Saturday, June 18, 2011

Cut Social Security? Of Course

While it may seem earth-shaking that the AARP has softened its long-held opposition - and congressional lobbying stranglehold - on cuts to Social Security benefits, it shouldn't be. In fact, it's sad that such rigidity ever existed in the first place. Social Security was, is, and always should be a simple safety net to keep retired people/elderly from slipping into poverty. A social insurance system against abject poverty is how it was sold, and how it should be treated. For that reason, cuts are in order, and that should have begun with "means-testing" years ago. Certainly, there could be some incentives against drawing early and often from the fund, and Americans should do all they can to make sure that the government payment is not their primary source of income in retirement. At the same time, it must remain, especially as wages lose ground for the lower classes. It has to be there as a safety net - but it should change.

7 comments:

abellia said...

First of all, it is means-tested -- you pay taxes on your social security income depending on your other income.

Second, how do you think people are going to live when they retire? Pensions are gone for most. The stock market seems an unlikely source of future income. Sure, people who can should save, but many live from paycheck to paycheck, and have no money for saving.

There is simply no reason to make seniors without money live like beggars. What are you suggesting?

mazenko said...

Benefit pay-outs should be means tested. And taxes are currently capped.

I understand your concerns about pensions. They are going fast and are replaced by defined contribution 401ks and IRAs. Thus, all workers need to do two things. Collectively bargain for better benefits and start saving. Saving means living below your means to save for later. And labor must rise again because corporations are awash in cash even as they eliminate benefits. The boons go to stockholders instead.

People who have "no" or little money to save are precisely the ones who should draw the most from Social Security. That's what means testing "means." Benefits should keep people out of poverty and no one should "live like beggars." But Social Security cannot be the primary source of income for a middle class retirement. That was never the point.

abellia said...

You made an assertion that Social Security must change without saying why. I'm not sure that I understand your logic.

mazenko said...

Government revenue cannot continue to fund 80+% of the retirement for Americans, especially those who have sufficient funds to support themselves. Regular cost of living increases for all recipients for the last forty years has led to a dependence on a social insurance system that provides far more in benefits for many Americans than they contributed. It's a social insurance program to keep seniors out of poverty - not fully fund a middle class lifestyle. The savings rate for Americans is miserable, and it may be because they have not had to save for their own retirement, expecting Social Security to support them.

abellia said...

Quite simply, you are incorrect.

The government can afford to pay for the retirement of Americans if it so chooses. You fail to understand the reality of money creation. The US government is the entity responsible for the net creation of money, and it can (and should) spend the money that it creates on needs for its people.

Whether more is paid out in benefit than is contributed is immaterial. The government can (and does) pay any amount to anyone it chooses. If you are going to argue that the government shouldn't support people in their retirement, then fine, but you can't win the argument based on money or affordability.

The US government is not a household. It has the very powerful privilege of creating money. This privilege comes with great responsibility but we the people need not be hostage to bondholders for our prosperity. We may be limited by the availability of real resources (food, water, oil, etc.), but we can never be limited by the availability of money unless we so choose.

Why, should retired Americans not live a middle-class lifestyle (which, really, ain't all that much), if the resources are available to make such a lifestyle possible? Because they weren't great savers? Because they didn't work hard enough? Because they aren't moral? Because they didn't earn enough? Because they aren't smart enough?

You trying to equate a moral position (that people don't deserve a decent retirement) with an economic position (that we can't afford to give people a decent position). The first position is mean-spirited. The second is incorrect. They certainly aren't equivalent.

P.S. - The savings rate is lousy, to a great extent, because people don't have money to save.

mazenko said...

You're arguing by ignoring our political system and the fact that half the country disagrees with you. We cannot and will not create anything on the scale of the safety net you envision based on the current revenues of the government. It's a non-starter.

I'm arguing, realistically, that the government shouldn't - and can't - "fully" support Americans in their retirement. They should - and can - support a supplemental insurance to keep people above poverty. And, ultimately, it's far more important to fund Medicare more than Social Security.

Beyond that, your comments about "creating money" seem naive. Printing money doesn't create money - it creates inflation. Money - off the gold standard - must be backed by confidence. And you know there is not as much of that as there used to be or needs to be.

The resources you are talking about are not available - at least not for the government to access. Yes, companies are sitting on trillions in liquid assets. But, no, the government can't simply tax and take more of that and use it to fund retirements. Our economic system and political system was not intended and has never operated that way.

abellia said...

I still don't get your point, then.

You're saying that because someone disagrees with me that I'm wrong or that I might not have an idea worth pursuing? One not worth discussing? The fact that you (and many other people) _believe_ that we can't afford to continue providing Social Security doesn't make it so.

Suppose that the economy keeps going the way that it is, and that wealth continues to accumulate in the hands of the few and people end up at the age of retirement with no savings. In essence, you are saying that we should do nothing, based on what, the idea that if we provide for people that there might be inflation?

My ideas about printing money aren't naive, though your response is natural based on what you have been taught and what seems like common sense. Do some more reading and you might reach a different conclusion. There is little evidence that creating money leads to inflation when demand is slack.

You say: "But, no, the government can't simply tax and take more of that and use it to fund retirements." Why do you say this? The government can do exactly that if it so chooses. You have a preconceived notion of how a market economy should work, which is based on...what? Take a look at our history and see what happened with our society under different tax regimes over time and you might come to a different conclusion about the right/wrong of progressive taxation.

Best,