I list the ongoing conversation below, should anyone care to read, and read, and... . Max, I don't think we disagree, I think we're just discussing different aspects of a complex problem. Just to add some points: 1. I think, on balance, a publically funded trust would be better than private ones, but there are problems with any funded program. I certainly wouldn't rule out some of our wonderful public leaders using a funded program as a private slush fund (gasp). 2. I understand that there is no problem in continuing to finance ss out of current spending as long as the income of the tax payers continues to grow, HOWEVER, (aha) I think assuming an increasing tax base from growing personal income is a big mistake. For the last decade or so real incomes for most Americans have been decreasing -- in particular, wages for white males have been on the down slide. A look at the small minority of Americans with increasing incomes shows that much of that income is not taxable to ss. Incomes have risen for the top of the wage earning pile, and income over $60,000 (or maybe $62,000) are not taxed for ss anyhow. 3. There are certainly ways of safeguarding ss as a pay-as-you-go-fund. Raising the cap may not resolve the entire problem, but it would help. Removing retirees with incomes above a certain level (say above $75,000 p.a.) would decrease the draw on the fund significantly. Another alternative would be to make the payments inversely progressive -- the more outside income you have, the less ss you receive. Ultimately, there is no easy solution. I do think, though, the worse solution would be privatization of the entire thing. Re: holidays. I had a wonderful time and ate too much -- hope you did the same. maggie coleman [EMAIL PROTECTED] In a message dated 96-12-07 12:54:46 EST, [EMAIL PROTECTED] (Max B. Sawicky) writes: >[EMAIL PROTECTED] wrote: >> >> The main reason SS is running into problems is that it is not a funded >> account, it is an account which pays benefits out of current spending. >> Shifting it over to a funded account would resolve the problem. Even a >few >> years of partial funding would significantly reduced the possibility of ss >> going broke. The thing is, all the vultures in Congress was to sponsor >> privatized funding of the program so that everyone and his uncle can dip >> their little fingers into the pie. A publically funded pool would be more >> effectively monitored. > >I suggest you reconsider this. Currently OASDI cash receipts exceed >cash outlays. >Obviously, if revenues grow at the same or a faster rate than outlays, >there is >no future problem. Revenues depend on taxable payroll, and payroll >depends on >the size and earnings per worker of the workforce. A pay-as-you-go >system can >go on forever, as long as the combined real rates of labor force and >earnings per >head are sufficient. Intuitively it would seem that as long as the rate >does not >decline, there is no problem, though the math here may be more profound. >This has been called a "natural rate of return" on paygo social >insurance, >an appealing turn of phrase. > >Listers will recognize that an increasing maldistribution of earnings >can offset >the abovementioned 'natural rate', but the fact is that uncapping the >payroll >tax base has a very small effect on total receipts (e.g., it doesn't let >you >reduce overall rates by as much as a percentage point). Uncapping also >raises >questions about the political viability of the system, since it raises >the >redistributive profile of the program. You didn't mention this, but it >is >a common enough response among the left that I thought it worth noting. > >The cure for an insufficient 'natural' rate of return in this sense is >whatever schedule of tax increases and benefit cuts resolves all literal >cash shortfalls in the system (which don't begin for another fifteen >years or so). Most here would favor tax increases over benefit cuts, >but that's more of a social question. > >Starting a private fund -- whether individual or publicly managed -- >raises >the same budget implications as any very large increase in spending. In >this case you are using receipts to buy financial assets. If you >finance >such a change so that it is "deficit neutral" -- by cutting other >spending >or raising taxes -- all you are doing is engaging in massive deficit >reduction > >All schemes for setting up some kind of funded >component amount to some kind of dubious effort to increase national >savings >by fiat. In other words, they rest on the premise that the tax >increases >and public spending cuts that would finance a fund don't cause >offsetting >dissaving (e.g., you tax me more to pay into a fund, I borrow more). >One >could have the same effect on the solvency of the OASDI trust fund by >simply >raising the payroll tax and/or cutting benefit outlays. The >establishment >of funded accounts, whether under the rubric of "privatized" individual >accounts or "progressive" publicly managed accounts, is entirely >irrelevant. >You are right that vultures would exploit any new fund. Not all of >these >vultures, unfortunately, would be Republicans and conservative >Democrats. > >>From a political standpoint, the nature of a new fund is exactly the >kind >of framing of the debate which diverts from the more fundamental macro >issues. Advance funding of any sort is positively anti-Keynesian. >The trust fund can be tidied up any number of ways without contracting >the economy. Advance funding = deficit spending; deficit-neutral >advance funding = deficit reduction. Thus, the macro criteria for >judging >a funding scheme are the extent, timing, and overall desirability >of its deficit implications. > >Hope you had a good holiday. > >MBS > > >----------------------- Headers -------------------------------- >From [EMAIL PROTECTED] Sat Dec 7 12:53:55 1996 >Return-Path: [EMAIL PROTECTED] >Received: from anthrax.ecst.csuchico.edu (anthrax.ecst.csuchico.edu >[132.241.1.25]) by emin15.mail.aol.com (8.6.12/8.6.12) with ESMTP id >MAA09060; Sat, 7 Dec 1996 12:53:54 -0500 >Received: from anthrax (localhost [127.0.0.1]) by anthrax.ecst.csuchico.edu >(8.8.2/8.8.2) with SMTP id JAA28862; Sat, 7 Dec 1996 09:51:22 -0800 (PST) >Date: Sat, 7 Dec 1996 09:51:22 -0800 (PST) >Message-Id: <[EMAIL PROTECTED]> >Errors-To: [EMAIL PROTECTED] >Reply-To: [EMAIL PROTECTED] >Originator: [EMAIL PROTECTED] >Sender: [EMAIL PROTECTED] >Precedence: bulk >From: "Max B. Sawicky" <[EMAIL PROTECTED]> >To: Multiple recipients of list <[EMAIL PROTECTED]> >Subject: [PEN-L:7766] Re: Fwd: Re: Social Security >X-Listprocessor-Version: 6.0c -- ListProcessor by Anastasios Kotsikonas >X-Comment: Progressive Economics >Content-Transfer-Encoding: 7bit >Content-Type: text/plain; charset=us-ascii >MIME-Version: 1.0 --------------------- Forwarded message: From: [EMAIL PROTECTED] (Max B. Sawicky) Sender: [EMAIL PROTECTED] Reply-to: [EMAIL PROTECTED] To: [EMAIL PROTECTED] (Multiple recipients of list) Date: 96-12-07 12:54:46 EST [EMAIL PROTECTED] wrote: > > The main reason SS is running into problems is that it is not a funded > account, it is an account which pays benefits out of current spending. > Shifting it over to a funded account would resolve the problem. Even a few > years of partial funding would significantly reduced the possibility of ss > going broke. The thing is, all the vultures in Congress was to sponsor > privatized funding of the program so that everyone and his uncle can dip > their little fingers into the pie. A publically funded pool would be more > effectively monitored. I suggest you reconsider this. Currently OASDI cash receipts exceed cash outlays. Obviously, if revenues grow at the same or a faster rate than outlays, there is no future problem. Revenues depend on taxable payroll, and payroll depends on the size and earnings per worker of the workforce. A pay-as-you-go system can go on forever, as long as the combined real rates of labor force and earnings per head are sufficient. Intuitively it would seem that as long as the rate does not decline, there is no problem, though the math here may be more profound. This has been called a "natural rate of return" on paygo social insurance, an appealing turn of phrase. Listers will recognize that an increasing maldistribution of earnings can offset the abovementioned 'natural rate', but the fact is that uncapping the payroll tax base has a very small effect on total receipts (e.g., it doesn't let you reduce overall rates by as much as a percentage point). Uncapping also raises questions about the political viability of the system, since it raises the redistributive profile of the program. You didn't mention this, but it is a common enough response among the left that I thought it worth noting. The cure for an insufficient 'natural' rate of return in this sense is whatever schedule of tax increases and benefit cuts resolves all literal cash shortfalls in the system (which don't begin for another fifteen years or so). Most here would favor tax increases over benefit cuts, but that's more of a social question. Starting a private fund -- whether individual or publicly managed -- raises the same budget implications as any very large increase in spending. In this case you are using receipts to buy financial assets. If you finance such a change so that it is "deficit neutral" -- by cutting other spending or raising taxes -- all you are doing is engaging in massive deficit reduction All schemes for setting up some kind of funded component amount to some kind of dubious effort to increase national savings by fiat. In other words, they rest on the premise that the tax increases and public spending cuts that would finance a fund don't cause offsetting dissaving (e.g., you tax me more to pay into a fund, I borrow more). One could have the same effect on the solvency of the OASDI trust fund by simply raising the payroll tax and/or cutting benefit outlays. The establishment of funded accounts, whether under the rubric of "privatized" individual accounts or "progressive" publicly managed accounts, is entirely irrelevant. You are right that vultures would exploit any new fund. Not all of these vultures, unfortunately, would be Republicans and conservative Democrats. >From a political standpoint, the nature of a new fund is exactly the kind of framing of the debate which diverts from the more fundamental macro issues. Advance funding of any sort is positively anti-Keynesian. The trust fund can be tidied up any number of ways without contracting the economy. Advance funding = deficit spending; deficit-neutral advance funding = deficit reduction. Thus, the macro criteria for judging a funding scheme are the extent, timing, and overall desirability of its deficit implications. Hope you had a good holiday. MBS
