The Great Social Security Heist Already Happened

[dkf]

http://www.dailykos.com/story/2011/03/11/955117/-The-Great-Social-Security-Heist-Already-Happened

[Mimosa]

1. Rec for excellent analysis

Excerpt from first few paragraphs:

Case in point was the Social Security "deal" between Ronald Reagan and the Democrats in congress in 1983. It was the largest redistribution of the tax burden from the wealthy to the working class, but was celebrated as a "a happy day for America" by the democratic leadership in the house. Because they didn't understand how our (relatively) new fiat money system really worked, they thought they were saving social security. Instead they increased the size of a regressive tax to make room for Reagan's tax cuts for the wealthy.

To see how this budgetary 3-card-Monte trick hurt us let's first take a look at how it was supposed to "save" social security. The problem was that, among other things, the coming retirement of the baby boomers was going to increase the ratio of retirees to number of workers which would cause more money flowing out of the social security trust fund than in and would cause it to go broke. Therefore the leaders of the time figured they would plan ahead and build up the social security trust fund so that the baby boomer generation could help fund their own social security benefits. Problem solved, right? Wrong. If you don't see why this didn't "solve" the problem, don't feel bad. Most of the country, and probably no one in the government got it in 1983 and most still don't get it now.

To understand why this didn't really solve anything, let's look at a more simplified example of the problem. Let's say there is an island of 100 people. There are 98 adults and 2 children on this island. When the adults are all about 40, they realize that when they are 65 or 70 there will only be 2 people left on the island to take care of them, grow their food, fix their houses, and take care of their medical needs. To "solve" this problem, all the adults hoard their money until they are old. When they all retire or are too old to work, they give all their money to the 2 young workers on the island. Does this extra money help the 2 workers do their work? Of course not. What they need isn't money, it' more goods and more workers. Or at least machinery and technology that will make them more efficient at growing the food, fixing the houses and providing medical care to everyone. No matter how much money the 98 adults save, it won't help the last 2 kids take care of them when they are older.

After taking a look at the island example, you can start to see how the social security trust fund isn't going to solve the underlying issue. People in Washington are obsessed with money. So when they hear about the problem of more retirees, they think it's a money issue. But it's not a money issue. It's about the amount of resources that our economy can produce. If you have fewer workers, you're going to produce fewer goods and no amount of money is going to change that. Even setting aside the absurdity of the federal government "saving" dollars(because it can create dollars at will), you can see the absurdity of the entire nation trying to "save money" to fix the problem of fewer workers. Money is not a durable good that can benefit future generations by previous generations saving money.

[dkf]

4. Thanks...

For the life of me I couldn't get my iPad to copy and paste this thing.

[Big Blue Marble]

2. As I have been saying for years,

this is biggest theft in the history of the world.

Republicans used this meta-scam to hid the increasing federal debt, while they
passed trillions to their overlords and convinced the public that they were getting
taxes cuts. Now, when the loans are being called in, whoops, the til is empty.

Oh so sorry.

[bemildred]

3. Indeed, this is the endgame, it all started back then. nt

[damntexdem]

5. Nonsense, that was a little stick-up.

The big heist is being considered right now.

[girl gone mad]

6. Did you realize that you posted a link to a diarist who endorses MMT?

I have to ask since I am an MMTer and you seem to take issue with most of my posts relating to the monetary system.

The working class got Shanghaied into higher taxes by thinking that they were providing for their own retirement. Meanwhile the deflationary effect of the higher payroll taxes was counteracted by lower taxes for the wealthy. All of this was sold as a "good deal" because nobody really understood how the fiscal and monetary system worked. That is the legacy of the 1983 "Social Security deal".

Please don't take any of this to think that I'm one of these "the social security trust fund is an illusion" people. I do believe that it exists, it should be payed out to retirees on schedule as it was intended. However, I also believe that we shouldn't worry about it running a deficit and should rewrite the Social Security Act to allow it to run a deficit. The point of all this is to get the left to understand how our lack of understanding the money system can allow us to be duped by conservative "deals" and institute counter-productive policy. We cannot allow ourselves to be dragged into the conservative fantasy that the federal budget has revenue constraints. I have no hope of convincing conservatives of this because they are emotionally and ideologically invested in fictional budget constraints so that they can institute their plan to destroy popular social programs. Such as when they wanted to "privatize" social security. They tried to sell it as "people will be able to better save their own money". Demonstrating that they both want to destroy social security, and the fantasy that everyone saving more money will solve the problem.

So what is the solution to the retirement problem? Their are several REAL solutions to consider. All you have to do is to temporarily take money out of your thinking. I am not necessarily advocating all of these, just listing them as possible solutions. I am listing them in the order of what I believe would be the most effective solutions.

First of all, while we have the workforce now, we need to build things whose value will last. For examples of this, think of things like the Hoover Damn, interstate highways, and other projects that have a lasting benefit for society.