A surprisingly receptive viewers response to Social Safety reform.
Yesterday I gave a chat to the Osher Lifelong Studying Institute (OLLI) at California State College, Monterey Bay (CSUMB). I sometimes give 2 such talks within the spring and a couple of within the fall. This yr isn’t any exception. One of many folks concerned with OLLI prompt final spring that within the fall I give 2 talks on financial points within the presidential marketing campaign. (The second speak shall be on October 8.) With some trepidation, I agreed. Why trepidation? As a result of I understand how even very cheap folks (and the OLLI viewers is usually very cheap) can get spun up about specific candidates.
So what I did early in my presentation was present a slide that mentioned:
Downplay candidates.
Play up points.
Once I confirmed that slide, I mentioned, “One good purpose for doing so is that I discover the problems way more attention-grabbing than the candidates.” That received a lot of heads nodding and a few laughs.
I talked at size about federal spending, federal taxes, and the federal funds deficit, displaying them some scary figures from the Congressional Price range Workplace. Then I identified that in keeping with the CBO, throughout the years 2030-34 Social Safety spending internet of Social Safety income would add a mean of 1.2% of GDP to the annual funds deficit and Medicare spending internet of income would add 2.4% of GDP internet of income. So these 2 applications alone would add 3.6% of GDP. That’s over half of the anticipated deficit as a % of GDP. If it weren’t for these, we might be in a lot better form.
Then I took a deep dive into Social Safety to make just a few factors. The primary was what considered one of FDR’s advisors motives was in organising Social Safety:
W. R. Williamson, an actuarial guide to the primary Social Safety Board, acknowledged that Social Safety extends Federal revenue taxes “in a democratic style” to the lower-income brackets.
I crammed within the background, declaring that the revenue tax again then was a “class tax” and that it was solely World Battle II that turned it right into a “mass tax.” Surveying the room of about 30 to 35 folks, I mentioned that I suspected that none of their counterparts of their a part of the revenue distribution within the mid-Thirties would have paid any revenue tax.
Then I laid out that the truth that Social Safety is a Ponzi scheme and was explicitly deliberate to be a Ponzi scheme.
I confirmed this quote from comic Dave Barry:
I say we scrap the present [Social Security] system and exchange it with a system whereby you add your title to the underside of a listing, and then you definately ship some cash to the particular person on the prime of the record, and then you definately . . . Oh, wait, that IS our present system.
—Dave Barry, “Election may come right down to who kisses most orifice,” Miami Herald, September 24, 2000.
Then I quoted Paul Samuelson blessing it as a Ponzi scheme. I quoted from the chapter on Social Safety in my 2001 ebook, The Pleasure of Freedom: An Economist’s Odyssey:
MIT economist Paul Samuelson added a few of the mental backing for these insurance policies. “The sweetness about social insurance coverage is that it’s actuarially [italics Samuelson’s] unsound.” Samuelson’s level was that if actual incomes have been rising rapidly, every era may get extra out of Social Safety than it paid in. Whereas its critics attacked Social Safety as a Ponzi scheme, Samuelson beat them to the punch in 1967 by blessing it as one. “A rising nation,” wrote Samuelson, “is the best Ponzi recreation ever contrived.”[1]
[1] Samuelson quotes are from Newsweek, February 13, 1967, and are quoted in Derthick, p. 254.
Then I quoted Franklin D. Roosevelt laying out how making it a Ponzi scheme would virtually definitely assure that Social Safety would by no means be abolished:
[T]hose taxes have been by no means an issue of economics. They’re politics during. We put these payroll contributions there in order to offer the contributors a authorized, ethical, and political proper to gather their pensions….With these taxes in there, no rattling politician can ever scrap my Social Safety program.[1]
[1] From Arthur M. Schlesinger, Jr., The Age of Roosevelt, vol. 2, The Coming of the New Deal (Houghton Mifflin, 1959), pp. 309–310, referenced in Martha Derthick, Policymaking for Social Safety, Washington, D.C.: Brookings Establishment, 1979, p. 230.
Then I confirmed an image of my Hoover colleague Mike Boskin and famous that his fee, arrange by the U.S. Senate, did a report in December 1996 that argued that the Shopper Value Index overstated annual inflation by 1.1 share factors. Then I did some math. “If Congress and the President had began in 1998 to set the Price of Residing Adjustment (COLA) at CPI – 1.1 share factors, in 2033, Social Safety advantages could be 32% decrease. (Right here’s the maths: 0.989^35 = 0.68.) The Social Safety disaster would have been gone identical to that. I then famous that the Bureau of Labor Statistics had made some changes in response to Boskin’s fee. Boskin, in an article in my Concise Encyclopedia of Economics, estimated that in consequence the CPI overstated inflation by 0.8 to 0.9 share factors.
So I redid the maths: 0.992^35 = 0.75. So Social Safety advantages could be 25% decrease. Once more, the disaster could be gone.
I may let you know different highlights of my speak–there have been many. However what I significantly appreciated was that this viewers, at the least 85% of whom have been receiving Social Safety, appeared fairly open to this.
It is smart. Who goes to a category on training, for which there isn’t any certificates? Reply: individuals who need to be educated.
