Will Democrat candidates talk about retirement crisis?
April 8th, 2008 by Matt KibbeAs the Democrat candidates for president spend more time in Pennsylvania these next couple of weeks, it will be interesting to see what they spend their time talking about.
So far, the campaign has focused quite a bit on identity politics, character, change and experience. Much of the bickering has had nothing to do with real policy questions like taxes, spending or energy.
There seems to be a consensus that the two Democrat candidates are not that far apart on these issues: both would raise taxes, move us toward government health care and impose severe restrictions on carbon emissions.
But voters should not be satisfied with this. What are the candidates going to do about one of the biggest financial problems this country has ever faced? Namely, how will the candidates deal with the looming entitlement crisis that awaits us?
As they travel the state from Pittsburgh to Philadelphia, and chat with concerned citizens about the economy, what specifics will they provide?
Will Barack Obama admit that he wants to raise the cap on the amount of income susceptible to Social Security taxes?
Will Hillary Clinton talk about why she opposes giving younger voters a personal account that they own and control?
It’s up to the voters in Pennsylvania to ask the tough questions of these candidates. Voters should remind these candidates that not only do we face troubling signs in the short term economic picture, but that our long term outlook is frightening. A big part of the problem is that both Clinton and Obama voted against stopping the congressional raid on the Social Security Trust Fund.
Voters in Pennsylvania should not let them get away with doubletalk on this issue. If the candidates are worried about the economic situation now, what are they willing to do to prevent a total collapse of retirement security in the future?
April 8th, 2008 at 12:58 pm
[...] President Matt Kibbe is asking whether the candidates for president are planning to address to coming retirement crisis [...]
April 8th, 2008 at 2:27 pm
I’m surprised this hasn’t become even more of an issue, especially since the highest percentage of their population falls between the ages of 20 - 40.
I’m not going to be effected by this retirement crisis, but its definitely those young people who will feel it most.
Unfortunately, without Republicans campaigning hard in the state, bringing up issues like Social Security and entitlement reform, I think they might just keep this issue under the radar.
April 8th, 2008 at 2:45 pm
How long have we been hearing about the coming “entitlement crisis”? Twenty-five years now? Thirty, maybe?
How many of the dire predictions of the entitlement reformists have come true since they started making them? Zero.
April 8th, 2008 at 3:00 pm
Sickle you are absolutely right. I would hope that it would be this Congress that would be the most pro-active simply in lieu of that fact.
They’ve been hearing about this since they were young adults and I’d hope their parental instincts would kick in when they look at the math that shows there will be no money for their grandchildren.
Eventually they’re going to have to stop passing the buck onto the next generation, because in reality, after awhile there wont even be a buck to pass.
April 8th, 2008 at 3:07 pm
Sickle, do you think it’s an issue that should just sit on the back burner for another 25 - 30 years?
What’s the most unfortunate about all of this is that the people who are going to be affected most, those under 35, aren’t even paying attention to this issue.
I’m guessing the majority haven’t even thought about opening an IRA, much less their social security.
What’s funny to me is that both Obama and Clinton spend all this time talking about why we need universal health care, and how Americans are living longer, but at the same time wont lead the fight to ensure that those of us who live long will have options to ensure we can afford living longer.
However, I guess we could all just hope for a bailout from the Government on this as well. It seems to be governments favorite form of a band-aid these days.
April 8th, 2008 at 3:24 pm
You’d figure the Democrats would like to come up with something to help save one of their social programs.
They all know that if they don’t fix this, this opens up an opportunity for conservatives to come in and provide their own system, except this time it would be market based and hopefully provide more options.
People just need to understand the simple reality that if something isn’t done soon, that by the time 2040 rolls around, we’ll be spending almost 30% of GDP just on paying back interest, social security and Medicaid & Medicare.
If people think we’re experiencing economic difficulties now, imagine how things will be when we’re spending more on that much GDP just to keep these programs and interest payments afloat.
Something needs to be done, we just need to get people in office who are willing to do it - Democrats and Republicans.
April 8th, 2008 at 8:22 pm
No, you guys missed my point. Amazing how ignorant the social security reformers are of their own legacy. Back in the 1980s, social security actually was in a crisis. From 1973 to 1985, Social Security actually did pay out more in benefits than it had coming in, the same problem you guys are saying is going to happen in 2018. The thing is, it already happened, it got fixed (under Reagan, of all people), and now it’s doing better than ever.
Remember what Reagan said: “For too long, too many people dependent on Social Security have been cruelly frightened by individuals seeking political gain through demagoguery and outright falsehood, and this must stop. The future of Social Security is much too important to be used as a political football.”
In 1994, the SS trustees predicted doomsday was coming in 2029. They thought it was coming in just twenty-five years. Well, ten years later, in 2004, the SS trustees made another prediction: SS would go insolvent in 2042, thirty-eight years away! In other words, SS actually got healthier over that decade, according to the SS trustees themselves.
We’ve been hearing about social security going bankrupt for decades, and every new doomsday prediction is just moving the goalposts again.
Social security does need some reform, it’s true. But we should leave it up to the grownups who actually understand what the issues are, not the kiddies and their doomsday tales.
April 8th, 2008 at 9:09 pm
So Sickle, what would you suggest then? It seems that your O.K. with the current system and the prolonging its inevitable demise.
However, the situation that Reagan faced was different, in the 80’s baby boomers weren’t coming of age. Furthermore, in the 1980’s entitlements weren’t taking up as large of a portion of our GDP.
Beyond that, Reagan “saved” Social Security by raising taxes and increasing the retirement age. Is that a solution that you would suggest be taken again?
Let’s remember that Reagan was also in favor of Personal Accounts, but of course political pressure ensured that never would have been possible. However, why not try and push for those again?
Sure, we’ll live longer, but I don’t think irresponsibility by the Congress should be a reason that the younger generation should have to work longer.
You may not think so, Sickle, but there are people who do understand this issue, but may not agree with you. That doesn’t make you right, if anything, it makes you ignorant to differing opinions.
Nonetheless, this is a very worthwhile discussion.
April 9th, 2008 at 3:16 pm
The overall budget won’t be able to withstand the baby boomers’ retirement. If nothing is done, more and more of the budget will go to entitlements, leaving less for other programs that liberals love so much.
The rate of workers to retirees is declining and we can’t just wish this problem away.
April 9th, 2008 at 4:14 pm
The bottom line is that the “problem” has been overblown. Yes, there is going to be a squeeze when the Baby boomers retire. And yes, the rate of workers to retirees is declining. Of course, twenty-five years from now, the opposite will be true. One of America’s largest generations is in middle-and-high school now, and the next generation of retirees is going to be decidedly smaller than the baby boomers. In other words, the “crisis” you guys see coming is only going to be temporary. People who know and write about the “long view” of social security understand this.
That’s why the data I cited above (which no one bothered to challenge) is so important. It shows that the Social Security fearmongers are wrong. (How I can cite and quote the fearmongers and yet be accused of being “ignorant to differing opinions” is pretty bizarre, too.) But there’s more than just this.
The 2007 OASDI Trustees Report states “Social Security’s combined trust funds are projected to allow full payment of scheduled benefits until they become exhausted in 2041.” In order to ensure full benefit payouts for 75 years, the payroll tax would need to be raised 1.95%. That’s not exactly a “crisis” figure. And it may not even be necessary to do so. As we have repeatedly seen, the date at which social security will become “insolvent” has been moved many times in the past twenty years, and is getting later and later in time.
Look, there has been a decades-long attempt by certain groups of Republicans to get rid of social security in favor of private investment. And the story’s always been the same: social security is going bankrupt soon and we need to do something! Peter calls it “one of the biggest financial problems this country has ever faced.” Trouble is, it’s not. Not by a long shot. Unless you twist numbers or omit certain data points, there’s no evidence that we’re facing a huge financial shock from which we could never recover. This is fearmongering, plain and simple.
April 9th, 2008 at 4:17 pm
Oops, sorry I credited Peter with the quote in the above post. It was actually written by Matt Kibbe. I should have realized that, as Peter’s posts include, you know, actual data and he makes reasonable arguments. Kibbe, well, you guys know all about Kibbe…
April 9th, 2008 at 8:46 pm
I don’t think that there are many differences between Obama and Clinton on “real policy questions like taxes, spending or energy.” Yea, “both would raise taxes”…on the rich…you guys always leave that part out of course.
“Will Barack Obama admit that he wants to raise the cap on the amount of income susceptible to Social Security taxes?”
I think he’s already done that several times…another tax increase on the mostly rich IMO.
“Will Hillary Clinton talk about why she opposes giving younger voters a personal account that they own and control?”
Well, if this question is about privatizing Social Security, we’ve already had that national conversation, and you guys lost, again. Doing that puts a huge hole in the funding source for *actual* SS benefits that still need to be paid to people that are retired/retiring. I’m personally in favor of allowing all Americans access to the same set of options that federal employees & Congress currently have access to under the TSP…outside of SS monies though.
Why do you guys always say “Democrat” instead of Democratic BTW? It seems foolish to me.
April 9th, 2008 at 11:19 pm
Sickle, you’re basing your assumptions on estimates. How often are estimates given by the government actually met?
Look at the Social Security shortfalls year after year, the spending is always more than they predicted in the previous year.
What are your thoughts on the idea of spending over 30% of GDP just on entitlement programs? If those prospects aren’t a crisis, then I don’t know what it is.
Finally, here is the Summary of that OASDI Report You Cite, pay attention to the conclusion:
“Social Security
The annual cost of Social Security benefits represented 4.3 percent of Gross Domestic Product (GDP) in 2007 and is projected to increase to 6.1 percent of GDP in 2035, and then decline to 5.8 percent of GDP by 2048 and remain at that level. The projected 75-year actuarial deficit in the combined Old-Age and Survivors and Disability Insurance (OASDI) Trust Fund is 1.70 percent of taxable payroll ($4.3 trillion in present value terms), down from 1.95 percent projected in last year’s report. This decrease is due primarily to changes in projection methods. Although the combined OASDI program passes our short-range test of financial adequacy, the Disability Insurance Trust Fund does not; in addition, OASDI continues to fail our long-range test of close actuarial balance by a wide margin. Projected OASDI tax income will begin to fall short of outlays in 2017, and will be sufficient to finance only 78 percent of scheduled annual benefits in 2041, after the combined OASDI Trust Fund is projected to be exhausted.
Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 14 percent in payroll tax revenues (from 12.4 percent to 14.1 percent) or an immediate reduction in benefits of 12 percent or some combination of the two. Ensuring that the system is solvent on a sustainable basis beyond the next 75 years would require larger changes, because an aging population and increasing longevity cause the projected current-law OASDI cash-flow deficits to be substantially larger after the 75-year projection period than they are on average during the period.
The projected actuarial deficit in the OASDI Trust Fund over the infinite future is 3.2 percent of taxable payroll (1.1 percent of GDP), or $13.6 trillion in present value terms. The system could be brought into actuarial balance over this time horizon with an immediate increase in payroll tax revenues of 26 percent (from 12.4 percent to 15.6 percent) or an immediate reduction in benefits of 20 percent, or some combination of the two.
Conclusion
The financial difficulties facing Social Security and Medicare pose enormous challenges. The sooner these challenges are addressed, the more varied and less disruptive their solutions can be. We urge the public to engage in informed discussion and policymakers to think creatively about the changing needs and preferences of working and retired Americans. A national conversation and timely political action are essential to ensure that Social Security and Medicare continue to play a critical role in the lives of all Americans.”
—
So Sickle, what’s so wrong about taking their recommendation and addressing these challenges?
We’re not fear mongers, we’re realists.
April 9th, 2008 at 11:20 pm
Link for the Trustees Report Summary:
http://www.ssa.gov/OACT/TRSUM/trsummary.html
April 9th, 2008 at 11:29 pm
“Why do you guys always say “Democrat” instead of Democratic BTW? It seems foolish to me.”
– Well, Democrat is a noun. Democratic is an adjective.
You don’t hear anyone saying talking about what the “Democratics” are doing, do you?
April 10th, 2008 at 12:09 pm
The key quote from the conclusion is “and Medicare.” Medicare actually is in crisis, in no small part because of the prescription drug benefit. I was talking about Social Security. Medicare is a very different scenario with very different problems, and I’d be happy to discuss that as well.
My problem with the fearmongers isn’t that they really want to “fix” social security. They want to get rid of it.
BTW you don’t seem to be reading my posts very well. I say very specifically that these things are difficult to predict. You also challenge my use of government data (asking “how often” it’s actually correct) and then use the exact same data to make your own points. That’s what fearmongers do, not “realists.”
You also don’t know the history of that document, and that the original conclusions were scrubbed by the Bush administration, which forced the trustees to write conclusions more in line with the Administration’s position on social security rather than what the trustees actually believed. But I suppose that doesn’t matter to a “realist” like you.
What do you propose to do about it? Besides eliminating it in favor of “private accounts,” that is.
I suppose, also, you have no trouble with how much money we’re spending in Iraq, either.
April 10th, 2008 at 5:23 pm
Yea, as in Democratic candidates…the adjective that describes the noun…is that really too hard a concept to grasp??
The concept of how to fix SS isn’t really that difficult to grasp. It can easily be done by raising the cap on SS taxes (the cap that primarily helps out the rich right now) and/or gradually raising the retirement age as people naturally live longer lives. “End of the world” avoided, period.
I agree that fixing Medicare is a more difficult problem. The way that we fund health care costs in this country is complete & totally ridiculous…just ask any health care provider. We need comprehensive health care reform IMO in order to fix things.
April 10th, 2008 at 8:15 pm
Sickle, I definitely have a problem with the spending in Iraq, I’m sure that we’re probably on the same page (or similar) when it comes to that issue.
I’m not necessarily saying that we need to have private accounts either, but what I am saying is that this is a issue that I think needs to be looked at more closely in Congress, on both sides, and see if there is a solution that would make both sides happy.
My guess is that the best solution for Social Security hasn’t even been thought of yet, and without bringing these issues to the floor, with both sides willing to listen and discuss ideas, I don’t know what progress can/will be made.
April 10th, 2008 at 10:59 pm
On that, we can wholeheartedly agree!