I Am Tired Of Talking About This So Here Is A Picture

So some folks from the Heritage Foundation were scanning current events and found a way to tie the Wall Street fiasco to Social Security. The San Francisco Comical,which appears to have a special contract to pick up this stuff, printed it. The Gist of the piece is this - If you think that you are in trouble now with Wall Street just wait until you have to bail out those shiftless baby boomers who didn't put anything aside to pay for their Social Security.

If you have visited this blog you may be familiar with Wonks Anonymous views on the so called Social Security shortfall. If you are not check, out the category archive for Social Security on this blog. To summarize Wonks anonymous critique of the Social Security is unfunded doomsayers:
  • They claim that Social Security must be paid out of current payroll taxes. This was largely true until the reforms of 1983 when Social Security was taken off of the pay as you go basis and became a real pension fund.
  • After 1983 Social Security taxes doubled. This tax increase was borne mainly by boomers who paid off the unfunded pensions of the so called greatest generation and contributed to reserves that were intended to pay their own pensions.
  • These reserves are largely adequate to fund the pensions of the boomers. Some minor adjustments will be needed.
  • Payment of boomers pensions will involve repayment of the rather large government debt held by the trust fund. This is the real reason why our friends from the Heritage Foundation want to convince us that Social Security is in need of drastic "reforms".
So here is the Picture:


The vertical axis crosses at 1983. Up to that point trust fund expenditures are about equal to total receipts. In the years immediately before the reform expenditure exceed receipts. After 1983 receipts climb above expenditures and the trust fund grows. In 2007 it was a little bit over 2 trillion dollars. The fund will continue to grow for the next decade.

This does not look like a pay as you go pension plan. It does, however, look like some policies will need to change if our pension savings are not to become a free gift to the government.

 

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  • 1/7/2009 1:04 PM Rodger Malcolm Mitchell wrote:
    The dual needs to stimulate the economy and provide more health care and retirement funds, give us the rare chance to do both. We should fold Social Security and Medicare into the general fund, and pay for them the same way we fund the military and every other federal agency.

    There are 400+ federal agencies, including all the military agencies, all the Departments, and dozens you never have heard of. When the military needs money to pursue the wars in Iraq and Afghanistan, Congress quickly votes hundreds of billions of dollars to this effort. No tax covers this budget. When the economy needed a stimulus, Congress quickly voted $150 billion to this effort. No earmarked tax was passed. When Freddie Mac and Fannie Mae ran into financial difficulties, the Treasury immediately gave them a blank check. Later, another $700 billion was voted, and again, no new taxes were levied to cover this government expenditure. The current, annual cost of Social Security and Medicare totals about $1 trillion, well within the government’s proven spending range.

    Now, President-elect Obama wishes to spend more and cut taxes.

    There is not one iota of historical evidence that federal deficits have caused inflation or cost taxpayers one cent. The belief that deficits are in some way harmful is based entirely on intuition and on zero facts.

    President Carter had modest deficits, yet had huge inflation, which cost taxpayers many billions. President Reagan had record-setting deficits, yet had modest inflation and taxes were reduced, so taxpayers paid nothing.

    No one's grandchildren have paid anything for Reagan's or Bush's deficits, and if taxes are not raised - an entirely unnecessary step - no grandchildren ever will pay.

    The government doesn't’t need FICA money. In 1971, President Nixon eliminated the final connection between gold and U.S. money. His purpose: To give the government unlimited power to create money. The government creates money by creating T-securities out of thin air and selling them.

    Even with a $1 trillion bailout, no additional taxes will be needed. Obama will reduce taxes.

    Even during the Great Depression no federal check bounced. There literally is no limit to the amount of money the federal government can create, and no limit to the size of the debt it can support.

    Every depression in American history (there have been six) came during federal surpluses. Every recovery came with federal deficits.

    A growing economy requires a growing supply of money. Deficits are the way the government adds money to the economy.

    The money supply needs to grow fast enough to overcome inflation, population growth and the current account (balance of payments) deficit. Today, this requires a $2 trillion annual deficit to accomplish 3% GDP growth.

    FICA can and should be eliminated. Federal spending can support Social Security and Medicare. Those who disagree should provide facts, not intuition.
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