderly were one of the few groups that kept spending. And there is also some good research from Frida Berrigan at New America Foundation on the surprisingly low multiplier effect of Pentagon spending.

Ellen Schultz May 12th, 2012 at 2:08 pm

Is anyone in Washington considering any of the solutions you mention?

BevW May 12th, 2012 at 2:08 pm

As a technical note,
there is a “Reply” button in the lower right hand of each comment. Pressing the “Reply” will pre-fill the commenter name and number you are replying to and helps for everyone in following the conversation.

(Note: If you’ve had to refresh your browser, Reply may not work correctly unless you wait for the page to complete loading)

Eric Laursen May 12th, 2012 at 2:09 pm

Raising the cap: gets a t least some lip-service from the Bowles-Simpson report – in other words, from the center-right – but they always couch it as a backup – start it, say 20 years from now, if nothing else works. They’d rather start with fairly brutal measures like raising the retirement age.

Eric Laursen May 12th, 2012 at 2:09 pm
In response to BevW @ 8

Got it. Thanks!

Ellen Schultz May 12th, 2012 at 2:11 pm
In response to Eric Laursen @ 9

How much would raising the cap help? I’ve heard it would take care of 75% of the funding problem>

Eric Laursen May 12th, 2012 at 2:13 pm
In response to Ellen Schultz @ 7

Yes – Tom Harkin recently submitted some very promising legislation that incorporates some of the ideas mentioned above. Bernie Sanders has been pushing raising the cap from some time. And on a slightly different note, I was delighted to see the AFL-CIO recently start encouraging discussion of improving Social Security benefits – something that’s tragically been lost from the debate for too long. Social Security could be a lot better for a lot of groups in society, such as widows, surviving children, and people who spend their careers almost entirely in low-wage jobs. I’m glad that labor is turning its attention to this.

Ellen Schultz May 12th, 2012 at 2:15 pm

In your book, you mention that raising the retirement age would have a harsh effect on minorities and low-income wage earners. Can you elaborate?

Eric Laursen May 12th, 2012 at 2:16 pm
In response to Ellen Schultz @ 11

It depends on how you measure the shortfall. Here’s where it gets technical, but briefly, if we’re just talking about the 75-year period that’s the traditional measurement, raising the cap would indeed take care of the bulk of the deficit. But the right has started to use a much more stringent measurement that originated during the Bush years – the “infinite projection.” Using this, raising the cap eliminates far less. But a lot of reputable pension actuaries don’t give much credence to the infinite projection.

Eric Laursen May 12th, 2012 at 2:20 pm

Yes, there are two ways. First, these are the people who are least able to to wait until the full retirement age to retire, because they tend to work in the most physically demanding jobs. They fill the gap by going on disability – but the disability rolls are huge and it can take years to receive benefits. Second, raising the full retirement age means you have to live til a very old age to make up the lost benefits. Mminorities and low-income wage earners are less likely than more affluent workers to reach, say, 9p or 95. So they lose out.

Tammany Tiger May 12th, 2012 at 2:23 pm

Has anyone explored the idea of making K-1 distributions subject to the Social Security tax?

BevW May 12th, 2012 at 2:23 pm

Eric is responding, had a tech issue. bev

Eric Laursen May 12th, 2012 at 2:23 pm
In response to Ellen Schultz @ 13

Don’t know if that last comment got through. First, these people are the ones who work the most physically demanding jobs. So they’re less able to keep going into, say, their late 60s.

Eric Laursen May 12th, 2012 at 2:25 pm
In response to Ellen Schultz @ 13

I’ll try one more time. These peple work the most physically demanding jobs and so are less able to keep working into, say, their late 60s. Also, they tend not to live as long in old age, period. So they lose beneits compared with more affuent workers.

Ellen Schultz May 12th, 2012 at 2:29 pm
In response to tammanytiger @ 16

Great question. There are many forms of income, including distributios from partnerships (K-1s), carried interest (which goes to hedge fund managers). Eric discusses these in his book.

BearCountry May 12th, 2012 at 2:30 pm

Hi, everyone.

Are these things being seriously considered on Planet Washington? Not much, unfortunately. If they’re to be addressed, the Progressive Caucus needs to grow considerably larger.

I would say growing by one person would make the Progressive Caucus would be considerably larger than the 0 that it is now. So far the putative Progressive Caucus is of very little to none in terms of real progressive help.

bigbrother May 12th, 2012 at 2:30 pm

“Third Rail”…why does Obama promote Peterson’s Catfood Commission? We are supposed to get a Defense budget cut? The work force cannot be thrown under the bus if we are a civil society. Retirees live on SS.

Eric Laursen May 12th, 2012 at 2:30 pm
In response to Ellen Schultz @ 13

OK, I’m back and I’ll try again with this one. Sorry!

Two things here: First, minorities and low-income wage earners tend to work the most physically demanding jobs. So they are less able to keep working into, say, their late 60s. Second, they tend not to live as long in old age as more affluent workers. If you keep living into, say, your 90s, you tend to make up the lost benefits – but these will tend to be more affluent people.

Ellen Schultz May 12th, 2012 at 2:32 pm

Have any participants out there today heard people advocating for separate accounts as a solution? The Bush Administration made a big push for this, and Eric provides a lot of detail about how this would seriously cripple the system.

Eric Laursen May 12th, 2012 at 2:33 pm
In response to bigbrother @ 22

As I point out in The People’s Pension, every president since Jimmy Carter has tried to cut Social Security, and that includes Obama – the deal he tried to cut last summer with Boehner would have slashed the index used to calulate initial benefits for retirees. Keeping him away from the cookie jar is going to be difficult afterv the election, too.

Ellen Schultz May 12th, 2012 at 2:34 pm

The People’s Pension sinks a harpoon into the myth about the success of the privatization program in Chile. Though it’s been widely touted as a model for America to follow, it’s been a big failure in many ways. Many people are left out; accounts are too small to pive on in retirement, and fees eat up as much as 30% of the benefits.

BearCountry May 12th, 2012 at 2:34 pm

I would also say that most of the topics that you cover and the arguments are familiar to regulars here at FDL. I think, however, that gathering them together with cogent explanations is of great value when discussing the topic with those who “know” that SS is a Ponzi scheme doomed to bankruptcy in a few years. I think this will be of great value to those unfamiliar with the arguments in favor of the viability of SS.

Eric Laursen May 12th, 2012 at 2:36 pm

Test

Eric Laursen May 12th, 2012 at 2:37 pm

Test 2

Ellen Schultz May 12th, 2012 at 2:38 pm

The book also demonstrates how the financial companies including FIdelity and State STreet, began lobbying for private accounts in the 1990s, when they realized that the same system that was funnelling billions into their invetmetn accounts in a cost-effecient way would be replicated in an even bigger way if payroll taxes were hanessed as well.

Eric Laursen May 12th, 2012 at 2:40 pm

Test 3

Eric Laursen May 12th, 2012 at 2:41 pm

Test 4

Tammany Tiger May 12th, 2012 at 2:41 pm

I’ve seen a number of proposals for privatizing Social Security, all of which ignore the issue of administrative costs. In traditional Social Security, those costs are less than 1 percent. I don’t see how a privately-managed system of retirement accounts could keep administrative costs that low, even if they didn’t pay their executives huge salaries and bonuses and their sales reps refrained from steering account owners into products with big sales loads and administrative fees.

Oilfieldguy May 12th, 2012 at 2:41 pm

All my life I’ve had a grudging admiration for the AARP’s effective lobbying. Now that I am getting close to retirement age, they seem to be “softening” their position. I cannot imagine the NRA behaving this way. Any evidence the recent pushback the AARP has received has worked?

Ellen Schultz May 12th, 2012 at 2:42 pm
In response to BearCountry @ 27

FDL participants are fairly sophisticated, but I think most would be surprised by the revelations in the book about how the Koch brothers bankrolled the anti-SS crowd. Laursen also has uncovered a great deal that peopel didn’t know about how Pete Peterson cozied up to the media –with a fair amount of success– winnning allies at 60 Minutes, among others.

Eric Laursen May 12th, 2012 at 2:44 pm
In response to Ellen Schultz @ 35

Test 5

BevW May 12th, 2012 at 2:47 pm

Test 6

Ellen Schultz May 12th, 2012 at 2:47 pm
In response to Oilfieldguy @ 34

Eric is still having technical difficulties, but hopefully will be with us soon.

AARP’s involvement with Social Security has been peculiar. There are internal differences within the organization, and their “softening” shocked many. This, too, is chronicled in the book, which I wish I could cut-and-paste into this discussion, since it has the answers to all the questions posted so far.

Tammany Tiger May 12th, 2012 at 2:48 pm
In response to Ellen Schultz @ 35

In 2004, Peterson wrote a book titled Running on Empty in which he argued that Social Security was unsustainable. On a number of occasions, he conflated Social Security and Medicare, which have different cost structures and funding sources. He also trotted out the argument that the Social Security trust funds are “stuffed with IOUs” and that retirees and near-retirees are waging generational war against younger workers.

Phoenix Woman May 12th, 2012 at 2:49 pm
In response to Ellen Schultz @ 30

Speaking of lobbying: I see that Jamie Dimon, Obama buddy, Simpson-Bowles advocate and thus yet another of those who want to get their hands on our Social Security, is now in the news for having done to JPMorgan Chase what he’d like to with Social Security. Does he figure in the book? And how many other “deficit hawks” are also a lot less good with money than they claim? (And do you agree with Paul Krugman today that the Republicans won’t raise anywhere near the fuss over this that they did with Solyndra?)

Margot May 12th, 2012 at 2:49 pm

I’m still reading your book and wanted to thank you for your chapter about the War Against the Geezers.
Now I know when it started and how Reagan started calling it an “entitlement.”
The bits about Townsend were interesting–I remember my mother talking about this.

Ellen Schultz May 12th, 2012 at 2:49 pm

The politicization of the Social Security Administration is another topic well-chronicled in the book. As a journalist, I saw this first hand: Under the Buch Administration, we began receiving daily press releases from the Social Security Administration touting privatization.

BevW May 12th, 2012 at 2:51 pm
In response to Ellen Schultz @ 35

This is Eric – I’m back, sorry for the technical problem! peterson turned out to be a much more interesting story than I had guessed. It’s not that he single-handedly “bankrolls” the movement against Social Security, although he does this to some extent. His real influence is that he aggregates a lot of the experts who take a dim view of Social Security and creates a sort of echo chamber effect for them through his foundations and media contacts. This creates an impression that the kind of changes he wants to see are somehow inevitable. It’s a more subtle process than, say, the Cato Institute engages in when it pushes private accounts (which Peterson has sometimes favored, sometimes not).

Ellen Schultz May 12th, 2012 at 2:52 pm
In response to Margot @ 41

I second your comment — Laursen debunks the whole “generational warfare” concept, and shows how it was part of a pretty successful spin campaign.

Ellen Schultz May 12th, 2012 at 2:54 pm
In response to Eric Laursen @ 43

Eric, can you discuss how the media came under the sway of the anti-Social Security crowd?

BevW May 12th, 2012 at 2:54 pm
In response to Ellen Schultz @ 42

This is Eric – that’s a very interesting story, which I cover in The People’s Pension. The irony is that Republicans traditionally complained the Social Security Administration was a part of the permanent part of the “liberal permanent government,” legislating expansion of Social Security behind the scenes. But the Bush administration went ahead in 2005 used the SSA in an extraordinarily politicized way to push its privatization agenda. Henry Waxman and others in Congress wound up doing a rather scathing investigation of all this. But it’s part and parcel of how Bush used the eexcutive branch in general during his presidency.

BevW May 12th, 2012 at 2:56 pm
In response to Ellen Schultz @ 44

Eric here – the “generational warfare” line is something that’s actually proved quite unsuccessful for the movement against Social Security. Polls over and over reveal that younger people don’t have any feeling of animosity toward their elders when it comes to retirement benefits – this despite millions that Peterson and others poured into Gen X “pressure groups” like Third Millennium back in the 90s.

Ellen Schultz May 12th, 2012 at 2:56 pm

In you r book, yu point out that there are a couple of reasons why ths happened. For one thing, the numbers lend themselves o misunderstanding. Every year, the Social Security trustees release a report that icludes projections of te program’s solvency over a periosd of 75 years. They include pessimistic optimistic and intermediate predictions. The media focues on the pessimistic ones.

BearCountry May 12th, 2012 at 3:00 pm
In response to Eric Laursen @ 43

I guess that I am replying to Eric.

peterson turned out to be a much more interesting story than I had guessed. It’s not that he single-handedly “bankrolls” the movement against Social Security, although he does this to some extent. His real influence is that he aggregates a lot of the experts who take a dim view of Social Security and creates a sort of echo chamber effect for them through his foundations and media contacts.

Other than ideological why would any “experts” have a dim view of SS? It seems to me the only reasons to want to end it are: first, the money lobby wants to get their hands on all that cash, and, second, the motu want to drive the older people into poverty and death as soon after their working years are done.

Eric Laursen May 12th, 2012 at 3:00 pm
In response to Ellen Schultz @ 48

Right – even though they’re not always the most accurate. this year, the big panic is that the “date of insolvency” in the intermediate projections is 2033, not 2036. But this is almost entirely because of the recession and higher unemployment, not the aging population, which was all factored into the numbers years ago. The mainstream media just never seem to get this basic point.

BevW May 12th, 2012 at 3:05 pm
In response to Ellen Schultz @ 48

Eric here – Briefly, the intermediate projections – the ones the media fiocus on – are actually quite pessimistic. They assume a rate of economic growth in future decades which most of us would regard as Depression-like. And they aren’t always the most accurate. The numbers that were reported last month – insolvency happening in 2033, not 2036 – are almost entirely because of teh recession and higher unemployment – not because of population aging, which was factored in a long time ago. It amazes me that the mainstream media never seem to get this point!

Ellen Schultz May 12th, 2012 at 3:05 pm

Eric, you also discuss how the projections by the trustees are too pessimistic, because they rely on the recent past, which includes several severe recessions. As a result, the projections over 75 years are dismal –even depression level in yor view. This was really surprising to me, but also made me more optimistic about the solvency of the system.

Ellen Schultz May 12th, 2012 at 3:06 pm
In response to Eric Laursen @ 51

The Columbia Journalism Review recently had a scathing article about the gullability (an innumercy) of many in the media.

BevW May 12th, 2012 at 3:08 pm
In response to BearCountry @ 49

Eric here – I think there’s another reason that’s simpler. Since the 70s, the “monied interests” have put a tax regime in place that treats them very kindly, to say the least. The worry is that as the population ages, it’ll be necessary to raise taxes to support a larger dependent population. They don’t want to see this happen, because some of that higher tax burden will inevitably fall on them. Cutting Social Security benefits preemptively is one way to forestall it and preserve the low-tax environment for capital.

Blue Onyx May 12th, 2012 at 3:09 pm

Mr. Laursen–

If time permits, will you please respond to Bear Country’s question at Comment #38:

“Other than ideological why would any “experts” have a dim view of SS? It seems to me the only reasons to want to end it are: first, the money lobby wants to get their hands on all that cash, and, second, the motu want to drive the older people into poverty and death as soon after their working years are done.”

Much thanks–

Blue

spocko May 12th, 2012 at 3:10 pm

those who “know” that SS is a Ponzi scheme doomed to bankruptcy in a few years

.

The Right wing media and a slew of right wing belief tanks drive these myths and there is not a counter balance to them. When there is, they belief tankers just ignore them and go back to saying the same thing. There are no sanctions, only rewards, for lying about Social Security.

I just listened to Jon Stossel speaking at the Commonwealth Club in SF.
He repeated these exact words. He actively spread this, and there is no one to refute him. The format wasn’t set up to have a anti-Stossel there to say, “Jon, that is a total falsehood. Here is why. Get him to agree that it is not a ponzi scheme. Then say, ‘Now Jon, I’m going to be following your comments from here on out. What should I do to ensure that you stop making this false Ponzi scheme comment again? What sort of person moral responsibility will you take instead of repeating a falsehood?”

Ellen Schultz May 12th, 2012 at 3:10 pm
In response to Eric Laursen @ 54

That’s fascinating. I’ve seen astonishing resistance to the notion of rasing the cap on income subject to payroll tax –it’s almost as if higher income anti-SOcial Security folks know that keeping the cap low is a way to starve the system.

Eric Laursen May 12th, 2012 at 3:10 pm

Test 7

Blue Onyx May 12th, 2012 at 3:11 pm

Sorry–

Guess you were answering, as I was typing!

Blue

Eric Laursen May 12th, 2012 at 3:11 pm
In response to Blue Onyx @ 55

See my comment 42.

Ellen Schultz May 12th, 2012 at 3:12 pm
In response to spocko @ 56

Spocko — I wonder if you remember the incredibly successful spin campaign in the late 1990s, where some group released a “survey” that supposedly showed that youn people were more likely to believe in aliens than they were in Social Security being there for tem in retirement.

Eric Laursen May 12th, 2012 at 3:12 pm
In response to Ellen Schultz @ 53

Trudy Lieberman with CJR does some wonderful reporting on this. Ironically, the Peterson Foundation funds a CJR project on deficit and national debt reporting (I told you, Peterson has his feelers out everywhere!).

Eric Laursen May 12th, 2012 at 3:15 pm
In response to Ellen Schultz @ 57

It’s simple, in a way. I think that Bowles and Simpson know raising the cap is more than a reasonable compromise. But they know that even scheduling a tax hike decades in the future is pushing it with their GOP allies – that is, with their allies period, since they have none on the progressive side.

Ellen Schultz May 12th, 2012 at 3:16 pm

Eric writes about how every president since Carter has tried to cut Social Security, including Obama, who tried to cut a deal with John BOehner last summer that would have cur benefits over time.

Eric Laursen May 12th, 2012 at 3:17 pm
In response to Ellen Schultz @ 61

I address the “UFO factoid” in The People’s Pension. It consisted of two questions spaced very far apart from one another in the survey. when another group ran a survey a few years later where they asked young people directly whether they were more likely to accept UFOs’ existence than Social Security’s promise, they overwhelmingly picked Social Security. The Luntz survey was pure Madison Avenue, out of Mad Men.

Ellen Schultz May 12th, 2012 at 3:17 pm

Eric, in your book, you mention that raising the retirement age would have a harsh effect on minorities and low-income wage earners. Can you elaborate?

bluewombat May 12th, 2012 at 3:19 pm

Eric,

Historically the Democrats have been champions of SS, while Republicans have been opponents. But now it seems to me that there’s a bipartisan consensus that SS needs to be gutted because that’s the wish of the people who write the checks enabling Congresscritters to afford TV commercials.

Rocky Anderson, whom I’m supporting, calls Obama the more effective of two evils rather than the lesser of two evils. It seems to me that if Romney wins the presidency, the Democrats will have to be pretend that they oppose his efforts to gut SS, if only to preserve their brand identity, whereas if Obama wins and starts gutting SS, the Dems will fall in line.

If my theory is correct, SS stands a better chance with Romney winning. How much (or how little) do you make of my theory?

Eric Laursen May 12th, 2012 at 3:19 pm
In response to spocko @ 56

I also spend several pages on the Ponzi scheme smear in The People’s Pension. Briefly, a Ponzi scheme is a black box, no one is allowed to know how it actually makes money. With Social Security, it’s simple and transparent: you’re taking a bet that the economy will perform well enough, and wages will rise sufficiently, to cover Social Security’s costs. This, again, is why I say Washington should be concentrating on improving job and wage prospects for Americans, rather than absessing about SociuaL Security’s “solvency.”

Margot May 12th, 2012 at 3:20 pm

I’m astonished to find out about the propaganda that’s been flowing over and into us like mucky fertilizer. How did I never notice it?
You have a chapter called “What’s In It For Me?” in which you talk about a slick campaign directed at Gen Xers. I hear the refrain from younger people now; “oh i’ll never get anything from Social Security.”
How do we combat this? How to change the view now?

papau May 12th, 2012 at 3:21 pm
In response to Eric Laursen @ 12

Excellent continuation of Myers book “Social Security” – congratulations.

As you know the SSA actuariers have over the years investigated many options to “fix” the system – mainly funding plus a few odd ball requests from Congress.

As an actuary that dealt with this material of 45 years, I wonder why the simple raising of the wage cap, for both tax collection and benefit calculation, with inclusion of investment income above say 10,000 a year via the SS payroll tax collection system already in the IRS 1040, is not just adopted. As you know it provides a forever solution, albeit with the rich getting benefit checks for a million or more a year – but that massive check comes with an even more massive tax that allows the system to actually lower the payroll tax rate we all pay.

Likewise the tying of the “normal retirement age and month” to the current Reagan introduced age 67 indexed for mortality improvements, while slightly reducing the amount available for the early retirees at age 65 over time, sets the system onto a more stable path.

Indeed the rest of the 20 or so options tested by the SSA and once published in the Trustees Report do not seem needed or logical. Indeed with the above two changes we could INCREASE the benefits by using a fair cost of living calculation – CPI-E (elderly) – rather than the current CPI-U (urban worker) – and we could ridicule Simpson/Obama’s attempt to screw folks with the CPI-CHAINED – that is lower than either of the above via the assumption that there is no inflation if the the higher price for meat can be offset by folks moving to protein from cat food and walking rather than spending money on gas.

But my observation is that the media has sold out and reasonable discussions on this topic – promoting the obvious two fixes noted above – will not appear in the media – so we are left with simply screaming “No Change” lest the public attention span is lost via two many words for our media to report.

RevBev May 12th, 2012 at 3:21 pm
In response to Eric Laursen @ 62

That was my question = Where is accurate information? What or who else do you suggest?

Eric Laursen May 12th, 2012 at 3:22 pm
In response to Ellen Schultz @ 66

Yes – I was trying to answer this one before the technical problem. two things: First, minorities and low-income wage earners tend to work the most physically demanding jobs, so they’re less able to work into, say, their late sixties. That means they have to accept lower, early-retirement benefits. The gap can be made up over time if you live to very old age, but minorities and low-income wage earners tend not to fall into this category either. So they get short-changed.

spocko May 12th, 2012 at 3:23 pm
In response to Ellen Schultz @ 61

I don’t but that’s the kind of work the belief tanks do. Most people don’t know that the Heritage Foundation has 15 PR people dedicated to getting their “experts” on the TV and Radio and place op/ed.

The fake survey is always a good way to push and idea. In the consumer product world my favorite is ‘dark chocolate’ has properties that might stop cancer. Ever wonder who put that out? The makers of Dove dark chocolate.
Ever wonder how big the sample size was and what was the population tested?
Totally about deciding what results you want first and then going back and designing the test and survey to get what you want.

Eric Laursen May 12th, 2012 at 3:24 pm
In response to bluewombat @ 67

I resist it at times, but the fact is that Social Security came the closest to being slashed under Clinton, when his administration worked behind the scenes with Gingrich on a deal. The fact really seems to be that center-right Dems are the most dangerous, because they have the “halo effect” of being members of the party that created Social Security in the first place.

Ellen Schultz May 12th, 2012 at 3:26 pm
In response to Eric Laursen @ 74

To me, that’s one of th most disturbing revelations in your book.

What do you have to say to this question from above:

“All my life I’ve had a grudging admiration for the AARP’s effective lobbying. Now that I am getting close to retirement age, they seem to be “softening” their position. I cannot imagine the NRA behaving this way. Any evidence the recent pushback the AARP has received has worked?”

Eric Laursen May 12th, 2012 at 3:27 pm
In response to Margot @ 69

As they say on Mad Men, you don’t. You change the conversation. It’s not about whether we can afford Social Security. It’s about whether we could possibly afford to do without it. We can’t. Slashing benefits or creating private accounts wouldn’t eliminate any costs for old age – it would merely shift the costs from the collectivity – us – to working households. This doesn’t work. Shifting the conversation in this direction is the way to win.

bluedot12 May 12th, 2012 at 3:28 pm
In response to spocko @ 56

Has anyone ever took a look to see just how high the payroll tax will have to be given the increase in the elderly v the rest of the population and the fact the fund is declining? Or, how much the base must increase?

Eric Laursen May 12th, 2012 at 3:29 pm
In response to Ellen Schultz @ 75

The AARP hasn’t been nearly as effective a champion of Social Security for a long time. they continue to send mixed signals. They like to think of themsleves as Washington power brokers, and fear that if they aren’t willing to talk about “changes,” they won’t be part of the “conversation.” But they do listen to their constituents – especially when the latter start cancelling their memberships (word!).

Mauimom May 12th, 2012 at 3:31 pm

Thank you, Eric, for writing this and for joining us.

My question comes from what’s been identified as an “unusual” portion of your book: identifying that Obama and the Democrats are really the biggest threats to social security. [This is something I've been saying for some time.]

I’m curious if you have any suggestions for how to deal with these miserable Obamabots who unblinkingly support anything he proposes, and don’t see the threat at all.

Eric Laursen May 12th, 2012 at 3:32 pm
In response to papau @ 70

That’s the tragedy of this whole 30 years of history that I cover in The People’s Pension – that we should be talking about how we can improve Social Security, for instance by instituting the CPI-E. But with “solvency” constantly being thrust in our faces, it’s nearly impossible. Social Security is a social institution. When a social institution doesn’t evolve to meet the changing needs of its constituency, it atrophies and dies. In this sense, the movement against Social Security keeps losing the battle but winning the war.

bluewombat May 12th, 2012 at 3:33 pm
In response to Eric Laursen @ 74

center-right Dems are the most dangerous, because they have the “halo effect” of being members of the party that created Social Security in the first place

I wouldn’t vote for Romney under any circumstances, but, at the risk of appearing discourteous, you didn’t answer my question straight-up: Is SS in more peril from Obama than Romney?

spocko May 12th, 2012 at 3:33 pm
In response to Eric Laursen @ 68

As I traveled cross country to Omaha last year I asked people what they were most concerned about. The number one thing was jobs. I asked them if they were concerned about the deficit (something that was all over the news this time last year.) They said no. I asked them have you ever heard of Pete Peterson? Nope.

“Would you be surprised to know that Pete Peterson has committed one billion dollars to make sure you hear about the deficit instead of jobs?”

Only one person (an owner of several Popeye’s chicken franchisee) had heard of a billionaire getting involved in our political discussions he had heard of George Soros. He also thought that there were probably and “opposite group” spending money to talk about jobs. Like the unions.

I asked, so, you really think that the Unions have that same power anymore or do you think that all the unemployed people are going to get together and hire lobbyists to push for jobs and twist arms in congress by offering money or withholding money?

He started getting irritated (clearly I was a hippie who knows too much) and stopped talking to me. His co-partner seemed to accept what I was saying, but we switched to talking about how safe he felt his chickens were (I told him about my research in to chicken tainted with melamine that was sold through one of the top suppliers.

bluedot12 May 12th, 2012 at 3:33 pm

Maybe you can comment on this idea. We keep hearing about ponzi schemes and that the fund will not be there for younger people. What if there were no fund at all and SS were paid out of general revenue, sort of how we fund defense. In that case those arguments fall away.

Eric Laursen May 12th, 2012 at 3:35 pm
In response to bluedot12 @ 77

The sky’s the limit – it depends on how “secure” you want the program to be, given the fact that we’re talking about projections 75 years or more into the future. The really relevant figure for me is 6.2% – the %age of GDP that Social Security is projected to absorb in 2050. That’s actually projected to drop to 6% shortly thereafter and stay there for the foreseeable. A small price to pay, and quite affordable, given we’ll be an older population.

Eric Laursen May 12th, 2012 at 3:37 pm
In response to bluewombat @ 81

Straight up, from Obama. Romney knows what happened to Bush in 2005. The Dems are ones who always want to make deals. That doesn’t mean one should vote for Romney. Just that Dems of the progressive persuasion must always realize they have to police their party’s center-right.

Ellen Schultz May 12th, 2012 at 3:38 pm

Someone asked above whether anyone explored the idea of making K-1 distributions subject to the Social Security tax? I personally would like to see carried interest, options, investment income and the like subject to payroll tax. Does anyone ever talk about this possibility?

Eric Laursen May 12th, 2012 at 3:40 pm
In response to spocko @ 82

Peterson isn’t widely known outside of elite circles. As for unions, whatever their failures in recent decades, they’ve done an extraordinary job helping to defend Social Security.

BTW, you can read The People’s Pension and make a long list of the vilification that’s been hurled at unions, grassroots organizers, elder advocates, POC organization, etc, that defend Social Security by the right and center-right. It’s quite extraordinary.

Margot May 12th, 2012 at 3:40 pm

You change the conversation. It’s not about whether we can afford Social Security. It’s about whether we could possibly afford to do without it. We can’t. Slashing benefits or creating private accounts wouldn’t eliminate any costs for old age – it would merely shift the costs from the collectivity – us – to working households. This doesn’t work. Shifting the conversation in this direction is the way to win.

Thanks!

bluewombat May 12th, 2012 at 3:40 pm
In response to Eric Laursen @ 85

Ah, thank you very much. And I would swallow rat poison before I would vote for Romney.

bluedot12 May 12th, 2012 at 3:41 pm
In response to Eric Laursen @ 84

6% does not sound atrocious to me. But I suppose that 6% of GDP is a different ratio that what we pay?

Eric Laursen May 12th, 2012 at 3:42 pm
In response to Ellen Schultz @ 86

Yes, there’s quite a bit of talk by economists like Dean Baker about taxing income from capital, which is what this is essentially. It doesn’t get to first base with Bowles-Simpson or anyone on the right. Even progressive-Dem lawmakers shy away from it. But it makes perfect sense, given that more and more of aggregate earnings in our society are non-wage.

papau May 12th, 2012 at 3:43 pm
In response to Ellen Schultz @ 52

Actually Bush had the assumptions decreased BEFORE THERE WAS A HISTORY OF RECESSIONS so as to promote his conversion to private accounts for the current SS system (decreasing the years till the Trust runs out and we can only pay 75% of the then promised benefit – albeit that future promise is a benefit much higher than the current benefit and indeed the cuts to benefits to save the system always end up with benefit levels WORSE that we get by doing nothing and paying at that 75% of future promise level).

I screamed about this in 2003/2004 – and not one media outlet published anything by me – or any other actuary – about these facts.

Indeed job one for the “left” at the time seem to be to sell the lie that Bill Clinton proposed converting Social Security to private accounts so Bush was just following Clintons lead – and that lie was used by Obama and friends in 2008 to take down Hillary. The fact of course was that Bill Clinton proposed in a State of the Union speech to add an addition to the social safety net with NO CHANGE IN SOCIAL SECURITY – the addition being a tax deferred 401K account for every citizen with voluntary contributions collection via the payroll tax system and invested in government bonds – He even discussed a “match” -gift – of 0.5% of wages to start it off.

Instead of truth telling we got side stories of Newt talking to staff at the WH about how Newt wanted to kill SS via taking part of the current payroll tax and diverting it into private accounts (something that Senator Moynihan (D) of NY and Rubin and Greenspan also wanted to do but were shot down by Clinton). We also go side stories about how investments in gov bonds were worthless – there is no money in the trust fund – because while bonds are a good investment for China, American retirees had just tossed money down the drain – the US should default on that part of the bond liability not owned by China – yeah right. And we got side stories about the actuaries doing the math incorrectly and that Cheney’s/Paulson’s spreadsheet staff had discovered that if you project forvever and assume that after the SSA actuaries 75 year projection that showwed everything OK you added a shortfall of revenue relative to benefits and projected from 75 years out to forever, you could get large “unfunded liability” numbers – and our media treated this as a truth. Indeed Simpson has used the forever liability projection nonsense as reasons to kill SS.

So in all this our media never pushes back and indeed it promotes the lies. Hard to see how we avoid an Obama led destruction of SS in a Grand Bargain given the refusal of everyone to listen to the actuaries. http://my.firedoglake.com/papau/2012/05/11/when-deficit-reduction-and-tax-fairness-must-be-avoided-call-it-a-fiscal-cliff-needing-a-grand-bargain/

bluedot12 May 12th, 2012 at 3:43 pm

The thing that really scares me is we are scared. Too many people buy into the framiing of SS as being broke or nearly so and,if you are young, forget about it. I think we need to change the framing.

Eric Laursen May 12th, 2012 at 3:44 pm
In response to bluedot12 @ 90

Exactly. That’s how much of total economic output is absorbed by Social Security. The point is that even if the payroll tax rate is raised substantially, if the economy is growing fast enough, it wouldn’t bite much (or at all). Again, get wages growing and we’re solving the problem, such as it is!

papau May 12th, 2012 at 3:45 pm
In response to Eric Laursen @ 74

That is not true – under Clinton Treasury, Moynihan of NY, Greenspan, and Newt were pushing a conversion of Social Security to private accounts – Bill Clinton refused – read the damn State of the Union and the proposals that followed.

There never was anything other than an expansion of the social safety net on the table.

bluedot12 May 12th, 2012 at 3:45 pm
In response to Eric Laursen @ 91

I don’t think that way will get us there. Those ideas will get chewed up in the news and congress. You can probably think of the headlines.

bluedot12 May 12th, 2012 at 3:47 pm
In response to papau @ 92

That privatization meme is another framing issue. It has to go.

Eric Laursen May 12th, 2012 at 3:48 pm
In response to papau @ 92

The important thing here – the pattern which you correctly point out – is that every time the pro-Social Security side identifies a way to solve the “problem” – to make Social Security more secure, since we’re talking about projections here and you can’t make something like Social Security completely secure in a future we don’t know – the right and center-right raise the bar, cooking up a new and more “rigorous” way to judge solvency that makes it look worse. And repeat. (Sorry for the run-on sentence!)

BearCountry May 12th, 2012 at 3:49 pm

As I said earlier, there is no Progressive Caucus worth the name. The congressional reps and the wh pay no attention to us who don’t make huge contributions. Those progressives who happen to make enough money to move uptown very quickly lose their interest in contributing to progressive causes. I’m afraid that in many ways we are left reading books like yours and screaming into the wind.

Eric Laursen May 12th, 2012 at 3:50 pm
In response to papau @ 95

Seen my book. Clinton was working on several tracks, but Gingrich and a team of Clinton aides cooked up a plan, which was shelved before the SOTU, to cut benefits and create private accounts on the side in compensation.

bluedot12 May 12th, 2012 at 3:50 pm

A fella named Alan Greenspan sold us on the idea of saving for the future. It is a fallacy. A nation does not “save” for the future with T bonds. It never did, it never will.

papau May 12th, 2012 at 3:51 pm
In response to Ellen Schultz @ 86

The health reform hit investment income with a 3.6% surtax for the top wage earners.

As to K-1, I have not done a K-1 return in a while but a distribution of a partnership’s earning earnings are subject to income tax and Social Security tax. Any income or loss listed on your K-1 will be reported on Schedule E. K-1 earnings are typically from a Partnership, Corporation or Trust/Estate or Beneficiary. A K-1 from a Corporation or if you are a Beneficiary, for example, are not subjust to FICA (social security and medicare tax). If you are subject to Social Security tax from your K-1 income, the Social Security tax is calculated on Schedule SE (self employment tax) which, if applicable, will be listed on the second page of your 1040 at line 56.

Ellen Schultz May 12th, 2012 at 3:51 pm
In response to Eric Laursen @ 91

A couple years ago, I found that one-third of wages were NOT subject to Social Securiy because the amouns were above the taxable wage base. (Obviously, I’m not talking abour investment income etc.–just wages)

Does it surprise you that one-third of wages fall outside of the taxable limit?

Eric Laursen May 12th, 2012 at 3:52 pm
In response to bluedot12 @ 93

I agree. The encouraging thing, though, is that just because people are scared doesn’t mean they’re prepared to see their Social Security cut. They expect their political leaders to fix it so it doesn’t have to be cut. The polls are very clear about this over a very long period of years, in fact.

BevW May 12th, 2012 at 3:52 pm

As we come to the end of this great Book Salon discussion,
[FYI - the comments will stay open for 24 hours]

Eric, Thank you for stopping by the Lake and spending the afternoon with us discussing your new book and the Social Security crisis.

Ellen, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

Eric’s website and book

Ellen’s website and book (The Retirement Heist)

Thanks all, Have a great weekend.

Tomorrow: Governor/Ambassador Madeleine Kunin – The New Feminist Agenda; Hosted by Amanda Marcotte.

If you want to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

bluedot12 May 12th, 2012 at 3:53 pm
In response to BearCountry @ 99

I think that,is true. I scream at the TV a lot in the last three years. Funny, no one hears.

Ellen Schultz May 12th, 2012 at 3:54 pm

Eric– thanks for writing this book. Firedogs: tell your lawmakers to read it.

Eric Laursen May 12th, 2012 at 3:55 pm
In response to Ellen Schultz @ 103

No surprise, since 1) wages for the 1% have risen so fast (even though they get most of their compensation through capital), and 2) the population of workers earning less than the cap has expanded rapidly. The payroll tax is not a progressive tax, and the above have made it even worse.

Eric Laursen May 12th, 2012 at 3:56 pm
In response to Ellen Schultz @ 107

What she just said! Thanks all!

bluewombat May 12th, 2012 at 3:56 pm

Thanks again for popping in, Eric.

papau May 12th, 2012 at 3:58 pm
In response to Eric Laursen @ 100

God bless – Clinton aids worked with Congress and Treasury and Greenspan and Newt – we all agree – but it is the Obama crowd dumping on Hillary and Newt dumping on Bill that CLAIM this means something more than it does. The fact you can quote Newt in your book does not change the facts.

THERE IS NO SUBSTANCE – NO BILL CLINTON SAYS DO THIS – IN ALL THESE CLAIMS.

“It was dropped before the SOTU” is crap – it was never going into the SOTU. Bill listened – that is what politicians do.

I worked with others pushing the actual proposal that was made (I was just a cheerleader)- seems only those with agendas that dump of Clinton get heard.

Eric Laursen May 12th, 2012 at 3:59 pm
In response to papau @ 111

Indeed. Clinton listened. Now we need to make sure Obama listens as well!

bluedot12 May 12th, 2012 at 4:00 pm
In response to Eric Laursen @ 104

In the end SS will live or die at the voting booth and in public opinion. As I said, we are at a disadvantage on the multiple framing issues. This is compounded by people like the Kochs and Petersen with unlimited money. We need very much to chamge the we think about this. The only way I see that happening is moving more to SS as a right of citizenship and depends only on the will of the people, not any payroll tax.

spocko May 12th, 2012 at 4:14 pm
In response to Eric Laursen @ 87

Oh I knew people didn’t know Pete Peterson, but it was interesting that they knew George Soros the right wing boogie man who funds everything (It’s just laughable how little money Soros has spent vs. the Koch’s or Schaifes.)

My point was that if you have enough money and you focus it on the Washington media they WILL cover you. If you always have and ‘expert’ available (with their own TV studio!) ready to talk the media will go to you.

Eric how many PR people are pitching you to appear on all the shows where Pete Peterson’s “experts” are on?

I’m a big reader of Krugman, Atrios and Digby and I’ve know for years that the media are constantly getting it wrong because there are lots of people actively pushing bad information.

I often look at “Who pays these anti-social security” people? Who is paying the “pro-social security people? Which group is applying more resources to the issue?” And then I ask, what will it take to disrupt the money flow? What will it take to disrupt the reputation of the “expert?”

Unfortunately there are only a few people who think like I do. I’m always trying to actively fight the right wing media and “experts” from the right wing belief tanks.

Phoenix Woman May 12th, 2012 at 5:59 pm
In response to spocko @ 114

And that is why you succeed where others fail.

bigchin May 12th, 2012 at 9:26 pm

The demise of SS can and should be laid entirely at the feet of the Democratic Party.

So, who you gonna vote for?

juliania May 13th, 2012 at 7:00 am

Thank you all for an informative discussion. (Unfortunately I couldn’t attend, due to early Mothers Day guests.) Had I been here I would have asked the authors’ opinions of the current backdoor attack on Social Security via student loans as described in Ellen Brown’s current article. This it seems to me is a timebomb which will and is threatening the viability of the system, given the size of outstanding debt in this area, and the ballooning interest fees. Even cosigners on their children’s loans are at risk, so this has the dimensions of the home mortgage theft.

I apologize for not being here to discuss it, but perhaps it can be researched by our wonderful FDL folk for future diary discussions. Thank you again for this historical work – it is so important to get these things on the record, and indeed, Obama is the greatest threat of the two, glad to hear and see that spelled out.

coberly May 13th, 2012 at 8:41 am

You need to make very clear:

Social Security does not increase “the deficit” AT ALL. EVER.

The projected shortfall in Social Security’s own funding can be closed entirely by raising the payroll tax one half of one tenth of one percent per year (CBO Options 2 and 3).. that’s forty cents per week each year in today’s terms.

This would avoid all the political problems of “raise the cap.”

Understand: the workers can continue to pay for their own Social Security as they always have, for an extra forty cents per week each year. This avoids all the “politics”… IF you can get the people to hear and understand this.

allenwsmithphd May 13th, 2012 at 12:05 pm

SOCIAL SECURITY CANNOT PAY FULL BENEFITS UNTIL 2033

Claims that “Social Security can pay full benefits until 2033 without any government action.” are being made by many commentators and politicians. But that is not true. For more than a quarter-century Social Security ran annual consecutive surpluses as a result of the 1983 payroll tax increase. That money was supposed to be saved and invested in marketable U.S. Treasury bonds, but instead, the government spent all of the money for wars and other government programs.

The so-called trust fund “bonds” are just IOUs that serve as an accounting record of how much Social Security money was spent for non-Social Security purposes. Prior to 1994, that record was recorded in government ledgers or stored on computers. In 1994, members of Congress, who worried that someone might actually want to see the IOUs, enacted legislation that required the actual physical printing of documents to serve as certificates of indebtedness. These certificates are stored in a fireproof filing cabinet, located at the Bureau of the Public Debt office in Parkersburg, West Virginia. That filing cabinet is the closest thing to the mythical Social Security trust fund that exists, and those IOUs cannot be used to pay Social Security benefits.

Beginning in 2010, the decades of Social Security surpluses came to an end, and a long period of annual deficits began. With Social Security deficits, the only way full benefits can be paid is for the government to borrow money with which to repay some of the looted money. The government borrowed $57 billion (probably from China) in 2011 in order to pay full benefits, and that number will increase with each coming year.

If Social Security actually had $2.7 trillion in marketable bonds, it could pay full benefits until 2033. But Social Security does not have a dollar’s worth or any kind of real asset that can be sold to raise cash. Social Security has only its annual revenue, which is insufficient to pay full benefits, even for one year. Even the interest that the government allegedly pays to Social Security is not paid with real money. The government “pays interest” by issuing more of the same non-marketable IOUs that the trust fund already has. It is true that the government owes the Social Security program $2.7 trillion, but there is no certainty that the government will enact higher taxes, or in other ways, be able to repay the money. The government has a moral obligation to repay the looted money, but it does not have a legal obligations to do so, because of a 1960 U.S. Supreme Court ruling—fleming v. nestor.

Allen W. Smith, Ph.D.
http://www.thebiglie.net
ironwoodas@aol.com
1-800-840-6812

P.S. You can download a free e-book version of my book, “The Looting of Social Security” by visiting my website at http://www.thebiglie.net.

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