Does Cenk Understand Social Security?

Email Print posted by publius 07/17/2008 11:10:01 PM EST

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I've been baffled on what we're supposed to think about McCain's recent comment on social security. 

Here is McCain's quote:

"Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace. It's an absolute disgrace, and it's got to be fixed."

 Disgrace is too strong of a word, but I don't think it means McCain "just figured out how social security works".  Wasn't he raising a perfectly reasonable point?I don't know the rest of the context, but I believe the point he was trying to make was that the current system where today's workers pay for today's recipients of social security payments is flawed. 

 Many people believe that they pay into social security and that money is saved until later when they retire and then it is paid back out.  If this was how social security actually worked it would be a much better system because all of the baby boomers would have paid in when they were working and be withdrawing now as they retire. 

 The major problem with social security is that we have an increasing number of older people in this country and fewer workers paying for their social security.  This is offset by immigration, our growing population, and growing economy.  But it is hampered by increasing life expectancy. 

 I know Cenk, and everybody that pays this much attention to politics understands this.  So are we just trying to score some points by impling that McCain thinks social security is a disgrace?  Or is there some context or major point that I'm missing?

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Does Cenk Understand Social Security? | 6 comments (6 topical, 0 hidden)
Don't Blame Baby Boomers (none / 0)

"...The only problem was that when Reagan took his meat axe to our tax code, he produced mind-boggling budget deficits. Voodoo economics didn't work out as planned, and even after borrowing so much money that this year we'll pay over $100 billion just in interest on the money Reagan borrowed to make the economy look good in the 1980s, Reagan couldn't come up with the revenues he needed to run the government.


Coincidentally, the actuaries at the Social Security Administration were beginning to get worried about the Baby Boomer generation, who would begin retiring in big numbers in fifty years or so. They were a "rabbit going through the python" bulge that would require a few trillion more dollars than Social Security could easily collect during the same 20 year or so period of their retirement. We needed, the actuaries said, to tax more heavily those very persons who would eventually retire, so instead of using current workers' money to pay for the Boomer's Social Security payments in 2020, the Boomers themselves would have pre-paid for their own retirement.


Reagan got Daniel Patrick Moynihan and Alan Greenspan together to form a commission on Social Security reform, along with a few other politicians and economists, and they recommend a near-doubling of the Social Security tax on the then-working Boomers. That tax created - for the first time in history - a giant savings account that Social Security could use to pay for the Boomers' retirement.


This was a huge change.

Prior to this, Social Security had always paid for today's retirees with income from today's workers (it still is today). The Boomers were the first generation that would pay Social Security taxes both to fund current retirees and save up enough money to pay for their own retirement.

And, after the Boomers were all retired and the savings account - called the "Social Security Trust Fund" - was all spent, the rabbit would have finished its journey through the python and Social Security could go back to a "pay as you go" taxing system.


Thus, within the period of a few short years, Reagan dramatically dropped the income tax on America's most wealthy by more than half, and roughly doubled the Social Security tax on people earning $30,000 or less. It was, simultaneously, the largest income tax cut in America's history (almost entirely for the very wealthy), and the most massive tax increase in the history of the nation (which entirely hit working-class people).


But Reagan still had a problem. His tax cuts for the wealthy - even when moderated by subsequent tax increases - weren't generating enough money to invest properly in America's infrastructure, schools, police and fire departments, and military. The country was facing bankruptcy.
 

No problem, suggested Greenspan. Just borrow the Boomer's savings account - the money in the Social Security Trust Fund - and, because you're borrowing "government money" to fund "government expenditures," you don't have to list it as part of the deficit. Much of the deficit will magically seem to disappear, and nobody will know what you did for another 50 years when the Boomers begin to retire 2015.


Reagan jumped at the opportunity. As did George H. W. Bush. As did Bill Clinton (although Al Gore argued strongly that Social Security funds should not be raided, but, instead, put in a "lock box"). And so did George W. Bush.


The result is that all that money - trillions of dollars - that has been taxed out of working Boomers (the ceiling has risen from the tax being on your first $30,000 of income to the first $90,000 today) has been borrowed and spent.

What are left behind are a special form of IOUs - an unique form of Treasury debt instruments similar (but not identical) to those the government issues to borrow money from China today to fund George W. Bush's most recent tax cuts for billionaires (George Junior is still also "borrowing" from the Social Security Trust Fund)..."


by ihavenobias on 07/17/2008 11:36:42 PM EST

RE: Don't Blame Baby Boomers (none / 0)
Okay...I hear you saying that it's Reagan and Greenspan's fault that social security is a "disgrace" today.  But what about McCain's comment?  I still don't see how it is supposed to make him look bad.

by publius on 07/18/2008 12:10:35 AM EST

[ Parent ]
Well (none / 0)
McCain is being dishonest and misleading about how we got ourselves into this mess.

It's hard to fix the problem in this case if you don't know how it was created in the first place. I don't claim to be an expert with a magical answer here, but I do think we need to start by acknowledging what really happened with taxes, the social security trust fund, debt and baby boomers.

My relevant point here is that republicans make it seem as though tax funded social security is inherently a flawed system (like all government programs in their mind) that is unsustainable and that if we privatized it (or if it had only been privatized from the beginning) it would work just fine.

But that's complete and utter bullshit.

Here's some more:

"...Later, Senator Rick Santorum made an odd admission for a Republican: ""You can't pay benefits with IOUs," he said on the Senate floor. "You have to pay it with cash."

And where will that cash - now nearly two trillion dollars - come from over the next decades as Boomers begin to retire?


Technically (and legally) it's simple - the Social Security Trust Fund will give back its IOUs to the Treasury Department and in exchange for them get cash to pay the Boomers' retirement checks. Practically, though, it'll be a crisis of biblical proportions. In order for the Treasury to come up with that kind of cash will require either massive tax increases or increased massive borrowing - at a time when we're already borrowing so heavily that China is propping up our economy with weekly loans.


Thus, Bush talks about a "crisis" in Social Security with some accuracy. But he doesn't dare tell us what the real "crisis" is, or how Reagan and Greenspan set it up, because when it becomes widely known that the real crisis is that Reagan set the course to steal Boomers' Social Security savings, it will destroy the reputation of both supply-side economics and the Republican Party for generations to come..."


by ihavenobias on 07/18/2008 12:27:20 AM EST

[ Parent ]
RE: Well (none / 0)

ihavenobias,

 I'm completely with you.  Republicans have no credibility on fiscal responsibility, social security, national security or anything.  Your responses are thorough and filled with great information. 

 However, I'm trying to get at this quote by McCain at the Denver townhall meeting.  Despite what I think about McCain and Republican policies I can't understand the Left's (and Cenk's) talking point on this quote. 

 From what I can tell people are making two points:

  1. McCain is out of touch on social security.  
  2. McCain thinks social security itself is a disgrace.

 I just don't see how you can draw either of these conclusions from this quote. 

by publius on 07/18/2008 01:21:30 AM EST

[ Parent ]
A big point (none / 0)
For me it goes back to this:
 
"...Social Security had always paid for today's retirees with income from today's workers (it still is today)..."

What McCain and other conservatives often suggest is that the system is broken because today's workers pay for today's retirees, or that at the very least this set-up illustrates the failure. But the fact is that was always the case and the system used to work just fine.

They're basically saying "you're paying for people to retire out of your wages so the system is clearly broken". Yes, the system has issues (as previously explained), but the fact that the workers of today are paying for the workers of yesterday is not one of them, at least not that fact in and of itself (forget the trust fund and all the rest for a moment).

And again, McCain is pro-privitization and strongly opposed to increasing the SS tax cap.

In that context when he makes those statements about SS, it says to me he's either ignorant or lying about how we got into this mess and therefore his proposed solution should not be accepted based on his particular argument (i.e. the public system is inherently flawed because as you can see Baby Boomer's ruined it, government programs always fail, you're paying for the retirees of today, etc., and therefore we need to privatize).

Basically he just wants an excuse to privatize the system and generate profits for his rich friends and donors (a standard Washington practice).

PS---I'm falling asleep here (it's almost 1 and I woke up at 5am today) so hopefully that made sense. I'll have to revisit tomorrow.

by ihavenobias on 07/18/2008 01:58:07 AM EST

[ Parent ]
Welcome to Karl Rove's OPPOSITE world! (none / 0)
Rove loves turning reality upside down, and here is another case where McCain falls for the Rove talking points so hard he fails to understand the very essence of what Social Security is.

For the record, the ONLY thing that's wrong with Social Security is the part that is run the way McCain wants.  Putting money aside for 50 years and then expecting it all to be there waiting for you when you retire is a dumb idea.  Someone will find a way to steal it, spend it or lose it somehow.  Because the boomer generation is too big for the rest of us to carry, Moynihan created a "savings account" element of Social Security, and then bingo, right away that money was stolen, spent and lost.

The part that McCain calls a disgrace is the part that works.  The part that is a disgrace is the part that McCain wants to expand to encompass ALL of Social Security.

by DigitalDave on 07/18/2008 12:29:57 PM EST

Does Cenk Understand Social Security? | 6 comments (6 topical, 0 hidden)
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