We’re finally starting to get more attention paid to the fiscal cliff, including from conservatives dedicated to discounting it. Ed Lazear tries to dismiss concerns that spending cuts could affect the economy, using typical confidence fairy logic, separating that part of the fiscal cliff from the expiration of the Bush tax cuts, which must be avoided.
Paul Krugman gives him the once-over here.
If Lazear were honest, he would say that spending has a higher economic multiplier than taxes, so if anything the opposite would be true, that we should fear the spending cuts from the fiscal cliff over the tax increases. And anyway, the spending cuts are immediate, while the tax hikes play out over a decade. But in the main, Keynesian fiscal policy has withstood every test presented by the Great Recession, and proven to be the most reliable remedy for any country seeking a return to recovery. The danger of the fiscal cliff is that it will have an anti-Keynesian effect, as the economy remains fragile.
Which brings us to the problem with the positions being staked out in the future negotiations. If anything, Republicans are pushing a more friendly policy to Keynesians in some respects; they want the tax cuts extended and some of the spending cuts eliminated. However, they just want to replace the spending cuts to defense with spending cuts on the discretionary side, and they want to take hostage the debt limit again, forcing dollar-for-dollar cuts to spending for every dollar of increase in that ceiling.
On the Democratic side, they’ve been pushing this “balanced” solution. But a balanced solution at this time is a solution that cuts the deficit. And while that may mitigate the fiscal cliff, it still sends things downhill.
Of most concern to progressives is the continuing game of footsie Nancy Pelosi appears to be playing with Bowles-Simpson, the deficit reduction plan that makes cuts to Medicare, Medicaid and Social Security benefits. For tactical reasons, she wants to look more “reasonable” than Republicans on the issue of deficits. But in reality, this striving for reasonableness will only put those entitlement programs at risk. Look at how Pelosi handled this on ABC yesterday:
Pelosi just skates on this one. She touts a few virtues of Bowles-Simpson (a better spending/taxes ratio, assuming the expiration of the high-end Bush tax cuts, substantial cuts to defense). Then she says that she didn’t like the Social Security aspect, but that this part of the deal could be handled separately. Of course, Bowles-Simpson DIDN’T handle it separately, but saw it as integral to their plan.
The only principle she makes clear here is that whatever changes get made to Social Security, the ensuing savings or revenue gains should be plowed back into Social Security to increase its solvency. That’s fine, but it says nothing about allowing or rejecting benefit cuts. She adds at the end that House Democrats stuck with the President last year on the grand bargain before John Boehner walked away from it. It has been widely reported that the grand bargain included cuts to Social Security benefits through the change in COLA.
The fiscal cliff will be used as an opportunity by many in the Democratic Party to reach that long-sought deal on deficits, presumably to “take it off the table” for future elections, which never works. Nobody’s laying down any marker on safety net programs, and in fact are being conspicuous about not doing so. And the implications of the fiscal cliff, that there’s a real danger to making any further cuts to spending, are not being heeded.





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I’m speechless…
dumbstruck…
how can one say this politely?..
Pelosi gives me a rash…
Thanks DD with nancy saying this last week the she expects demodogs to take back the house I can see my SS going bye-bye. It worked so well the first time demodogs controled both houses I can hardly wait for part of the cat food peoples return. Voting Green this Time nancy good luck to you all.
Hear that folks??? No??? Then it’s cause you’re NOT listening.
The DEMOCRATS. That’s right the DEMOCRATS, are going to cut your Medicare and Social Security after the election.
So, please, by all means, make sure you go out and vote for those DEMOCRATS.
And afterwards, you know, it really would be nice to not bitch about what the Democrats do after you voted them in to do it. K?
Why would SS go bye-bye?
The Trust Fund will supplement revenue shortfalls for 20 some years, and the SSA will still be able to pay out 75% of benefits after that.
And as Jon said above, they’ve only been talking about cuts to Social Security benefits through the change in COLA. That ammounts to something like .2%.
I think Pelosi and the rest of the official Democratic Party are scared silly at the prospect that the Big Money are going to throw loads of it at the Congressional races, and she is trying to stake out a position that will allow her to say ‘look, we’re responsible to.’ This is of course the most irresponsible thing she could do. If the big money does to Congressional Democrats what it is doing to the recall election in Wisconsin, she has plenty to fear, but nothing she can do to water down the Democratic message is going to do any good. If you are going to be executed anyway, committing suicide is not going to improve the situation.
My feelings exactly. And, please, everyone WRITE to Nancy. You can’t e-mail her but she should notice letters more anyway. The Rs are doing what they always do but the Dems seem to have truly lost their minds.
You do realize the irony of the Democrat bookends: FDR to enact SS and Obama to destroy it. I got gypped. Started working and paying at 16, at 68, two years into benefits, facing the very real prospect of cuts. A plague on all of them. Something terribly painful and slow and crushingly expensive.
Yes, you can email her:
http://www.democraticleader.gov/
It’s unfortunate that more people don’t realize they can send their ‘concerns’ to her attention.
AND, fwiw, the whole SS cola adjustment thing is a sign that the FED is planning to inflate away the so called debt instead of using the options presented by MMT theory or the platinum coin option.
I’d like to double down on what Krugman said about the politicization of academic economics. Lazear had some interesting articles on labour markets and compensation schemes, but he is Chicago through and through. The aim of his article and those like it is to turn the debate into ‘he said she said.’ This is exactly what the Creationists have tried to do with Evolution, though even Chicago economists wouldn’t be caught debt with a Fundie walking his pet dinosaur.
I pointed out on Saturday that the academic economics profession had become increasingly nihilistic. Chicago types pretty much control the journals, and he who controls the journals controls who gets tenure. They are no longer making any secret of it. It’s my way or the highway.
I personally doubt that Social Security will be meaningfully available by the time anyone under 45 today needs it.
Oh, yes. Mail from the public will SO impact on Pelosi.
Hey. David! Didn’t you write this piece completely analyzing how simpson-bowles’ recommendations were a benefit cut through progressive indexing, age of eligibility changes and raised tax rates??
http://news.firedoglake.com/2010/11/15/why-the-bowles-simpson-social-security-recommendations-arent-adequate/
SS cuts are the third rail. If the Democratic party lead by Obama goes there, they will lose big time.
What did that Occupy Marine Vet yell at the cops attacking unarmed Occupy protestors??
I would like to yell that to Nancy Pelosi:
There’s no honor in this Nancy Pelosi. Shame on you for not going on the offensive and countering the Republican and the centrist Democrats as they purport to cut Social Security, Medicare and the other safety net programs. Shame on you. There is no honor in strip mining Americans who paid ahead 2.6 trillion dollars into the Social Security Trust fund, just so you can transfer taxes-they-did-not-have-to-pay to the Rich, one percenters. There is no honor in what you are doing, Nancy Pelosi. At the very least you could have pointed out that the deficit is from two unfunded wars, unfettered military spending, and record low taxes on the rich, in addition to reduced revenue from a down economy. There is no honor in attacking the retirement security of Americans, now or in the future. There is no honor in screwing young people too busy to know what is going on, out of their future retirement. There is no honor in what you are doing, Nancy Pelosi!!
What’s interesting is you’ll get back in the first 6 months what you paid in in the first 20 years.
Shows you how much lower the payroll taxes were then, and how much more generous the benefits are now.
Pelosi, like nearly all Fed pols, is part of the problem, not part of the solution.
Pelosi is a big old 1%er, and she has her middle finger firmly uplifted at all of the 99%, including her now erstwhile “constituents.”
The only constituents that Nancy serves are others in her exclusive .0001% Club.
Got that? Writing to Pelosi is a fool’s errand, IMO, but if you feel like doing so, go ahead.
Vote Third Party is what I’m doing.
Pelosi’s bascially saying to the 99% rabble: I got MINE, EFF You.
Well EFF you back, Nancy. Not voting for anyone in the UniParty Kleptocracy no mo, fwiw.
I dunno about that.
I get annual info about what I’ve put into Soc Sec from the Admin. There is NO WAY that I’ll get back what I put into Soc Sec from my first 20 years of contributions in the first six months of collecting it. I’m not sure how long it will take to get back what I paid into Soc Sec(plus at least *some* kind of interest), but I think it’s closer to 11 years. Don’t have my documentation at hand, but I know *for sure* that your claim of getting back my first 20 years’ worth of “contributions” within 6 months is glaringly incorrect.
Unsure where you got that info.
On the other hand, if all my Soc. Sec. deductions were invested in Microsoft, I’d be a millionaire, many time over.
Neither of which come close to optimism (confidence fairy). Expectations are the determining factor in how good the economy is. If you think the future is bright one borrows and invests. If you think the future is bleak one hoards. It really is that simple.
Regarding SS, it already contributes to the deficit. A little austerity now would be better than a lot of austerity later.
http://www.ssa.gov/oact/tr/2012/II_A_highlights.html
I built a spread sheet going back to the inception of SS. Originally it was 1% on the first $3000 max income.
Using libs numbers of current age 68, started working at 16, then in 1959, the most anyone would have to pay in was 2 1/2% on $4800 max. income, or $120. In 1960, the max. would have been $144, and so on.
BTW, in my haste I neglected the employer contribution, so if you take that as your money, then it would be closer to a year to get back 20 years of “investment”.
Nonsense.
It’s not an investment, it’s insurance. I paid to support the people on SS at the time. And, yes, I expect the same now. AB SO LUTE LY.
The real problem isn’t SS or Medicare, it’s stagnant wages. Ordinary people have gotten less and less able to pay………..for anything.
Get back to me when you have a fact.
Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. For earnings in 2012, this base is $110,100.
In 1959 it was $4,800.
http://www.ssa.gov/oact/cola/cbb.html
Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program is financed primarily by employment taxes. Tax rates are set by law and have changed over time and apply to earnings up to a maximum amount for OASDI.
Today it’s 6.2%, in 1959 it was 2.5%
http://www.ssa.gov/oact/ProgData/taxRates.html
So the most you would have paid in 1959 is 2.5% of $4,800, or $120.
It’s easy to see how you would pay in for 4 or 5 years in the 60′s, to pay for your first months benefit today.
I’m not suggesting anyone take anything away from you. But I don’t know why you find the facts to be nonsense.
Because I found the paperwork from SS. Don’t get back to me.
Thanks for the response. In the paperwork I get from the Soc Sec Admin, it is only providing me with figures of what I contribute. Frankly I have no idea what my employers have contributed over the years.
Again, just going on my own personal info, I know that it will take me way more than 6 months to collect what I contributed in my first 20 years.
I have been contributing now for approx 40 years, and I know it will take closer to 11 years (at least) to recover just my contributions.
Footsie? To even mention that it has any room in the discussion, that it is in any way “on the table”, is to give it a full-on embrace. She might as well be seen on YouTube fellating Alan Simpson.
No, Virginia, there is no Santa Claus and there are no real FDR Democrats anymore. (At least not in office or actively supporting the party.)
I may be wrong, I don’t have your paperwork. But the SSA says you (and your employer) didn’t pay more than $120 in payroll taxes in 1959.
If you claim your paperwork says you paid more than that, your conscience will have to be your guide.
I started working and paying in in the mid 70’s. By that time the max. contribution was $16,500 (not that a high school kid made anywhere close to that) and the rate was 4.95% for employer and employee. So the max. anyone paid in that year was $816.75.
The 20 year in 6 month rule wouldn’t apply to younger people.
As I stated originally, shows you how much lower the payroll taxes were then, and how much more generous the benefits are now.
I can’t argue the calculations, because I don’t have actuarial training. But isn’t Social Security like any other insurance? Some people will collect more than they paid in, others less, or nothing depending on how long they live.
You don’t expect to get back dollar for dollar what you pay. You expect everyone to pay in and collect according to schedules built on a sound actuarial basis. That’s why Social Security payments/benefits have been re-calculated numerous times before, and need a small recalculation (raising the cap or applying to all forms of income, for example) to better meet the needs in 25 years. (And of course the fund shouldn’t be borrowed for other purposes and not paid back, but that’s another story).
Sorry if I can’t be more technically accurate on this, but I think that’s how insurance works. ??
Yes.
confidence fairy, if that is the driver of prosperity, does not appear when austerity is tried – see the EU results of late and the last 40 years of IMF advice and results. Actually the job creator is public demand for goods and services – the 1% crowd as job creators and the confidence fairy as the goal are just justifications for lower taxes on the rich and corporate – a policy shown most recently y GW Bush to not produce jobs (I believe Bush produced 1 million jobs in 8 years in contrast to high tax/high regulation Clinton’s 22 million).
SS by law can not contribute to the deficit – indeed it runs a $70 billion surplus for the next few years. Of course one can pretend interest paid on bonds in the Trust Fund is not needed – that we should default of US Bonds – so we take away from SS the bond interests and now there is a negative. Amazing what we can prove with that default on SS Bonds concept.
Medicare part A also by law does not contribute to the deficit. But you are correct that Medicare Part B via the “doc fix” – a general funds expenditure – does add to the deficit.
So logic would say don’t touch SS – but then our GOP friends don’t deal in logic – prime example of course being the falling upward of Paul Ryan into intellectual guru heights based on a combination of really bad, proven wrong, ideas and on his never being called on his “producing a budget” that has no specifics – just unnamed “tax loophole closing” and “discretionary spending cuts”
Let me suggest that someone look at the disability aspect of SS. IIRC they are rising quickly. For instance if one has an “speech delay” (?) child one is eligible for $700/mo.
silly – nonsense – ignores “insurance” aspect – and ignores safety net aspect – but then folks forget the survivor benefits and cost of living benefits and disability benefits that just are not available, and well never be available, in the private sector.
The first low wage retiree in the very early 40′s had paid in for a few years and got an 80 to 1 return via the minimum benefit rule – under 20 per month as I recall – and of course the GOP in Congress screamed that it was an unfair investment – amazing that the same nonsensical screams are still heard today.
IT IS NOT AN INVESTMENT
IT IS INSURANCE PROTECTION FROM THE HAZARDS OF LIFE LIKE LIVING TOO LONG OR BECOMING DISABLED.
So how is the public’s demand to be paid for? In the real world, you can demand all you want but it won’t do you any good, if you don’t have the money. Heck, these days if you do have a job you’re petrified you’re going to lose it.
On the other hand we have North Dakota and their boom. Demand is soaring and it has money to feed on. Jobs are going begging.
So which attitude is preferable do you think – pessimism, or confidence?
Again nonsense -
Where in the world did you get that info?
I do pro-bono work getting folks on SS disability – and it is very very hard to get on. Requires unqualified by disability to get ANY job in the US economy – almost requires an expectation of early death. You may be thinking of the welfare program called SSI that has children’s disability benefits, although severely disabled children do go on SS disability – just not for slow speech. The claim approvers are the same claim approvers you see at the insurance companies – just as tough if not tougher. If someone lucked out and got such a benefit, it is certainly not the norm.
But you are correct the SS DI claims are up – Sick people try to work as there is more money and status from working – but in a GW BUSH economy of no jobs, they cave in and apply for the small DI benefits they are entitled too. Indeed DI benefits by law will have to be cut in next 7 or 8 years if the wage cap is not lifted because like all of SS, SS DI is not allowed to add to the deficit.
The public demand can be paid for by government temporary hiring – its called stimulus.
It also shows the magic of compound interest, or didn’t you learn that where you studied?
Shooter, your display of economic ignorance sets the lower bound of understanding. Your IQ can’t be much bigger than your dick. You should peddle your stupidity some place where there is someone dumb enough to swallow it.
Between the reference to “dick” and the one to “swallow” there’s the makings of a joke or a double entrende someplace, but I’m not bright enough to figure it out exactly.
On this we can mostly agree. That marym in IL @ 29 is mostly correct.
My grandmother lived to 102, and one of her kids died at 64. One collected a whole lot more than the other. But that’s the way it works.
You’re also correct about this “That’s why Social Security payments/benefits have been re-calculated numerous times before, and need a small recalculation (raising the cap or applying to all forms of income, for example) to better meet the needs in 25 years.”
The cap and the rate have been raised dozens of times. I think the only time they applied to other forms of income was to tax SS benefits.
I believe it did last year “by law” when they passed the payroll tax holiday. The 2% break that we all got was “by law” made up for out of the General Fund, contributing to the deficit.
I didn’t ignore safety net aspect or survivor benefits or cost of living benefits.
I just said you’ll get your first 20 years paid in, back in half a year. It’s math, not nonsense.
It’s math in the sense that you probably didn’t make arithmetic errors (I’m not gonna do similar calculations because I would make arithmetic errors!) but what does it mean? You don’t pay into any form of insurance to get back what you paid in, you pay to get a defined benefit based on defined rules. So I don’t get your reason for describing it in these terms.
I don’t know if your figures about six months is fact or not (but I’m checking, I think the thing that’s throwing others off is your cute “FIRST 20 years of contributions” but I do know that your RATES are bullshit.
The rate on the first $110,000 roughly is 12.4%, not 6.2. Half of that 12.4% is paid by the employer and the other half is paid by the worker, but they both constitute a tax of 12.4% on ones wages. And in 1959, if the rate was 2.9 for workers, then the total rate was actually 5.8% of a persons wages were collected as taxes. And it’s always been an economists contention, CONSERVATIVE economists, that a payroll tax is money the worker would’ve gotten in wages. So, in that sense, the worker pays the entire amount.
I’m betting your six months figures are off because of that.
And as far as paying back more than one contributes, it doesn’t matter anyway. That’s not the way insurance works and you know it. The FACT is Social Security has, over the years, built up a huge trust fund because it has collected more than it paid out. THAT’S MATH for you.
http://www.boston.com/news/health/articles/2010/12/13/follow_up_process_lacking_in_ssi_disability_program/
So far we’re spending $1 trillion+ in borrowed/printed/taxed money for the last few years. Obama’s debt is larger than Bush’s for all his eight years. If you can’t move an economy on that kind of money, it’s not going to happen. In fact our deficits are larger than all the reported income for the bottom half of the country.
http://www.taxfoundation.org/taxdata/show/27235.html
This recession, like Japan’s isn’t going to end until enough debt is paid down that borrowing again looks reasonable.
It’s hard to believe that the academic economist holding Krugman’s hand Sat. is the same foul mouthed lowbrow posing as my own personal troll today.
I’m sorry I missed the opportunity to pose questions Sat. so since you’re an acolyte of Krugman’s I’ll ask you.
I think this is a debt recession, while Krugman says this is a demand recession. If a significant amount of people’s money is tied up paying off debt, why is he saying demand is the problem? After all, wants/needs/demands are always with us, the means to pay for them aren’t.
More complete and utter horseshit.
Borrowing is not the problem, demand is.
If you run a business and base your decision to borrow and expand on something other than demand for your service/product, then you won’t be in business long.
And if demand were such that any company out there needed to borrow to capture that demand, then they’d be doing that right now. Nothing stopping them, except, you know, that it would be a waste to borrow and expand or borrow and invest if there is no demand for your product/service.
Just by saying it over a million times doesn’t make it fact, no matter how you wish it were so. Go ahead supply sider, open up a business and make all of your decisions based on the supply side of things. I’d love to see it. You’d be out of business the first six months. DEMAND drives the economy. Always has, always will. You can come up with the greatest invention since sliced bread, and it won’t add a penny to GDP unless there is someone that is willing to demand and purchase that product.
Those of you that keep repeating that bullshit are either really stupid or knowingly lying. Or both.
Now you’re mixing up individual debt and government debt.
Yes, when individuals pay down debt instead of purchasing products, it does lower demand, and thus hurts the econom. So see, you just said yourself how DEMAND drives the economy. So thank you for proving my point.
bs
Microsoft has been flat for the last 10 years
http://tinyurl.com/c7fz4ug
Actually, you can email Nancy Pelosi if you go to her leadership site: http://www.democraticleader.gov/contact
And I encourage everyone to do so on this issue, as I have already twice.
I’m sure you put forth a lot off effort into your spreadsheet but you’re just mistaken in the 6 months generalization.
First of all the minimum wage in 1959 was $1; times the 2080 hours per year that was standard then and now, that equates to $2080.
Second, in using such numbers from the origination, you don’t factor inflation.
BUT most importantly, I saved the yearly SS statements as towards how much I earned in the first 20 years of contributions and I can tell you I definitely did not get back in the first 6 months what the SS Admin says I contributed during the first 20 years. Of course I started contributing back in 1964, not the 70′s.
Depends on how much mail and whether it addresses a single subject; but the old refrain holds true: “speak now or forever hold your peace”.
Yeah, the same way voting for the Iraq War took the national security issue “off the table” for future elections.
I do have a recent statement (2009) handy and it shows that the contributions I made in my first 20 years of full-time employment (I’m leaving out the contributions from part-time jobs I held in my school days) plus my employers’ contributions would be distributed back to me in a little more than 5 years. So, it’s not 6 months, at least for the time period (1986-2006) relevant for me. BUT – you also have to consider inflation otherwise the calculation is meaningless. I don’t know the appropriate multiplier so I’m not going to attempt the adjustment but the result would obviously be greater than the unadjusted number.
But as others have pointed out – so what? We’re talking about a social insurance program that’s intended to reduce if not eliminate poverty among the elderly not a personal investment program. Unless one is fortunate enough to be wealthy (and yes, luck is involved) the threat of poverty once one enters the “golden years” is very real. That was the major goal of FDR in introducing Social Security and those who denigrate it should really take a look back at what things were like before it’s introduction. And please, the benefits are very modest compared to other Western, industrial countries’ programs. Social Security was supposed to be one leg of a three-legged stool, the others being private pensions and personal savings, supporting retirement. Now that pensions are mostly gone and personal savings have been decimated by the financial crash and the deflation of the housing bubble Social Security is more important than ever. It would be a gross mistake by the Dems to make a deal that cuts SS and Medicare benefits on the premise that they will then be seen as “fiscally responsible” but then again there seems to be no lower bound to their stupidity.
To OFG at #45 (Linky thing doesn’t seem to work).
Except for your course language, I agree. I said it at #20.
“BTW, in my haste I neglected the employer contribution, so if you take that as your money, then it would be closer to a year to get back 20 years”
I also agree that as far as paying back more than one contributes, it doesn’t matter anyway. That’s not the way insurance works (and it’s not really exactly insurance, but kind of).
“The FACT is Social Security has, over the years, built up a huge trust fund because it has collected more than it paid out. THAT’S MATH for you.”
I agree with your math, even though there wasn’t any. The $2.5T trust fund should last for more than 20 years, as I said in #4. You’re late to the party potty mouth.
For Ub ar 52.
The spreadsheet really wasn’t that much effort, and I’m not mistaken in the statements I made. Some are upset that it sounds like I’m making some kind of bold claim, but I just said “for example if you started working in “59″ you’d get back the dollar amount you paid in in 20 years in 6 month (one year if you include the employer amount).
Min. wage doesn’t change the dollar amount. I’ll give you the fact that it’s different.
I also don’t take in inflation. Granted.
I made a true statement. Too many folks will just ignore it, or think, well, it’s probably inflation and min. wage, so let’s ignore it.
Head in sand.
“BUT most importantly, I saved the yearly SS statements as towards how much I earned in the first 20 years of contributions and I can tell you I definitely did not get back in the first 6 months what the SS Admin says I contributed during the first 20 years. Of course I started contributing back in 1964, not the 70′s”
I can’t tell you how much you made, or how much you contributed, but I can tell you the maximum you would have been required to contribute.
And for someone starting in ’59, they paid in MAX $120 per year.
I don’t know what your monthly check is, but if it’s more than $1200, you made that up in Jan.