Krugman 1997: Social Security Is a Ponzi Scheme

[Denny Crane]

I have to say, Richard W. Fisher is full of shit.



Why would anyone consider that? The concept is moronic. Should we also fund all future defense department expenses with a one-time tax? How big is the 'unfunded liability' for all future defense spending? How about highways? A one-time tax to fund all future highway construction?

This is the sort of calculation one does when one is more interested in scaring Denny than in the truth.

barfo

http://www.ssa.gov/oact/progdata/fundFAQ.html

The Social Security Trust Funds are the Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI) Trust Funds. These funds are accounts managed by the Department of the Treasury. They serve two purposes: (1) they provide an accounting mechanism for tracking all income to and disbursements from the trust funds, and (2) they hold the accumulated assets. These accumulated assets provide automatic spending authority to pay benefits. The Social Security Act limits trust fund expenditures to benefits and administrative costs.

There is no automatic spending authority to pay for defense. The size of the defense budget is also subject to a vote every year.

There is the reality, not the "barfo might be" scenario.

 

[Denny Crane]

What's the difference between SSI and Medicare/Medicaid? The obvious answer is the latter two start with Medica...
barfo

Medicare has a trust fund, too.

http://www.ssa.gov/oact/trsum/index.html

What Are the Trust Funds? Congress established trust funds in the U.S. Treasury to account for Social Security and Medicare income and disbursements. Social Security and Medicare taxes, premiums, and other income are credited to the funds. There are four separate trust funds. For Social Security, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits and the Disability Insurance (DI) Trust Fund pays disability benefits. (The two trust funds are often considered on a combined basis designated OASDI.) For Medicare, the Hospital Insurance (HI) Trust Fund pays for inpatient hospital and related care. The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts: Part B, which pays for physician and outpatient services, and Part D, which covers the prescription drug benefit.

Disbursements from the funds can be made only to pay program benefits and administrative costs. All excess funds must be invested in interest-bearing securities backed by the full faith and credit of the United States.

 

[BrianFromWA]

While your point is reasonable barfo, I don't think that it's in tune with the reality of the situation.

For the most part, I'm with you on SS. It's untenable as currently constructed, but it's not that far away IF people really want to continue it and pay for it. Like you proposed...maybe some cuts and reduction of fraud, maybe an increase in availability age, maybe a higher tax %, but it's not off the reservation. Now, it may be too large a thing to compromise on for THIS Congress (or the next one), but that's more an indictment of the skills and intelligence of the people involved rather than the magnitude and complexity of the problem.

Medicare/Caid IS off the reservation, though. I've posted a couple times that the overruns this year are in the realm of being as large as another entire DoD and DHS put together. The small payroll taxes that are supposed to pay for it don't, while the projections are that costs are going to go up exponentially. ObamaCare had very little health reform (or cost of health reform), and a bunch of attempted health insurance reform and fancy hand-waving for cost numbers in the future.

I also disagree with you about the following:

I don't know what the solution will look like, but I'm sure there will be a solution. Show me another service whose cost steadily rose much faster than inflation over a period of 70 years.

I fully admit that I don't know the projections for SS as well as you and Denny, so I'll just stay mute on that subject. But SS at least has increased the tax % and availability age and reduced the promised benefits (my last statement said I'm projected to get 72% of my entitlement when I retire) as the ratio of workers-to-recipients has gone down. There has been no such increase in M/M (even a reduction in payroll tax, which can be construed as some reduction in the M/M portion of the payroll tax) since it was created in the 60's, and lobbyists (like the AARP?) have ensured that M/M cuts aren't brought up for debate. M/M's costs have been rising faster than inflation for at least 46 years with no speed bumps.

Thanks in part to expansions promoted by California's Henry Waxman, a principal author of the current House bill [ed. this was from 2009], Medicaid now costs 37 times more than it did when it was launched—after adjusting for inflation. Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that's before the health-care bill covers millions of new beneficiaries.

Medicare has a similar record. In 1965, Congressional budgeters said that it would cost $12 billion in 1990. Its actual cost that year was $90 billion. Whoops. The hospitalization program alone was supposed to cost $9 billion but wound up costing $67 billion. These aren't small forecasting errors. The rate of increase in Medicare spending has outpaced overall inflation in nearly every year (up 9.8% in 2009), so a program that began at $4 billion now costs $428 billion

 

[Denny Crane]

Which is pretty much what I've been saying all along - an increase by 1/3rd (4.5% to 6% of GDP). That isn't pretty, but obviously if we choose to, we can afford to pay 16% instead of 12% for SS. Or if we don't choose to, we can reduce benefit payments accordingly.

barfo

Reduce benefits accordingly. That would be a 25% cut.

http://ssa-custhelp.ssa.gov/app/ans...-social-security-benefit-for-a-retired-worker

What is the average monthly Social Security benefit for a retired worker?

The average monthly Social Security benefit for a retired worker was about $1,177 at the beginning of 2011. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.

I suppose the elderly can learn to live on $882.75/month.

 

[BLAZER PROPHET]

Which is pretty much what I've been saying all along - an increase by 1/3rd (4.5% to 6% of GDP). That isn't pretty, but obviously if we choose to, we can afford to pay 16% instead of 12% for SS. Or if we don't choose to, we can reduce benefit payments accordingly.

barfo

Or maybe trim away some of the things people shouldn't be receiving from these entitlement programs.

 

[barfo]

While your point is reasonable barfo, I don't think that it's in tune with the reality of the situation.

For the most part, I'm with you on SS. It's untenable as currently constructed, but it's not that far away IF people really want to continue it and pay for it. Like you proposed...maybe some cuts and reduction of fraud, maybe an increase in availability age, maybe a higher tax %, but it's not off the reservation. Now, it may be too large a thing to compromise on for THIS Congress (or the next one), but that's more an indictment of the skills and intelligence of the people involved rather than the magnitude and complexity of the problem.

Medicare/Caid IS off the reservation, though. I've posted a couple times that the overruns this year are in the realm of being as large as another entire DoD and DHS put together. The small payroll taxes that are supposed to pay for it don't, while the projections are that costs are going to go up exponentially. ObamaCare had very little health reform (or cost of health reform), and a bunch of attempted health insurance reform and fancy hand-waving for cost numbers in the future.

I also disagree with you about the following:

I fully admit that I don't know the projections for SS as well as you and Denny, so I'll just stay mute on that subject. But SS at least has increased the tax % and availability age and reduced the promised benefits (my last statement said I'm projected to get 72% of my entitlement when I retire) as the ratio of workers-to-recipients has gone down. There has been no such increase in M/M (even a reduction in payroll tax, which can be construed as some reduction in the M/M portion of the payroll tax) since it was created in the 60's, and lobbyists (like the AARP?) have ensured that M/M cuts aren't brought up for debate. M/M's costs have been rising faster than inflation for at least 46 years with no speed bumps.

Well, if you believe there is no solution, that we are doomed to simply pay more and more for healthcare forever, even as it consumes more than all of our money and more than all of the money we can borrow, then I guess there's no reason to worry about it further. The human race will just health-care itself to death. In the end, we'll have to stop buying food in order to buy healthcare, and we'll all starve. Bummer.

barfo

 

[BrianFromWA]

I didn't say there's no solution. The solution is to make people pay for their healthcare, or to get private insurance to gamble on that for them. Yes, you might get people dying of cancer before they spend a quarter-million of taxpayer money. You might get someone who dies after his 2nd, instead of 3rd heart attack. You may get pressure to reduce medication costs (or reduce medications altogether). Heck if you want to take that almost-trillion dollars annually and set up a Department of Doctors and Nurses, and have people go see them at reduced costs, that would even be a solution.

You're better than the "you said my solution won't work, so there isn't one and I'll just barfofy right now" tack in that post.

 

[3RA1N1AC]

this is the greatest nation in the world right?

 

[barfo]

The solution is to make people pay for their healthcare, or to get private insurance to gamble on that for them. Yes, you might get people dying of cancer before they spend a quarter-million of taxpayer money. You might get someone who dies after his 2nd, instead of 3rd heart attack. You may get pressure to reduce medication costs (or reduce medications altogether). Heck if you want to take that almost-trillion dollars annually and set up a Department of Doctors and Nurses, and have people go see them at reduced costs, that would even be a solution.

Wait, people don't pay for their healthcare/insurance now? There is a suspicious amount of money withheld from my paycheck by my employer. They always said it was for private health insurance. Am I the only one?

And the odd thing is, it doesn't seem to help the situation. Costs of private insurance have been going up and more or less the same rate as medicare costs. But you are saying, if old people had to buy private health insurance, the costs would suddenly go down? What's special about old people? Are they cheap to insure?

I didn't say there's no solution. [...] You're better than the "you said my solution won't work, so there isn't one and I'll just barfofy right now" tack in that post.

But that's not what you said. You said:

I also disagree with you about the following:

I don't know what the solution will look like, but I'm sure there will be a solution. Show me another service whose cost steadily rose much faster than inflation over a period of 70 years.

What did you mean by that if not 'I disagree that there will be a solution'? Did you bold the wrong part of my quote?

barfo

 

[BrianFromWA]

My point with the bolded is that you seemed very laissez-faire that there will be a solution. I highly disagree. Not because there isn't a solution, but that there are multiple options that haven't been vetted and/or chosen and implemented.

And no, old people are not paying their health care costs if the government is paying and overrun of $700B a year for it. Much like in your insurance plan, you don't suddenly stop getting care when your costs go over how much you've paid in in premiums. The company is using premiums from me (who hasn't been to the doctor in years, but has a plan that costs 8-12k a year) to pay for people who use more than their 8-12k a year. Which is fine, if a plan staggers its clientele and premium structure to afford that. The US government has not. 49M people are paying income tax (or the government is taking out debt that those people will have to pay back) to cover the overruns of the "premiums" (payroll tax for M/M). This year it's ~$700B. There's not a lot of hope that that will go down anytime soon.

 

[Denny Crane]

Brian,

He's not getting the distinction between paying for health care and buying insurance.

 

[barfo]

My point with the bolded is that you seemed very laissez-faire that there will be a solution. I highly disagree. Not because there isn't a solution, but that there are multiple options that haven't been vetted and/or chosen and implemented.

Ok, I agree with you that there are multiple options, etc. Eventually, we'll choose one or more of the options and implement it. That's all I was saying.
And when we do, that exponential growth on the graph goes away, and the world is saved once again! Hooray!

And no, old people are not paying their health care costs if the government is paying and overrun of $700B a year for it. Much like in your insurance plan, you don't suddenly stop getting care when your costs go over how much you've paid in in premiums. The company is using premiums from me (who hasn't been to the doctor in years, but has a plan that costs 8-12k a year) to pay for people who use more than their 8-12k a year. Which is fine, if a plan staggers its clientele and premium structure to afford that. The US government has not. 49M people are paying income tax (or the government is taking out debt that those people will have to pay back) to cover the overruns of the "premiums" (payroll tax for M/M). This year it's ~$700B. There's not a lot of hope that that will go down anytime soon.

Ok. My point is the structure of medicare isn't the fundamental problem here. The cost of healthcare is the fundamental problem.

I'm not really sure what your point is about the 'overruns'. The old people aren't paying their own healthcare costs, working people are paying it for them. Does it really matter if we pay it via a payroll tax, or an income tax, or the combination of the two that we currently use?

barfo

 

[barfo]

Brian,

He's not getting the distinction between paying for health care and buying insurance.

I don't think Brian was drawing a distinction. But you are free to take that tangent if you wish.

The solution is to make people pay for their healthcare, or to get private insurance to gamble on that for them.

barfo

 

[Denny Crane]

If people paid their own health care bills, the cost would go way down. As it is now, people are directed to go to specific doctors where their co-pay is accepted.

If people paid out of pocket, and the first doctor quotes them $100 to remove a hangnail, the person can go next door tooth doctor who charges $50.

Competition and free markets are a great thing.

 

[BrianFromWA]

Ok, I agree with you that there are multiple options, etc. Eventually, we'll choose one or more of the options and implement it. That's all I was saying.
And when we do, that exponential growth on the graph goes away, and the world is saved once again! Hooray!

That's the part I disagree with. Unless it's pushed (and pushed past the AARP people who don't want it touched) there won't be changes, and it will remain status quo. And I see it as sufficiently third-rail as not to be implemented by weak partisan leaders sweating the next election.

Ok. My point is the structure of medicare isn't the fundamental problem here. The cost of healthcare is the fundamental problem.
I'm not really sure what your point is about the 'overruns'. The old people aren't paying their own healthcare costs, working people are paying it for them. Does it really matter if we pay it via a payroll tax, or an income tax, or the combination of the two that we currently use?

I use "overruns" as defined in the following manner. The payroll tax set up for M/M (akin to your "premiums") comes in at around 100B a year. The cost of care (as budgeted!) is ~800B a year. So the overrun for this program (which is easy to identify, since it has a documented revenue stream--tax--that's supposed to pay for it and a budgeted expenditure amount) is ~700B, or basically DoD+DHS.

We're looking at across-the-board cuts to solve our deficit problem, yet keeping as a sacred cow the unfunded expenditures of an exponentially-growing entitlement program making up almost half of the deficit.

I don't want to put words in anyone's mouth, but I surmise that that's the model that Denny and others think will happen with SS in the near future. Like I said before, I'm not as pessimistic about SS, but M/M has to be clamped back hard.

 

[barfo]

That's the part I disagree with. Unless it's pushed (and pushed past the AARP people who don't want it touched) there won't be changes, and it will remain status quo. And I see it as sufficiently third-rail as not to be implemented by weak partisan leaders sweating the next election.

Well, we seem to be going back and forth on this. Either there will eventually be a solution or there won't. If there won't, then I guess we'll starve to death after spending all our money on healthcare. I think there will be a solution, however. I don't think it will happen tomorrow. Maybe by 2020.

I use "overruns" as defined in the following manner. The payroll tax set up for M/M (akin to your "premiums") comes in at around 100B a year. The cost of care (as budgeted!) is ~800B a year. So the overrun for this program (which is easy to identify, since it has a documented revenue stream--tax--that's supposed to pay for it and a budgeted expenditure amount) is ~700B, or basically DoD+DHS.

Ok, but that's just semantics. No one actually expects the payroll tax to cover the cost of medicare, the 'overruns' are intentionally paid for from the general fund.

We're looking at across-the-board cuts to solve our deficit problem, yet keeping as a sacred cow the unfunded expenditures of an exponentially-growing entitlement program making up almost half of the deficit.

I don't want to put words in anyone's mouth, but I surmise that that's the model that Denny and others think will happen with SS in the near future. Like I said before, I'm not as pessimistic about SS, but M/M has to be clamped back hard.

No, it doesn't. Healthcare costs have to be clamped back hard. The reason M/M costs are exponential is because healthcare costs are exponential. Even if we got rid of medicare and medicaid entirely, healthcare costs would still be growing exponentially. Killing off medicare doesn't reduce the cost (enough), it just changes who pays.

barfo

 

[barfo]

If people paid their own health care bills, the cost would go way down. As it is now, people are directed to go to specific doctors where their co-pay is accepted.

If people paid out of pocket, and the first doctor quotes them $100 to remove a hangnail, the person can go next door tooth doctor who charges $50.

Competition and free markets are a great thing.

That is one of the two most likely solutions as far as I can see. The other is the opposite solution.

barfo

 

[Denny Crane]

Obama's going to cut payments to doctors by 30% and raise their taxes.

Slick.

 

[maxiep]

Reduce benefits accordingly. That would be a 25% cut.

http://ssa-custhelp.ssa.gov/app/ans...-social-security-benefit-for-a-retired-worker



I suppose the elderly can learn to live on $882.75/month.

Or perhaps people could fucking save something for their retirement. Social Security was never meant to live on. We should stop pretending that's its purpose.

 

[Denny Crane]

Or perhaps people could fucking save something for their retirement. Social Security was never meant to live on. We should stop pretending that's its purpose.

Right. It's purpose is to prevent the elderly from living in poverty. $900/mo is poverty.