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 individuals concerned with OLLI advised final spring that within the fall I give 2 talks on financial points within the presidential marketing campaign. (The second discuss will likely be on October 8.) With some trepidation, I agreed. Why trepidation? As a result of I understand how even very affordable individuals (and the OLLI viewers is often very affordable) can get spun up about specific candidates.
So what I did early in my presentation was present a slide that stated:
Downplay candidates.
Play up points.
Once I confirmed that slide, I stated, “One good cause for doing so is that I discover the problems much more attention-grabbing than the candidates.” That obtained numerous 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 Finances Workplace. Then I identified that in accordance with the CBO, throughout the years 2030-34 Social Safety spending web of Social Safety income would add a mean of 1.2% of GDP to the annual funds deficit and Medicare spending web of income would add 2.4% of GDP web of income. So these 2 packages 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 significantly better form.
Then I took a deep dive into Social Safety to make a number of factors. The primary was what considered one of FDR’s advisors motives was in establishing Social Safety:
W. R. Williamson, an actuarial marketing consultant to the primary Social Safety Board, acknowledged that Social Safety extends Federal revenue taxes “in a democratic vogue” 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 Struggle II that turned it right into a “mass tax.” Surveying the room of about 30 to 35 individuals, I stated 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 substitute it with a system whereby you add your identify to the underside of an inventory, and then you definitely ship some cash to the individual on the prime of the listing, and then you definitely . . . Oh, wait, that IS our present system.
—Dave Barry, “Election might come all the way 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 among 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 had been rising rapidly, every technology might 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 sport 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 nearly actually assure that Social Safety would by no means be abolished:
[T]hose taxes had been by no means an issue of economics. They’re politics right through. 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 Client Value Index overstated annual inflation by 1.1 proportion 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 proportion factors, in 2033, Social Safety advantages can be 32% decrease. (Right here’s the mathematics: 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 because of this the CPI overstated inflation by 0.8 to 0.9 proportion factors.
So I redid the mathematics: 0.992^35 = 0.75. So Social Safety advantages can be 25% decrease. Once more, the disaster can be gone.
I might let you know different highlights of my discuss–there have been many. However what I notably appreciated was that this viewers, at the least 85% of whom had been receiving Social Safety, appeared fairly open to this.
It is smart. Who goes to a category on schooling, for which there isn’t any certificates? Reply: individuals who wish to be educated.
