Ken Blackwell posted on his Facebook fan page a column by his friend, and the Republican Senator from Utah, Mike Lee. Senator Lee wants a balanced-budget amendment, and five other Senators on the Judiciary Committee agree.
This week, 58 senators – including all 47 Republicans, 10 Democrats and Sen. Joe Lieberman, an independent – recognized this urgent need and expressed support for a balanced-budget requirement. I have put forward a proposal that would require a balanced budget every fiscal year; limit federal spending to 18 percent of gross domestic product; and require a two-thirds vote in Congress to increase taxes, raise the debt limit or run a specific deficit.
I made the comment, “We never would have been able to have supply-side economics during Reagan if we had a balanced-budget amendment.” Nobody responded.
Unfortunately, the nation’s debt has sky-rocketed to levels high enough to be mistaken for a Ron Paul supporter at a Phish concert (I kid). Now we are at the point where even the people who say, “deficits don’t matter” are thinking, “holy hell, this deficit is out of control.” In fairness to Vice President Cheney, he was saying that deficits don’t matter in the short-term because he was responding to the naysayers from all sides of the aisle that have never been fond of supply-side economics. It might behoove us to remember that then-Chief of Staff Dick Cheney was on the ground floor of the supply-side revolution when, according to legend, Arthur Laffer drew an inverted U-shaped curve on a napkin at lunch. The Laffer Curve was used to articulate how lower tax rates might produce higher tax revenues.
In the 1970s and early-1980s it was a party of the Right Fight Club (the rule is to never speak of Party of the Right Fight Club) with the supply-siders arguing that the deficit will work itself out with the tax cuts (as it started to do) while the old guard was arguing that balancing the budget was the way to go, hands down. Irving Kristol and the Neoconservatives argued that the traditional right’s fetish with balancing the budget meant a deep-recession in the 1980s, and a pessimistic vision that would even make John Derbyshire, the king of conservative pessimism, balk.
Our current condition is one that should cause considerable alarm. However, I am not of the opinion that a balanced budget amendment is the solution to our woes. Ronald Reagan’s magic would not have been exercised had a balanced budget amendment been instituted (well, not his economic magic, if that is your thing) while he was in office. Balancing the budget is a good goal, and a deficit as large as the one we are facing is potentially devastating to our country. Yet we survived as a Republic without a balanced budget myriad times before, without considerable harm to ourselves. There may be times where we need to do so again, and I cannot say that I have enough faith in 2/3rds of the legislator being able to agree on a time when the government is allowed to carry such a debt (as would be the rule, according to Senator Lee). I know the Senator uses the time following the 9/11 attacks as anecdotal evidence of the Congress coming together, but I think it is far fetched to believe that Congress could do so barring another horrendous attack, which will hopefully never happen again.
Unemployment is the new-old hot button issue that is all over the news again since we finally corked the oil spill in the Gulf for the time being. This is also a topic that affects far more Americans directly, so naturally, it is back on the front burner before Congress takes their August recess. Today it is looking like we are going to get the extension passed without any consideration for how it will be paid for, or what it will even accomplish.
There is one talking point I would like clarified by our friends on the left: has the stimulus been successful, or are we in a dire situation? We cannot have it both ways, and yet, President Obama and his cabinet would like you to believe that the stimulus was successful while at the same time lecturing the Republicans on the reasonableness of passing the unemployment extension because we are in a crisis (and God knows, this Administration won’t let any crisis go to waste!). You can’t have your cake and eat it too, although, we are supposed to eat ours.
So which is it? Those of us with a more Conservative (or rugged individualism) proclivity are likely to say, “a year for unemployment benefits is ample time! Suck it up and get a job!” Those of us who may be more mindful of taking care of our fellow man (or, at least forcing others to do so through government so we don’t have to do the dirty work ourselves) might argue, “there are no jobs, what are they supposed to do?”
Taking only one side of this issue leaves one without a complete understanding of our present crisis’ gestalt. There are certainly a number of situations where people have been using unemployment benefits to subsidize their sloth; while one cannot take away from the fact that some areas of a state simply have no infrastructure for job growth. You cannot deny that the job situation has gotten worse, the New York Times has an interactive map that shows the growing unemployment rates state by state and how they climbed over time. Furthermore, the Bureau of Labor Statistics does not show a particularly peachy picture of jobs to come, considering at the present moment there are five Americans competing for every one job.
I know it won’t happen, but there are two things I would like to see done if Congress and the President are to pass the Emergency Unemployment Benefits Extension:
First, I cannot imagine why we can’t find a way to pay for it. Emergency unemployment benefits are not paid by the employer during the worker’s tenure, it comes straight out of thin air thanks to the Federal government’s Nietzschean ability to posit something from nothing; in this case, create money and with it, value. The Federal government sets aside a block grant to the state, whose Department of Labor hands out the benefits accordingly. Our Federal deficit stands at a paltry $1.6 Trillion dollars this year, as projected by the administration. The Unemployment bill that is set to pass today will add yet another $36 Billion to our gluttonous budget, and all the Republicans and a few Blue-Dogs ask for is a means to pay for it… part of it? Half of it? Any of it? Somebody please go to YouCut and find one of those programs that Representative Cantor’s office has bulls-eyed and we could have this extension paid for.
Secondly, I’ve already hinted to it earlier in the piece, but the Wall Street Journal has an article about stimulating unemployment where a crazy correlation was made: “A 2006 NBER study by Raj Chetty of UC Berkeley on a related subject begins, ‘It is well known that unemployment benefits raise unemployment durations.'” Imagine that: incentivizing people to not get jobs, and then telling them “well instead of getting a job call your Congressman and ask him or her to extend unemployment benefits” would lead people to strive for nothing. That’s as stupid as setting time-tables in a war. Nevertheless, if we are going to do this last emergency extension, why the hell would we not get something out of it in return? Why not ask of people (and I say ask now, but rather, I’d be much more willing to demand it as part of the prerequisite for receiving such benefits) to help out their community? I would make it mandatory for people to volunteer at least 20 hours of their week towards their community, state or nation in exchange for their free benefits (because we must remember, that they did not pay into this unemployment pool). This would allow people to create at least some value from their benefits outside of paying for the bare necessities that had to be paid for already. Giving money away doesn’t add value; but giving money to people in exchange for something does.
When I mentioned this on my Twitter account (follow me, rcaster – we are not afraid of shameless self promotion here) I was accosted by some #P2 fellow, which means he is a “Progressive” in Twitter lexicon. He claimed my idea was unfair because “the unemployed are not criminals!” I would have re-posted the conversation for you, but BlackJedi”somethingorother” was embarrassed enough to just erase his entire end of the conversation, and my tweets went as well (I guess that means I was blocked).
Imagine that, doing something for your community is an activity that should be relegated to those people who are being punished. Perhaps this is the truth about the soul of our communities, and why liberal areas tend to lack it. Doing community service is a punishment? Well I would rather bestow benefits upon people willing to contribute to their community, than give it to those who do not. And besides, who can take away the fact that people will feel better once they get into a productive groove; perhaps they will put their rear-into-gear afterward and go look for that next job with some new skills; perhaps they won’t sit around and feel sorry for themselves, but feel a sense of accomplishment for having achieved something, and that may just be the push they need to go out the door and apply. I used to get into arguments with my high school history teacher, Mr. Lubenetski, about FDR’s New Deal and whether or not it ended the Great Depression. He would say to me, looking exactly like Teddy Roosevelt (he did, red hair, mustache, glasses and all) and explode with his booming voice, “it may not have brought people all the way up to their feet, but it kept them off their knees!” If we are going to pay people who lost work, I say we put them back to work, because you may not be able to measure the benefit of doing so, but a man’s pride can carry him further than his pouting ever will.
(You can grab the audio of the interview here via “Right-click… Save as…”. Or hover your mouse over the speaker icon to listen to the interview as streaming audio. -nick)
Representative Michele Bachmann (R-MN) was kind enough to give thelobbyist.net a few minutes of her time last week to talk about the national debt and how if Congress trusts the American people, the so-called Debt-Paying Generation (those young Americans whose futures will be crushed by the tsunami of debt the nation faces) will be able to live the American Dream and not be forced to live a life of less quality than their parents.
Representative Bachmann is the Republican representative of the 6th District of Minnesota. She has represented her constituents since 2007, and has been a conservative leader in everything from government transparency to health care reform to reversing course on the size and scope of the federal government.
Dustin Siggins: So you and I met, briefly, Representative, when you were on the Laura Ingraham Show back in March…
Michele Bachmann: Mm-hm, isn’t she great?
DS: Oh she’s awesome; she’s a riot.
MB: She is such a talent.
DS: I really liked when she was on Bill O’Reilly a couple of weeks ago, and they were talking about blaming Napolitano- I don’t know if you saw it?
MB: I didn’t.
DS: They were debating and Bill O’Reilly decided that he wasn’t going to blame Napolitano for the BP response for the oil spill. And he was trying to play the middle road, and so Ingraham just went crazy on him and then picked up his cup of water from behind where he was sitting and went, “He is drinking the Kool-Aid!”
MB: Oh! (laughter) She is so creative. Well you know the great thing is, he has a tremendous audience, and a lot of interests, and he tries very hard, I think…I think he is really trying to be fair and balanced and trying to get both sides or both perspectives. And obviously he has been very successful for a long period of time. But people really do love Laura and I think that her stock is only going to continue to soar.
DS: Oh I have to agree with you. There’s no way, and especially with what’s going on here in DC, there’s no way any conservative’s stock is going to tumble in the next two to four years.
DS: Um, so I was talking to Dave, whom I met a couple of weeks ago, and I am currently at the Heritage Foundation working on the Debt Paying Generation project…
MB: Oh good so you’re working with Bill Beach!
DS: Exactly. According to Mr. Beach you are a ‘huge fan.’
MB: I am a huge fan! This is the issue, I told Bill, that I really want to hit on because I think that young people’s ears are starting to perk up on their future, what their future is going to be like. And I think that it’s a tremendous shock for a lot of young people to find out that their standard of living could be demonstrably lowered beyond what their parents had. And even though people may hear that in the abstract, especially for younger people, it’s hard to believe that it could be true or that it could be translated into a diminishing reality going forward, and I think it’s important for us to make that case and I think it will be easier, then, for us to talk about positive solutions to be able to dig our way out so that we can have a way forward. Because, there is, it isn’t something where we have to give up and realize that we have to consign ourselves, especially the young debt-paying generation, to a future of less. We can have a better future, but what it means is people in my generation are going to have to make alterations as well. We can’t let the government try to be the answer to every problem.
DS: Your generation, 31,32?
MB: That’s right. (laughter) No actually I love getting older, to be honest with you. I’m 54 years old and I told my husband that I love getting older so it doesn’t bother me at all.
DS: Interesting. Well I’m 24 and look 20, or 19 and 18; so I wouldn’t mind looking a little older, but-
MB: Ahh, well I’m sure, well your…It’ll come sooner than what you think.
DS: Well hopefully- I think the grey hair would help make me look distinguished.
MB: Yes, undoubtedly. Get a pair of glasses- that will help.
DS: I’ve had glasses since I was one and a half and it hasn’t helped (laughter) Well anyway, a little side-tracked. Regarding the debt paying of this generation, I mean obviously the democrats aren’t going to pass a budget in the house. Rep. Hoyer just stated that yesterday, correct?”
MB: That’s right.
DS: Why are they not passing a budget? Are they scared that American will look and say “oh wow, they made it worse than the Republicans did?”
MB: Well, it’s a dereliction of duty and it’s also an admission that they can’t govern. They had made the comment about Republicans passing budgets and I think now what is good for the goose is good for the gander. I think they’re going to have to live by their own statements. If they make an admission that they can’t pass a budget when they own the white house, when they own the senate, and when they own the house, they are making an admission that they cant govern. And frankly, they are digging a hole for themselves…that they hole that they dug for themselves is embarrassing. The debt and the taxing…the taxes that result from this out of control debt will be one that will mean fewer jobs will be created in the private sector. You have to have a growth economy to create jobs and we saw that there were some 40,000 jobs that were created last month, that is not going to get us anywhere. Especially for the debt paying generation, there is certainly more than 41,000 people who graduated from college last year. Those recent college graduates and those individuals that have left high school and chose not to go onto college, they are looking for employment; and unfortunately, under President Obama’s policies and Speaker Pelosi’s policies…their policies are not inducing entrepreneurs to grow and create jobs. Without private job creation, there can be no healthy public sector either. And so, they are making some very foolish decisions that have long term consequences and they bode ill for the debt paying generation.”
DS: The Center for American Progress did a study- well I guess they called it an analysis, I wouldn’t call it an analysis myself- but they cited several polls showing that the most popular thing for America is to cut the budget of Foreign Aid which is two percent of the budget that President Obama proposed and yet older Americans seem to like Social Security and seem to like Medicare, how do we convince people in my age bracket that we have to get rid of these programs, or at least reform them severely, as President Bush tried to do in 2005. How do we convince people this is best- that they’re going to have to suffer a little bit for the long-term benefit of the country?
MB: Well, I think the best way we can do that is to make the case to people that these programs are going to collapse of their own accord- no one will benefit from that. We don’t want to see senior citizens put in a situation where they’re dependent on either Medicare or Social Security, and one day when they go to their mailbox, they open it up, and there’s no check there because these programs have collapsed because we’re actually bankrupt. That’s why we need to do the responsible thing and make these programs work for the people they were intended to benefit. And we can do that- we could do that sitting down with a magnifying glass and a pencil, and we could make adjustments so that we can actually save these programs for the people who really, truly need them and who truly depend on them, and then for the Debt-Paying Generation we want to make sure going forward that we have alternatives for them so that they can have a secure retirement and deal with health care in a more rational level.
Government takeover of health care has been the Obama way and the Obama solution, and it isn’t that I think President Obama is an evil, negative person- I think he just simply, simply has it wrong. I think he’s simply wrong about the government takeover of health care, and a person can’t point to one jurisdiction or area where the government takeover of health care has actually improved healthcare for people, or made it more inexpensive, because adding the price of bureaucracy to a product doesn’t make a product cheaper, it makes it more expensive and more difficult to obtain- and I think Americans intuitively know that will be our future going forward.
This is why I think, when it comes to health care, which is a new entitlement program, that’s why I think we have a real, and realistic, chance, of actually repealing the bill, and I was the first Member of Congress to issue a full-scale repeal of the bill, and ObamaCare, and it is very popular, as a measure, and we’re looking at about 2/3 of the American people hoping Congress will have a repeal. If you have 2/3 of the American people, wanting to repeal the president’s signature achievement over the last 18 months-perhaps the signature achievement of whatever length of time is his presidency- I think that we will be able to make the case on a number of areas of government overreach.
DS: Well, I guess my last question- and you talked about what the Democrats have done badly, and I agree with you- but I came of age during the Bush years, and Republicans obviously didn’t do so well between 2001 and 2006 with the Medicare Part D, and they jumped the cost of government, the size of government, up. How do you convince the American people that Republicans are trustworthy? Not you individually, of course [DS: Rep. Bachmann was first elected in 2006, and served her first term starting in 2007], but how, I mean, the Republican Party as a whole. This year, yes, it’s anti-incumbent, but I don’t think, personally, that it’s so much pro-Republican.
MB: Oh, I think you’re accurate about that. I think people are reacting negatively to what they have observed from the Pelosi/Reid/Obama agenda. People intuitively understand that they can’t live with excessive spending that creates unsustainable levels of debt- if they can’t live like that in their own personal lives or in their businesses, they certainly know that government doesn’t have a magic formula that defies economic reality. So people are rejecting the Obama agenda. People want to know, “Republicans, if we give you the gavel, can we trust you? Will you be responsible? Do you have a plan to get us out of this hole?” And that’s up to Republicans, now, to make that message. I think one of the best things we could do, is let the American people know- number one- if you put us in office, we will vote to full-scale repeal ObamaCare. Root and branch, we will pull it out, and we will repeal that measure. I think that’s something that is a very saleable proposition. I also think it’s saleable to tell the American people that we will pass a budget- a balanced budget- and I think that’s what people want us to do, is to pass a balanced budget, and then to show the American people, first of all, that the tremendous straits that we’re in, financially, going forward, once people know the difficulties and the reality of the problem that we’re in right now, I think they’ll be more amenable to the solutions that we can propose to put our financial house on a- in the right order.
DS: I hope so, because I’d like to see this country be as good for me as it was for my parents, so-
MB: Exactly. I will tell you, anywhere I go to speak, I ask that question. “Do you believe you live better than your parents?” Almost everyone in the audience puts their hand up. I ask them, “do you think your children will live better than you financially?” Virtually no one puts their hands up. I doubt in the last 234 years, if you ask that question of any generation, that they would think that their children would not be better off than they are; I just don’t think that you would have gotten that response. That’s really what is frightening today, because we’ve always been a country that’s been about forward- looking people, and growth. And this is one of the first times when Americans look into the future, and they see diminished way of life, and they see decline.
The beauty of America, is that we get to choose. We get to choose decline, or we get to choose if we want growth. I think that if you put the question to a referendum to the American people, they will choose growth. And if that means pinching back on a social safety-net, I think that we’ll have buy-in from people, because, ultimately people do want better for their children and for the next generation. Even if people are childless, they want the next generation to be able to do well. In fact, I think it’s simply the matter of having to make the case, you know just like you’ll see on Glenn Beck with his chalkboard, he makes a compelling case if he’s describing an issue. And I think that’s something that Republicans will have to do, so to speak, have our own kind of a chalkboard where we make the case to the American people of two futures for America: one where we go down the road of the Pelosi-Reid Agenda that they have taken us down, which the American people are thoroughly rejecting, but take it beyond the year 2010…play it out to 2020, and play it out to what America will look like when we are in the same economic bind that Greece is in today. Economists like Larry Lindsey tell us that we are looking within a ten-year window of having that type of economic decline. That truly is not a road that people would choose to go down, and that’s what gives me great hope and great excitement because even people who are senior citizens, they don’t want to bequeath a future grounded in decline. I know that sounds like an oxymoron; but senior citizens don’t want to see that for their own children and grand-children. And that’s what gives me hope going forward- because we really are a nation of very bright people, who make good choices. We could trust the American peoples’ choice, we just need to give them the truth and put all facts on the table, and then I have every hope and every reason to believe that people will make choices for their own gain and their own benefit because no one wants to succeed… I mean, no one wants to fail, everyone wants to succeed.
DS: Well, Representative Bachmann, I think I’ve run out of time. I really appreciate what you’ve said and hopefully we’ll see you doing a lot of that, especially if Republicans take back the House.
MB: Well, and we’ll do this again soon, I’d love to do this again!
DS: Alright, thank you very much. Take care!
MB: Alright, bye bye.
[Note: I would like to thank RJ; Will; and Nick for helping transcribe the interview. This would not have gotten posted without their help. DS]
I was recently able to interview James Agresti, the founder of JustFacts.com, about the dark future facing Social Security.
The audio can be heard here. The transcript is forthcoming, and will be up ASAP.
Update: The transcript has been added below.
On May 26, 2010, Rep. Anthony Weiner (D-N.Y.) wrote an op-ed in Politico defending Social Security’s solvency, and refuting many concerns cited by critics. Intrigued, I contacted the Congressman’s press secretary by phone the following day to interview the Congressman about his assertions, and to contrast them with what I have heard and read from critics of Social Security. His press secretary and I exchanged several phone calls, and I sent two follow-up e-mails regarding an interview. After receiving no response, I moved forward.
I decided to interview James Agresti, the founder of the non-profit think tank Just Facts, about the very dark future Social Security faces. I intended to write a full article, as opposed to a simple transcript, but without the Congressman’s perspective and given the critical information James provided, I decided to stick with a simple transcript. The audio of the interview can be heard here.
(Full disclosure: I met James at a Leadership Institute seminar last April, and we have kept in touch since. I am a regular caller on his Tuesday evening radio show, Just Facts Radio.)
Dustin Siggins: Anthony Weiner, the Rep. from New York, wrote a piece supporting Social Security as a vital part of retirement for Americans. He said the program was in very little to no trouble, and was perfectly solvent. This was a couple of weeks ago, in a Friday’s [Correction: The op-ed was written on a Wednesday] Politico. I called the Congressman’s office twice, I traded e-mails with his Press Secretary- they did not get back to me. So, I’m writing the article, because I’m past my deadline.
James Agresti: That is correct.
DS: I just have a few questions, I guess based upon the assertions the Congressman made in his Politico column. The first is that he said Social Security will be solvent for many, many years. My question to you is, are seniors receiving at least an equal payback? They’re putting 6.2 percent, I believe, of their income, plus the 6.2 percent from their employer, into their retirement- essentially, through Social Security. Are they receiving an equal number, an equal amount, back?
JA: Well, that depends on what seniors you are talking about. Under the current system, some will get absolutely nothing back, while others will get back far more than they put in. The way the system is currently structured- let’s take an example of someone who dies right when they are ready to receive benefits, let’s just say 65 years old. They have no surviving heirs, no surviving children—I shouldn’t say heirs, I should say they have no surviving minor children. They may be adults, and may be self-sufficient, they’re not dependent on him- that person will have worked their entire life, paid into the system—and it is 6.2 percent, but that money from the employer ultimately comes from the employee’s paychecks. The Obama administration has been clear about that in other contexts, such as the health care bill, where they say, “Hey, if your employer’s spending less on insurance, on health insurance, on health benefits, that’s more money in your paycheck; that’s more money they can give to you.” So that money, even though they say the employer is paying it, you’re paying it, the employee’s paying it. The market rate for a person, when they calculate how much it’s going to cost to have an employee, they bill that into it. I know that from running a small non-profit organization. It’s built into the paycheck.
Now for seniors as a whole, which is often the way people look at this, they look at it as a generation, not as an individual- which, by the way, under the personal ownership that have been put forward, that would not be the case. If you put that money in it would be your property, and you could will it to whoever you wanted, whether that be a child or a charity, whoever that may be, your friend. But if you look at seniors as a whole, I’ve looked at such performing rate of return calculations, in other words, when you look at a generation- what the generation put in, and what they’ll get out- it’s a very difficult calculation because of the numerous tax increases for Social Security over the years, plus the cost-of-living adjustments, the earned-income tax credit, the nature of the tax-to-benefit ratio, make this a very complicated calculation, and thus I haven’t done it. But another important variable in all of this is what constitutes a reasonable rate of return? If these current retirees had taken their money that was put into Social Security and places this into moderately conservative investments over their working years, I would estimate they would get a lot more money back. However, if they simply put the money into bank accounts or CDs, the opposite may be true.
The point I usually make when explaining the Social Security system to retirees is the fact that the government has already spent all of the money they have paid into the system. They say, “Well, I’m due this money back, I paid it into the system.” Yeah, you paid it in, but it’s gone! Okay, either they spent it- either they paid it into the system and it was spent by the Social Security system, or the Social Security Administration [SSA] took that money, loaned it to the federal government, who then spent it. But the money’s gone, so all the money the current retirees are receiving is coming directly from the pockets of younger workers, and often these younger workers have far less money than a retiree they’re forced to support, and furthermore these workers, these current workers- guys like you, young guys like you- cannot possibly receive your full Social Security benefits unless workers younger than you are forced to pay even more in taxes. Far greater than these people put in, and far greater than you’ve put in.
DS: So, essentially, what you’re saying is it’s a vicious cycle of increasing poverty and increasingly lost revenue for each continuous worker.
JA: Not necessarily poverty, and not necessarily ongoing. The projections of the Social Security system show it eventually stabilizing, but we’ll get into that a little bit down the road. The thing people have to realize is Weiner says the program is solvent- first of all, it’s only solvent because of the massive tax increases of the past. At the outset of this program, the federal government published an informational pamphlet that said the following in regard to taxes- I’m quoting here- “And finally, beginning in 1949, 12 years from now, you and your employer will each pay three cents on each dollar you earn, up to three thousand dollars a year. That is the most you will ever pay.” Okay? This is a direct quote- this is a pamphlet put out by the federal government, and after adjusting for inflation, the maximum tax collection, the most you will ever pay, right now, is more than seven times this amount. So they have just basically- well, I don’t want to say “lie,” because that implies that they knew this would happen, but it seems pretty obvious to me, looking back with hindsight, which I guess isn’t a fair comparison, that there was no way this was going to hold out the way they projected it would, or promised it would.
DS: Okay. Well, related to that, the 2008 SSA report to Congress stated that-
JA: Dustin, I’m sorry for interrupting, I just want to make one more point on this. My fault- I told you to move on, and I wasn’t ready. We did some calculations here at Just Facts, and what we found is that if extra money had not been added to the Social Security program by increasing the tax rate above the levels specified in the original Social Security Act, the system would have been unable to pay full benefits since about 1980- or, the word that is used is “insolvent,” I’m not sure that is a proper word, but it wouldn’t have been able to pay the promised benefits. So I just wanted to add that in.
DS: The 2008 SSA report to Congress matches the Congressman’s claim in his column, which is that they will be able to pay 78, or 73, percent of promised benefits in 2080. [Correction: The actual quote from Rep. Weiner’s column was “Without any change, Social Security could cover three-quarters of benefits until 2083 — when people born today will be 73.”] That is what he claimed, and that is what the report said in 2008. But that, obviously, was before the crash, before the major disaster that happened in the economy in the last two years. Have you seen an updated report on whether those numbers are going to be changed?
JA: An updated report was due out earlier in 2010. The Obama administration delayed it until June 30. That is when the 2010 report will come out, which will contain information on Fiscal Year 2009, which runs from October 2008 until September 2009. That report is not out yet.
DS: All right. I was just curious. I guess I’ll just have to follow back up with you in about a month. The last question—could you just clarify your statement from earlier, about the program eventually being solvent? How would that happen, given that we are going to have 10,000 people a day retire for the next 20 years, and they are going to increasingly live longer, and use more money?
JA: Give me a moment here- I want to pull up the exact numbers.
DS: Sure, sure.
JA: If you look at the ratio of people paying taxes to the people receiving benefits, it has gone from 41.9 workers in 1945 paying into the system to one person receiving benefits. By 1970, that had dropped to 3.7 to one; in 2000, 3.4 to one; in 2007 3.3 to one; around 2030 it’s going to drop to 2.2 to one; and 2070 2.1 to one. According to projections.
Now, let me add that there are reasons to be suspicious of these projections. First of all, their track record from the past is not that great. Secondly, even- and I’m talking long-term track record—their short-term predictions have aroused my suspicions. Let me give you an example: in 2001, the Social Security Administration projected the trust fund balance would reach $2.54 trillion by the end of 2007. It actually reached $2.24 trillion- 13 percent lower than projected. Yet, if you compare the projections from the 2001 report and the 2008 report, they’re more optimistic in the 2008 report than in the 2001 report. So the financial condition of the Social Security program is worse than they projected, from sitting back from eight years before, but yet they are saying it’s going to be better in the future. All right? So in 2001 they were saying, by the time – let me see here- the expected annual deficit in 2075, we’d have to increase Social Security taxes by about 49 percent to cover that deficit. In 2008, they said we’ll only have to increase taxes by 32 percent.
When you dig deep into those reports, you see that the actuarial calculations- in other words, based upon the demographics; how many people are going to be working; how many people are going to be living; life expectancy- there are a whole bunch of variables that build into that- they change those numbers and say, “Well, we’re going to have more immigration, so there will be more people paying into the system.” But what these calculations don’t show is what will it then cost to pay those people when they retire? Does that make sense?
DS: Right, because they are assuming the immigrants won’t be receiving Social Security, not paying into it. They’re not double-counting.
JA: Well, they’re not assuming they won’t be receiving it- what they’re doing is they’re backloading the calculations and- let me get the quote here from the U.S. Treasury Department- the simple time horizon calculations (in other words, the 75-year unfunded liability, whatever it may be)- I’m quoting here, “Understates financial needs by capturing relatively more of the revenues from current and future workers and not capturing all of the benefits that are scheduled to be paid to them.” So, there are numerous ways of calculating what kind of shape the Social Security system is in. Weiner is doing his calculations, but there are other ways, more accurate ways, of doing this. I, personally, think the best way to look at it is the way private corporations are forced by law to look at their pension obligations, which is called the “Closed Group Unfunded Liability,” and when you look at these numbers, they are far more than the numbers that are commonly cited in the media, and by people like Congressman Weiner.
You’re looking at approximately $16 trillion projected shortfall. If you who’s in the system right now, what they’re going to take out in benefits, and what they’re going to pay in taxes, the Social Security system is about $16 trillion in the hole.
DS: Is that from the Treasury Report earlier this year?
JA: That is from the 2009 Treasury Report, yes.
DA: And that Treasury Report was very devastating.
JA: It’s an Obama administration document, okay, so we’re using his numbers.
DS: James, I really appreciate your time. If I have any more questions, may I follow up by e-mail?
JA: Of course.
*Originally published at The Daily Caller.
My colleague Cord Blomquist at CEI has a very thought provoking post on how much debt our country is in.? Staggaring.