Dan Crawford | February 6, 2013 3:24 pm



by Dale Coberly

DEAR PAUL KRUGMAN

Please Read This

about Social Security

Dear Paul Krugman,

There was an indication the other day that you read Angry Bear, at least sometimes. I hope you read this, because it is important, and you have a better forum than I have.

I think the following facts would be game changers in the so-called “debate” about Social Security, if they become widely known and understood.

Social Security has nothing to do with the deficit…

In spite of tortured logic like that of Chuck Blahous who admitted grudgingly that “technically” Social Security does not affect the budget, but “in reality” if Congress has to pay back the money it has borrowed from Social Security, that will have an effect on the budget. This amounts to blaming granny for lending me her life savings. After all, if she hadn’t lent it to me I wouldn’t have spent it. Therefore it’s her fault that I have to get a job or borrow money from someone else to pay her back.

… and therefore should not be part of the “deficit reduction” hysteria.

Again, in spite of logic so tortured it gives lies a bad name: The serious folks who are so very worried about the deficit sometimes admit that Social Security has nothing to do with the deficit, “but we need to cut Social Security to give confidence to the markets.” Because even though Social Security has nothing to do with the deficit, cutting it will show “the market” that we are serious about controlling our deficit.

Social Security is not going broke.

It can’t go broke. It is paid for by the workers who will get the benefits. As long as they understand the value of protecting part of their savings from inflation and market losses… insuring at least a minimally decent retirement… they will want to be allowed to continue to pay for their Social Security.

The Trust Fund is NOT Social Security. It does not matter at all when it “runs out.”

The Trust Fund is normally a reserve of one year’s benefits designed to smooth the ebbs and flows of taxes versus benefits. It was allowed to grow following the 1983 increase in the payroll tax to about three times the normal size in order to allow the Boomers to help pay in advance for their own Social Security benefits beyond what would normally be paid by “pay as you go” financing. This corrected a potential “generational inequity.” This enlarged Trust Fund was always supposed to run out of money about the time the Boomer cohort no longer put unusual stress on the pay as you go system. So far it is on schedule to do exactly that. The precise date that the Trust Fund returns to the normal level is completely unimportant to Social Security.

The “Eight Trillion Dollar Actuarial Deficit” can be paid for by raising the payroll tax eighty cents per week each year.

This is a fact that can be established with certainty with real arithmetic (real arithmetic is not the “it’s just arithmetic” you hear about from journalists and congressmen who have no idea what they are talking about). Raising the payroll tax one half of one tenth of one percent per year… about forty cents per week in today’s terms … would entirely close the projected actuarial deficit over the 75 year actuarial window. Wages are projected by the same Trustees Report to rise about eight dollars per week each year over the same time period. So at the end of the day the workers will have twice as much money in their pockets AFTER paying for their Social Security, plus they will have guaranteed their own retirement at the normal retirement age with the present replacement rate… an amount that will also be twice in real value what today’s retirees get. Because of the recent recession, it would be better to raise the tax eighty cents per week each year over the next twenty years instead of at the slower rate. Eighty cents per week would still not be felt by the workers.

Social Security was designed…insisted upon by Roosevelt…to be worker paid: “So that no damn politician can take it away from them.”

Roosevelt did not count on the persistence of damn politicians, or the bad memories of workers, or the failure of the “defenders of Social Security” to honestly inform the workers. The workers will be glad to pay that eighty cents once they know about it, and understand it. The “defenders” of Social Security play into the hands of its enemies by calling for schemes to “make the rich pay for it.” Roosevelt knew that would be the death of Social Security. The rich will not pay for it. Or if they did, they would own it, and it would not be long before they would insist upon cutting it, turning it into welfare, and means testing it. And the workers would no longer be able to say… as they do now… “we paid for it ourselves.”

The “bi-partisan groups worried about the deficit”… which means folks paid by Peter Peterson to destroy Social Security by pretending Social Security is causing the deficit… tell very carefully crafted lies about Social Security. The people who style themselves defenders of Social Security waste their time deconstructing the little lies, while the Big Lie goes unanswered. One of those people apparently believes that “doing nothing” is the answer. He seems to believe that something will turn up that will extend the life of the Trust Fund and silence the calls for “fixing” Social Security. He could be right… the best “fix” for Social Security would be to raise the wages of workers. But this is not something we can realistically expect to accomplish in any reasonable time. And the Big Liars are not going to wait. Unless we can offer a realistic plan, that people can understand, to pay for the projected Social Security actuarial deficit, the Big Liars will push forward their “fixes” that are designed to destroy Social Security.

The Big Lie is that “Social Security is going broke, causing huge deficits that will burden our children.”

Social Security is not going broke. It has nothing to do with the deficit. The workers pay for it themselves. They can always pay for it themselves. If the costs of retirement rise as they are expected to, the cost of Social Security will rise…. about eighty cents per week per year. This is not a burden on the young. It is money they will get back with interest when they need it most. It is in fact the best deal that workers have ever had.

Tell the people.