Social Security: Shock Therapy

[Hannah Bell]

Wrote this in 2007. Thought it could stand a repost what with the budget doings.

Shock Therapy
Part 1
by HB


As all good torturers know, fear and uncertainty can be wonderfully motivating.

In Naomi Klein’s latest book, The Shock Doctrine, she explains how this simple principle has been used by international financial institutions to push through neo-liberal economic policy around the world. In the wake of crises and disasters, the boys from the IMF and the World Bank would show up, loans in hand, preaching the gospel of privatization and austerity.

The natives, their better judgment clouded by fear and confusion — or bribes, when needed — would generally submit. It was called “shock therapy.”

Klein has, however, been at some pains to deny any deliberate engineering of crisis by the neo-liberal shock cadres. And though I’m generally enamored with her thesis, here we part ways. To my mind, there’s plenty of circumstantial evidence that deliberate engineering is sometimes precisely what’s going on.

Case in point, right here at home: Social Security.

A recent headline from my local paper: “Social Security 13.6 Trillion Short.” Big, scary number, but you’ll search the article in vain for any contextual detail. Just how much is 13.6 trillion? And when will this shortfall occur? Next week? Next year? Sometime in infinity?

They don’t say. Just the scary number. The lack of context, boys and girls, is a clue you’re being played.

The correct answer is: “Sometime in infinity”.1

It’s the Bush Administration making its annual noises about the Social Security “crisis.” Alan Greenspan has been out hyping the same message. On Democracy Now, for example, he pronounced that “There is no alternative” to increased private funding of retirement.2

But wait a minute. Alan Greenspan? I dimly remember him as the guy who “saved” Social Security, back in the reign of St. Ronnie Reagan. Greenspan chaired Reagan’s National Commission on Social Security Reform, for heaven’s sake, and made the recommendations that became the Social Security Amendments of 1983. A bipartisan Congress passed them, and Reagan signed them into law. St. Ron said at the time:

“This bill demonstrates for all time our nation’s ironclad commitment to Social Security. It assures the elderly that America will always keep the promises made in troubled times a half a century ago. It assures those who are still working that they, too, have a pact with the future. From this day forward, they have one pledge that they will get their fair share of benefits when they retire.”3

Now Alan’s saying we have to privatize? What terrible disaster’s occurred since 1983?

In fact, the disaster was the 1983 “reform” itself. Its main provision was an increase in Social Security taxes calculated to generate 25+ years of ever-increasing surpluses, surpluses that could be dumped into the general budget to grease the skids for tax cuts to the super-rich.

In 1983, 20 million in extra Social Security taxes and interest was collected, 20 million more than needed to pay retirees. In 1988, Reagan’s last year in office, the surplus was 38 billion. By 2006, it was 182 billion,4 and nearly 2 trillion in bonds sat in the Social Security Trust Fund, mostly surplus tax payments and interest accumulated since 1983.5

The 2006 surplus was 1/3 over and above the $544 billion mailed out to beneficiaries that year. 102 billion of it was interest paid to the Trust Fund, and 80 billion was excess payroll taxes: 13% of total collections.6

Tossed into the general budget, the 2006 surplus easily financed the Department of Education budget (67 billion),7 with plenty left to pay for the Administration for Children and Families (47 billion).

ACF, by the way, is welfare, Head Start, child support enforcement,* adoption assistance, foster care, child care, community block grants, energy assistance, and programs for the mentally retarded, refugees, and Native Americans.8

That’s how big the yearly Social Security surplus is.

Alternatively, the 2006 surplus would fund about a year of the war in Iraq. That’s how big the war budget is.”9



1. Social Security Administration, 2007 Trustees Report, Table IVB6.

2. Democracy Now 9/24/07.

3. R. Reagan, “Remarks on Signing the Social Security Amendments of 1983” 4/20/83.

4. Congressional Budget Office Historical Budget Data 1962-2006

5. Social Security Administration, “Fiscal Year Trust Fund Operations.”

6. Social Security Administration, “Trust Fund Operations in 2006.”

7. Department of Education Budget History, 2007 Total Appropriation.

8. Administration for Children and Families, “ACF All-Purpose Table 2006 Enacted.”

9. “Iraq War Budget Jumps for 2008,” LA Times, 10/11/07, ret. 10/11/07.

[Hannah Bell]

1. Shock Therapy pt 2: Three-Card Monte

Three-Card Monte


In 1983, the hike in Social Security taxes was sold to the
public as a way for the boomers to pre-fund their own
retirement. Kind of like putting away a nest egg at the local
savings and loan. Sounded reasonable. 

But in that scenario, you’d be loaning your money to a
separate entity, who’d pay it back — plus interest — from its
own money. 

In the case of the 1983 reform, Social Security taxpayers
effectively loaned money to the Federal Government, and their
children (in their role as regular taxpayers) will pay it back
— plus interest.

No easing of the burden for the next generation has occurred;
they’ll pay about what they would have paid anyway, even
without the 30 years of extra payments from their elders. Plus
interest. 

Everybody involved in the 1983 “reform” knew this: Reagan,
Greenspan, the bipartisan Commission that made the
recommendations and the bipartisan Congress that passed them.
Any surplus Social Security money, by law, must be loaned to
the government in exchange for government bonds. That hasn’t
changed since 1936.1 

The only difference in the past was, once a cushion was built
up in the Trust Fund reserve, no significant yearly surpluses
(or deficits) were allowed to accumulate. Taxes taken in were
kept in rough balance with benefits going out.2 From the
1950’s to the 80’s, the Trust Fund balance stayed at under 200
billion in inflation-adjusted value.

Performance of Social Security Trust Funds in
Inflation-Adjusted (2005) Dollars*

Year Current $ (Mils) 2005 $ (Mils)

1943     4,820    55,709 
1953    18,707   132,760 
1963    20,715   129,015 
1973    44,414   199,960 
1983    24,867    48,434 
1993   378,285   507,152 
2003 1,530,764 1,611,323 
2005 1,858,660 1,856,660 

(*Social Security Administration, “Performance of Social
Security Trust Funds, 1937-2005.”)


“Pay as you go” was policy for over 40 years; it worked very
well. With an overhead of less than 2%,3 Social Security never
missed a check. It’s the most successful and longest-lived
retirement security program in history. 

It took a financial wizard like Alan Greenspan to think of
generating increasing surpluses. But since they don’t ease the
burden on the next generation as advertised, one has to ask:
why?

First, note that in 1983 Social Security taxes applied only to
the first 32,000 of wage income, and now apply only to the
first 97,000. Wage income over the cap isn’t subject to Social
Security taxes.4 Not a concern for most of us, since 90% of us
make less than 90,000 a year, and every penny is taxed.5 

Second, note that Social Security was designed as a
stand-alone, transparently self-financing program on purpose,
so that its taxes and benefits wouldn’t be mixed in with the
general budget for nefarious ends. 

But that’s just what happened in 1983. While Greenspan and
company were busy raising Social Security taxes on the bottom
90%, the Reagan Administration was merrily cutting income and
capital gains taxes, mainly for folks making over 200,000. 

In 1979 the top income tax rate was 70%, assessed only on
income above 200,000, and the capital gains tax was 28%. By
1986 the top rate was 50%, and the capital gains tax was 20%,
with 60% of income excluded.6 

Here the “reform” begins to look like a three-card monte
shuffle. Raise Social Security taxes on ordinary working
people to generate a surplus. Borrow the surplus into the
general budget. Whoa Nelly, look at that extra money! Someone
needs a tax cut! 

The super-rich and big businesses gain; ordinary workers and
small businesses lose. 

Predictably, increasing budget deficits were the result. Both
Bush I and Clinton re-jiggered taxes to generate more revenue,
but never back to their pre-Reagan levels at the top.6 

Now here comes Bush 2, and he wants to lower taxes even more.
Who’s there to help but Alan? In 2001 Greenspan testified in
support of Bush’s tax plan.7 Wonderful idea, he told Congress.
Clinton’s budget surpluses are just too big. We’re in danger
of paying off the federal debt too fast, and then whatever
would we do with all the money rolling in? Someone needs a tax
cut. And once again, dear reader, that someone isn’t you. 

Never mind that without borrowing the Social Security surplus,
Clinton never produced a general budget surplus. But who
bothers with details like that? With a wink and a nod from
Alan, Congress passed Bush’s tax cuts. Currently the top rate
on capital gains is 15%, and the top rate (on income over
250K) is 35%.6 

The Social Security tax is 12.4%. Half is taken off the top of
employees’ checks and half is paid by employers. Both halves
are part of the employee’s compensation. So in effect, the kid
who works for $5.15 an hour at the Burger Palace gets taxed at
almost the same rate Bill Gates does when he sells a property
for capital gains. 

But here’s another wrinkle that’s not as immediately obvious:
the owner of the Burger Palace also takes it in the shorts.
Small and medium-sized businesses use more labor than large
ones to generate a unit of production and profit. Every
increase in Social Security taxes hits a small business harder
than a giant corporation because the giants are less
labor-intensive. Compared to a 28% cut in the top income tax
rate, a 2% increase in payroll taxes is insignificant to Bill
Gates; each of his 79,000 employees generates over 100K in
profits.8 

For the owner of the Burger Palace and his 5 employees
generating only 3K each, it’s a different story. But hey — by
Greenspan’s style of reckoning, who needs an inefficient
Burger Palace when you have a shiny corporate Burger King?




1. Social Security Administration, “Agency History.” #

2. Congressional Budget Office Historical Budget Data,
“Revenues, Outlays, Surpluses, Deficits and Debt Held by the
Public, 1962 to 2006.” #

3. Social Security Administration, “Administrative Expenses.”
#

4. Urban and Brookings Institution Tax Policy Center,
“Historical Social Security Tax Rates.” #

5. Citizens for Tax Justice 3/07, “Background Information on
Incomes and Income Ranges.” #

6. Citizens for Tax Justice, “Top Federal Income Tax Rates on
Regular Income and Capital Gains Since 1916.” # # #

7. “2001 Tax Cuts were Justified, Greenspan Maintains,”
Washington Post, 3/16/05, ret. 10/07. #

8. Gates profit/employee, MSFT Investor Relations (July 19,
2007). “Microsoft Fourth Quarter FY 2007 Earnings Release:
Microsoft’s Annual Revenue Surpasses $50 Billion“.
microsoft.com, Ret. 07/08/15. #
 

[Hannah Bell]

2. Pt. 3: The Big Lie

Shock Therapy: The Big Lie


So new tax cuts were passed by a bipartisan Congress in 2001, and once again, the main beneficiaries were — you guessed it — the filthy rich. The top 1% of wage earners, those making 500K and up, saved 70 billion in 2006 alone. Enough to fund the Department of Education with change to spare.

Over the ten years 2001-2010, the top 5%, those making 191K and up, will save about 920 billion dollars. That’s 48.3% of all Bush’s tax cuts.1

Incidentally, that’s about half of what’s in the Social Security Trust Fund right now, built up over 24 years on wages under 97K.

But the Trust Fund debt, some say, is “just IOUs”. You’ve heard the spiel. Here’s Bush in 2005:

"Now, let me tell you something about the Social Security system. It’s not a trust. A lot of people think, well, we’re collecting your money and we’re holding it for you, and then when you retire, we’re going to give it back to you. That’s not the way it works. We’re collecting your money, and if we’ve got money left over — in other words, if the — if there’s more money than the benefits promised to be paid in our hands, we’re spending it and leaving behind an IOU. That’s how it works. It’s called a pay-as-you-go system. You pay, we go ahead and spend it." (Laughter.)2

Isn’t he cute? Here he is again, same year:

“We take your payroll taxes, we pay out the benefits to current retirees, and with the money left over, we pay…for other programs. And there’s nothing left but file cabinets with IOUs. And that’s how it works.”3

Let’s not ignore his second-in-command. Here’s Cheney on the mission:

“Now, about 1.7 trillion of that is in the so-called Trust Fund: that is, money - that’s money that’s been collected that’s not there as cash at this point.”4

They don’t sound very encouraging, do they?

The cost of the war in Iraq, waged over imaginary WMDs, is approaching 200 billion a year.5 Nine billion of that has simply disappeared6, and unknown millions have gone into the pockets of corporations with ties to Cheneys and Bushes.789

Apparently it’s easy to find 200 billion a year to kill people, even while cutting 70 billion from millionaires’ tax bills — but impossible to come up with 60 billion or so a year to redeem the Trust Fund.10

Those IOUs are implied to be “worthless” only because they’re owed to ordinary working people: sheep to be sheared, rubes to be conned, like the rubes dying in Iraq.

Greenspan’s no better. In 2004, he urged the House Budget Committee to “deal with the country’s escalating budget deficit by cutting benefits for future Social Security retirees.”11

There. Did you watch his hands? Same old three-card monte shuffle.

Thanks to Bush’s “No Billionaire Left Behind” tax policy and Iraq, there’s a growing deficit in the general budget — so Greenspan wants to cut Social Security benefits. That’s the kind of rigorous logic that earns you the title of “Wizard” in ruling circles.

Social Security was set up as a self-funding program. It’s currently running multi-billion-dollar surpluses. Its finances and benefits have nothing to do with the general budget, or didn’t, until Alan stuck his paws in. Is he senile? Doesn’t he remember what he did and said in 1983?

If deficits are bad, why in 1983 did he recommend the deliberate creation of a deficit — the debt now owed to the Social Security Trust Fund?

And if the extra money we’ve been sending Social Security for 24 years is just creating debt and “worthless IOUs,” how come Alan never suggests we stop making those excess payments?

Because he’s senile like a fox.

And neither will you hear our party leaders suggesting we stop paying the extra freight. Instead, Republicans cheerlead for private accounts, and Democrats push for payroll tax increases. To save us from crisis, they say. They’re picking our pockets, and they offer us every solution but the obvious one: remove their thieving hands.

They’re lying. They’ve always been lying.

“…the great masses of the people… more easily fall a victim to a big lie than to a little one, since they themselves lie in little things, but would be ashamed of lies that were too big. Such a falsehood will never enter their heads and they will not be able to believe in the possibility of such monstrous effrontery and infamous misrepresentation in others…”

– Adolf Hitler, Mein Kampf, Chapter 10



1. Citizens for Tax Justice, “The Bush Tax Cuts: The Latest CTJ Data,” 3/07. #

2. “President Participates in Social Security Conversation in Arizona,” 3/21/2005. #

3. “President Participates in Social Security Roundtable in Texas,” 4/26/2005. #

4. “Vice President’s Remarks at Town Hall Meeting on Social Security,” 3/22/05. #

5. “Iraq War Budget Jumps for 2008,” LA Times, 10/11/07, ret. 10/11/07. #

6. “Audit: US Lost Track of Nine Billion in Iraq Funds,” CNN 9/05, retrieved 10/07. #

7. “Cheney’s Multi-Million Dollar Revolving Door,” Mother Jones 8/2/00. #

8. “The Perpetual War Portfolio,” Rational Enquirer. #

9. “Big Contracts Went to Big Donors,” CBS News, 10/30/03. #

10. Ignoring the complication of interest, it would cost about 63 billion/year to pay off 2 trillion dollars over 32 years. #

11. “To Trim Deficits, Bush Recommends Social Security and Medicare Cuts,” New York Times 2/28/2004; “Greenspan Urges Future Social Security Cuts,” MSNBC 2/25/04. #

[Hannah Bell]

3. Pt. 4: "Ideas That are Lying Around"

“Ideas That Are Lying Around”


Here’s where we come back to Klein’s thesis. In her book she quotes Milton Friedman, the capo di capi of the Chicago School of Economics: “Only a crisis produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”1

Within certain circles of power, the Social Security “crisis” has been lying around for a very long time. In his 1936 campaign against FDR, Alf Landon called the new program a “fraud on the workingman,” and continued:

“Every month they bring 6 per cent of their wages…so that he may act as trustee and invest their savings for their old age….the day comes…What do they find? Roll after roll of neatly executed IOU’s.”2

Those damned IOUs again.

FDR won that election. It was the Great Depression, the poorhouses were full, and for some the threat of starvation hit all too close to home.3

During the war and after, booming profits kept the rich folks busy for awhile, but by the end of the 50’s things had started to slow down and Social Security crisis was back on the agenda.

St. Reagan, in his nominating speech at the 1964 Republican convention, suggested privatization.4 Goldwater, the nominee, echoed the call.

He lost. Too many folks still remembered the Depression and the poorhouses. Social Security had put those institutions out of business, but in their day, the overwhelming majority of their residents were over sixty.56

Today Social Security is a bulwark against penury for the elderly. It provides 50% or more of retirement support for 2/3 of beneficiaries, and 100% of support for 1/3.7

In 1978, a young Congressional candidate picked up the theme of crisis. Stumping at the Midland Texas Country Club, George W. Bush said:

“ will be bust in 10 years unless there are some changes…The ideal solution would be… to invest the money the way they feel.”8

Like the WMDs, the 1988 Social Security bust never manifested. You’d think Bush would be embarrassed, but 20 years after the crisis-that-wasn’t, he’s still banging the privatization gong.

There’s plenty more scary talk where that came from, a steady stream of policy papers and opinion pieces, dutifully parroted by the media. The think tanks that produce them are funded, not by any grass-roots demanding Social Security reform, but by a handful of big private fortunes, some well-known: Mellon-Scaife9, DuPont10, Coors.11

Other funders are less famous, but their fortunes are equally large. The Koch brothers, inheritors of one of the world’s largest private oil fortunes, fund what’s probably the most important source of privatization propaganda: the Cato Institute.12 Incidentally, George Bush’s sister Doro Bush Koch, is reportedly married to a Koch cousin.13

In 1983, in the wake of another failed attempt to gather public support for privatization, Cato published an influential paper titled “Achieving a Leninist Strategy.”14

The authors start by acknowledging that Social Security is a popular program, so head-on approaches to dismantling it are unlikely to be successful. Instead, they recommend the “Leninist Strategy” of the title. Strange to find libertarian free-marketeers so enthusiastic about a reviled communist, but politics does make strange bedfellows.

Lenin was a political strategist known for super-pragmatism, a proponent of stealth tactics, alliances of convenience, and sleeper cells. He advised a secretive vanguard to help create the conditions for revolution, while lying in wait for the “revolutionary moment” when power could by seized by virtue of the same vanguard’s superior organization and discipline.

This is exactly what the Cato authors recommend in the way of a long-term strategy to take Social Security private. To help create revolutionary conditions, they suggest:

1) Mobilizing a coalition of folks who’d benefit from privatization (banks, investment houses, and other financial institutions).

2) Continuing public “education” aimed at discrediting Social Security and talking up privatization.

3) Creation and promotion of financial savings alternatives (e.g. 401Ks, IRAs) to get people accustomed to using them.

4) Splitting potential coalition supporters of Social Security, such as current and future recipients: “…the strategy must be to propose moving to a private…system in such a way as “to…neutralize…the coalition that supports the existing system.” Thus, older folks would be told their benefits wouldn’t be cut, making them less likely to mobilize to help protect benefits for the young.

All this has happened in the years since.

At the end of the paper, the authors say: “The next Social Security crisis may be further away than many people believe…it could be many years before the conditions are such that a radical reform of Social Security is possible. But then, as Lenin well knew, to be a successful revolutionary, one must also be patient and consistently plan for real reform.”



1. Milton Friedman, Capitalism and Freedom, 1962. #

2. Alf Landon, “I Will Not Promise the Moon,” Speech of 1936. #

3. Ronald Edsforth, The New Deal: America’s Response to the Great Depression, Starvation deaths, pp. 84-87. #

4. Ronald Reagan, “A Time for Choosing,” Speech of 1964. #

5. Michael B. Katz, The Shadow of the Poorhouse, Social Security as “the end of the poorhouse,” p. 132. #

6. Abraham Epstein, Facing Old Age: A Study of Old Age Dependency in the United States and Old Age Pensions, majority of residents elderly, pp 28-29. #

7. Economic Policy Institute, “Economic Snapshots, Social Security and Income, Figure 1, Importance of Social Security Benefits to Those Aged 65 and Older.” #

8. “For Bush, A Long Embrace of Social Security Plan,” New York Times 2/27/05. #

9. Mellon-Scaife helps fund Cato, Heritage and other anti-Social Security initiatives through Scaife foundations. #

10. The Dupont think tank is the National Center for Policy Analysis. #

11. The Coors family helps fund Cato, Heritage and other anti-Social Security initiatives. #

12. Media Transparency, Koch Family Foundations; Cato Institute Project on Social Security Choice. #

13. “Kicked in the Koch,” American Politics Journal 8/4/00. #

14. Stuart Butler and Peter Germanis, “Achieving a Leninist Strategy.” #

[Hannah Bell]

4. Pt 5: Perfect storm

Shock Therapy: Perfect Storm


Lenin and the boys at Cato agree with Friedman: “Only a crisis produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”

We know what ideas our “leaders” have lying around. They’ve been drumming them into our heads for years. What shape might the coming crisis take?

Crisis needn’t be a hurricane or tsunami; it can be a financial disaster as well — even a phony one. As long as people are scared and confused and will do what you want them to — that’s all that matters.

Crisis might look like the perfect storm of mortgage meltdown, recession, declining industries and wages, rising deficits, all coming to a head as the boomers retire — and that unfortunate file cabinet full of IOUs, with — so sorry — “no money” to redeem them.

Combine that with a full-court press of pundits, preachers and politicians, all well-manicured and well-fed, none in any danger of going without in their old age, though they insist you must. All of them nattering away at you, on the TV, in the papers, on the radio, relentless as the zombies in The Night of the Living Dead:

“There’s no-o-o-o money! No-o-o-o money! If you don’t do what we say the country’s going to go broke and you’re all going to die!”

It might be that the 1983 debut of both Greenspan’s “reform” and the Cato paper wasn’t coincidental. It might be, indeed, that Greenspan created the debt to the Trust Fund with an inkling that it could eventually be hyped as a “crisis” to take down Social Security for good.

That’s how the IMF did it, Klein says. Get the rubes in debt, then pressure them to take your “shock treatment,” your austerity program. As in Chile, as in Russia, where poverty rates doubled and tripled after the treatment1; so here. We too must take our medicine.

Bugger that.

There’s no Social Security crisis. There never has been. If you’re not convinced yet, how about this: the projection used to hype the phony crisis assumes a growth rate of 1.8% over the next 75 years.2 That’s lower than the 1.9% average growth rate of the Great Depression, 1929-1940.3

But there are actually three projections; an optimistic one, an intermediate one, and a pessimistic one. In the “optimistic” scenario, long-term growth averages 2.6%, the Trust Fund never runs out, and there’s a 17-trillion dollar surplus in 2080.4 So far, reality has always turned out closer to the optimistic projection than the other two. Since 1980, growth has averaged 3.1%.5 Whee! Feel better?

Not that a projection 75 years into the future has any bankable accuracy anyway.

The projection, like “crisis” it predicts, is a fraud, a cynical Big Lie, a con. They want your money. That’s all they’ve ever wanted, and they’ll keep pushing until they get it, unless they know you understand the con.

Here’s the straight story.

“The economy” isn’t the casino, isn’t the game, isn’t even the chits of paper we use to trade and keep score with. The economy is the real world of producing real goods and services. So long as American workers are producing real goods and real knowledge for decent wages, there will be enough surplus for their elders’ Social Security.

If, on the other hand, our “leaders” follow the road they’ve been on the last 30 years: off-shoring production, outsourcing democratic government to unaccountable private power, stripping resources faster than they’re renewed, allowing infrastructure and human skills to decay, and substituting a casino economy for a real one, we’ll all go broke, and private accounts won’t change that likelihood one bit.

Social Security’s not in crisis. Our leadership is. Our democracy is.

No tax hikes, no benefit cuts, no private accounts. Hands off, ya lying crooks.



1. See discussion of the effect of “shock therapy” and privatization on Chile and Russia in Melanie Klein, The Shock Doctrine, 2007. #

2. Social Security Administration, 2004 Trustees Report, Table V.B.2, intermediate projection 2015-2080 = 1.8% GDP growth #

3. Growth % calculated from “Real GDP 1929-1940,” Louis D. Johnston and Samuel H. Williamson, “The Annual Real and Nominal GDP for the United States, 1790 - Present.” Economic History Services, 10/05. #

4. Social Security Administration, 2005 Trustees Report, Table VI.F7. #

5. Growth % calculated from “Real GDP 1941-2006,” Louis D. Johnston and Samuel H. Williamson, “The Annual Real and Nominal GDP for the United States, 1790-Present.” Economic History Services, 10/05. #

6. Three-card monte is a confidence game where the “mark” is tricked into betting he can find the money card among three face-down playing cards, a classic short con in which the outside man pretends to conspire with the mark to cheat the inside man, while in fact conspiring with the inside man to cheat the mark. (*definition from wikipedia) #

[deaniac21]

5. I can't seem to find the surplus. Seems we spend 59% more than

we recieve. The trust fund is a giant pile of iou's.

[TheKentuckian]

7. Yup, just like the pile of IOUs for China, Japan, Treasury bond purchasers, etc

I would favor a separation from the general fund, raising the cap, and applying social security taxes to all forms of income.

[Hannah Bell]

9. so you're saying if you borrow money from me & spend it you no longer have to pay it back?

not only would that be dishonest, it would be in violation of 60 years of precedent.

[sad sally]

6. Add to the SS Shock Therapy the Payroll Tax Holiday stimulus effects

Where did this stimulus go?

In the United States, the job market is showing increasing signs of life. In March, payrolls rose by about 200,000 for the second month in a row. For the quarter as a whole, our US economics team points out that aggregate hours worked rose at a 2.0% annual rate. Adding in a percentage point of productivity growth to this number, the rough supply-side measure of GDP growth comes to 3.0%. On the back of this improving outlook, markets have been very sensitive to even the smallest hint of an exit . However, consumption is looking softer despite the payroll tax cut. The 2% cut in the social security tax started adding about an $8bn per month tailwind to disposable income starting in January.
Unfortunately, that tailwind is quickly being displaced by mounting food and energy price headwinds. As Chart 23 shows, our US economics team thinks the cumulative rise in food and energy prices this year will completely cancel out the tax cut by April.

Read more: http://www.businessinsider.com/remember-how-the-payroll-tax-holiday-was-going-to-save-the-economy-2011-4#ixzz1JXAU9EZU?du

As for the Payroll Tax Holiday ending December 31, 2011, will that actually happen?

http://news.firedoglake.com/2010/12/08/republicans-casually-agree-theyll-never-allow-payroll-tax-cut-to-rise-again/?du

Nancy Altman called the payroll tax cut in the Obama/McConnell deal the end of Social Security. In her view, the American political system circa 2010 doesn’t let taxes go back up, and so Social Security will face a revenue crisis faster with a reduced payroll tax. The money will come out of general revenue to pay for that payroll tax holiday, but that just makes Social Security more dependent on general revenue – and more vulnerable. That this is all coming at a time when knives have been unsheathed and are ready to hack away at Social Security makes it all the more dangerous.

Ryan Grim asked the exact right questions, and Republicans were unusually blunt with him.

Republicans acknowledged that the expiration of the tax holiday will be treated as a tax increase. “Once something like this goes into place, a year from now, when it expires, it’ll be portrayed as a tax increase,” said Sen. Bob Corker (R-Tenn.). “So in a body like Congress, precedents matter and this is setting a precedent. I think that certainly is going to create some problems down the road if it passes.”

Given that Congress, under Democratic control, can’t gather itself to let tax cuts for the wealthiest Americans expire, members of both parties are convinced that letting the payroll tax rate revert back to its current spot will be near impossible.

“Once you bring a rate down, if it goes back up, people will feel that. They’ll feel their paycheck being less and that argument” — that letting it expire amounts to a tax hike — “eventually is bound to be made,” said Sen. Mike Johanns (R-Neb.).

“There’s always a tendency to continue those things… Once something comes in, it’s very difficult to change it,” said Sen. George Voinovich (R-Ohio.) He then volunteered, without prompting, that “It would be detrimental to the Social Security system, especially when it’s in bad shape.”


ORIGINALLY POSTED TO DAILY KOS ON WED DEC 08, 2010 AT 01:36 PM PST.:

The final point: we haven't heard from the White House how they plan to defuse this new bomb they've created two years from now. We've heard from his economic advisors that this temporary defunding of Social Security simply isn't a problem because we'll be writing IOUs from the general fund to pay for it -- but no acknowledgement that that's what we say every single time we "borrow" money from Social Security, and somehow never manage to pay it back, and that that, precisely, is exactly why there's currently a problem. On the part of ostensible experts like Summers, Geithner and the others, it fairly reeks of insincerity. Obama is willing to call Republicans "hostage takers" and irritated liberals "sanctimonious", but his people haven't yet addressed how they're magically going to stand firm on something two years from now that they're willingly giving away today.

If America is expected to subject themselves to yet another Republican tax-cut experiment, and set itself up for not one, but two more rounds of hostage taking when these "temporary" measures run down their own clocks, the White House needs to be a lot clearer on why this newest one won't result in the same disaster all the last ones have caused. "Trust us next time around" is not a plan.

[Hannah Bell]

8. k

[Hannah Bell]

11. k

[Starry Messenger]

10. k&r