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Marcus Stanley

Ah, the lost days of the lockbox...sigh. An actual plan to save social security, for which the unfortunate Al Gore is not being given even retrospective credit for.

Nice post Mark.

Grant D.

I have a dumb question, Mark, and I'm sick of asking economists for a straight answer: What, praytell, is the Social Security Trust Fund?

I thought I had a handle on it - that it's the surplus created through higher payroll taxes, implemented on the recommendation of Greenspan's commission in 1983-84, in anticipation of Baby Boomer retirement. That surplus has been "lent" to the general fund in the form of non-marketable Treasury bonds.

Therefore, I told myself, the claim by some Republicans that the money is "gone" is absurd. Not only is it a slap in the face to workers who paid the higher payroll tax all these years, it's akin to saying the federal government will default on bonds for the first time it its history.

Then I read this Mike Kinsley column from 2000 and confused myself all over again. I realize the politics of Social Security has evolved into a completely different organism since Kinsley wrote that piece. But he strongly intimates that the Trust Fund is more of a promise to pay than a requirement. What gives?


Grant, your first three paragraphs are correct.

It is the accumulated difference between payroll tax income and social security payments.


The Trust Fund has actually existed since the beginning of the program, tho of course it's all been tweaked. While Social Security was for awhile more genuinely a "pay as you go" program, not accumulating sizeable assets until the greenspan reforms, it was of course never a perfectly balanced program with revenues=benefit payments every year.

Judith Gran

The AARP Social Security website, http://aarp.typepad.com/socialsecurity, characterizes Social Security in a nice, Family Values-friendly phrase, as a "family income protection program." I think I'm going to start using it too. Here's the quote:

"Social Security is much more than a retirement program. It is a family income protection program that reflects the commitment of the country to the economic security of workers, retirees and their families.
"Social Security provides a strong, unshakable financial base ... "

Judith Gran


I must say I'm getting damn tired of the Johnny-One-Note "there is no crisis" response.

Presently, the Repub plutocracy is schedule to remain in power for the next twenty years. By then, we'll owe so much money that there isn't a snowball's chance in hell the majority of bonds in the Social Security Trust Fund will be redeemed.

If I were a twenty-something with average or better than average earnings expectations, I'd take Bush's deal.

I sure wouldn't count on the Democratic party to get the country's financial house in order.

Hell, the party hasn't elected a President with 50% of the vote in 40 years.


the party hasn't elected a President with 50% of the vote in 40 years.

Um, 28 years ago, actually.


(but 50.1% isn't much to brag about)


"I sure wouldn't count on the Democratic party to get the country's financial house in order."

Well, first of all, as has been noted, you can't count anyway ... and then there is the fact that the most recent administration to get the country's financial house in order was, in fact, a Democrat.


I think the surplus was only a small part of it. For the entirety of the Clinton administration, the notion the social security was "doomed" went unchallenged. We are paying for that today by having to expend so much time and effort in the current fight to save social security. Plus, in the then DLC dominated party in Washington, it was fashionable to look for "third way" ways to "save" social security. Notice none of the beltway Democrats in the nineties suggested the simplest and fairest way to solve any future funding problem--lifting the FICA cap.


Mark, I hate to reveal my ignorance, but can you explain this to me:

pledging to run a budget surplus "every single year" until the entire national debt was paid down, which is, if possible, equally irresponsible as economics.


prakite, I think you missed the point.

Could you give us your best estimate of the date when Democrats will regain control of the Congress?

Until then, you can't count on the Democratic party to do much of anything.


Social Security is and always has been a pay-as-you-go system; it cannot be "fixed."

The Greenspan/Moynihan "reform" was never intended to "fix" it. It was intended to do exactly what it did -- generate tax revenue to pay for the Reagan tax cuts and the 600-ship Navy. The fact that it also supported the Bush II tax cuts may have been an "unintended consequence."

Twenty years from now the X and Y Generations may have income adequate to support the Baby Boom Generation in the manner they would wish to be supported -- and maybe they won't.

The fact that from 1984 to 2018 Boomers paid some of the costs of government via FICA taxes rather than via income taxes is irrelevant.

a different chris

hope I've fixed Ellen's italics...

"Plus, in the then DLC dominated party in Washington, it was fashionable to look for "third way" ways to "save" social security. "

For the DLC it was fashionable to genuflect to the stock market in any way and at any time possible. Gotta show that you're part of the Kool Kids, you know. In illustration, look at all the coiffed heads on ESPN spending the week talking about Bill Belichick. They aren't talking about Bill to call attention to Bill, they're talking about Bill to get attention for themselves.

Social Security? That's retirement funding, and since the DLC is convinced that Mr. Stock Market is the most wonderfullest thing ever (and that includes sliced bread) then they just had to exclaim over how much better the godlike Mr. SM could do the job.

Like I've observed repeatedly, the biggest problem (and illustrated again in Mark's opening paragraph) is that the Third Wayers starting from Clinton and working on down are very bright people, but like many smart guys they Don't Know When To Shut Up.

I do, so I will. :>


Testing my italics --

Obscure -- Running a long-term budget surplus would be deflationary and tip the economy into a recession/depression.

Ask Andrew Jackson.


also central bank holdings are now basically in other countries' bonds.

James S. W.

Ellen1910, I remembember reading somewhere that Jackson screwed up the financial situation, leading to the "Panic of 1837" in "Van Ruin's" (Martin Van Buren, his veep and succesor) Administration because of either too little faith or too much fiddling with the First Bank of the United States. Anyone have any experience in this area? Please e-mail me.


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