Take the Hit

You know, articles like this make we wish that it will be my generation that decides to be the grown-ups and takes the hit with things like Social Security and the national debt and what have you. I wouldn’t mind waiting until 75 to collect a Social Security check, if it means not saddling my kids with ridiculous Social Security-related taxes; even better, I wouldn’t mind converting my Social Security benefit into something that wasn’t so obviously a pyramid scheme based on gulling the young for my advantage. Likewise, I wouldn’t mind paying a little more in taxes now to work down the national debt to reasonable levels so my kid and her kids don’t have to pay for the stupid wastefulness that’s been happening for the last several years and today, plus all the interest the debt on that stupid wastefulness will accrue.

Yes, it would suck to have to clean up other people’s messes. But from a moral and economic point of view, it would suck worse to refuse to clean it up and to leave it for the next generation. Taking responsibility for things is what makes people grown-ups, and why as far as I can see grown-ups are mighty thin on the ground in Washington. The Bush folks are excellent, even primal examples of people who are not grown-ups economically or morally, but to be clear there seems to be a bipartisan lack of grown-ups in government right about now. It’s not just the Bushies who are the problem here.

I’ll be 37 in a couple of months, and this means that my generation of folks are now beginning to enter the political sphere in a serious way. Here’s a hint for all of them: I don’t care if you’re a Democrat, a Republican or something else — I want you to be a grown-up. I want you to say to us that we have to be the grown-ups and that we need to expect something other from our government than for it to be a never-ending, cost-deferred teat for whatever it is that we want — and that we shouldn’t expect our children to pay for the things we’re not willing to pay for ourselves. That’s a politician I’m going to be inclined toward.

This is not the same thing as a Grover Norquist-esque plan to strangle the federal government in a bathtub; Norquist and those of his cheaply petulant ilk who infest Washington thinking are the least grown-up people in several generations, and we’re suffering the penalty for that fact. I think the government can do good, interesting and occasionally expensive things for the overall benefit of the nation. But this thing of pulling debt out of our ass and putting Band-Aids on programs that are structured on a series of data that have nothing to do with the current state of reality has really got to stop.

It’s not too much to hope my generation is the one who decides to actually do it, even at the risk of taking the hit ourselves. My kid’s future is worth me being a grown-up now; so is my nation’s future.

34 thoughts on “Take the Hit

  1. I think he makes some good points, but I’ve heard all sorts of horror stories about people’s applications for Social Security Disability payments being routinely turned down the first half-dozen times and so on. I don’t have personal experience with this, so maybe it’s one of those great urban legends about the evil-ness of government bureaucrats, but if there’s anything to it, raising the retirement age needs to be coupled with making Social Security disability payments easier to get.

    My mother-in-law died last year at 65. In the last year of her life she was on dialysis, and lost her sight; she’d had adult-onset diabetes, and had suffered from osteoperosis for years. She also had heart disease and lung problems. In her case, she had a husband who worked, as well as a substantial nest egg, so Social Security Disability payments were not something I think she pursued. But if we’re going to raise the retirement age to 70, we need to account, generously, for the people who really can’t work because of health problems, and who don’t have a working spouse or a nest egg.

  2. Put me squarely in the middle between disagreeing with you and agreeing with you.

    Yes, fiscal responsibility is GWB’s major downfall. The man apparently never met a spending bill he didn’t like.

    On the flip side, I don’t look at the economic system as a zero-sum game. I think we should reduce the drag on small business (and big business, thinking about Ford and GM) that the government routinely puts on businesses that is non-productive work and reduces profits. Establish a fair taxable system for businesses and a flat tax for the citizens and I think that we would see the economy grow and eliminate the deficit that way, rather than taking more of my husband’s income (our only) and forcing me to go to work to pay for little things like food, clothing, etc.

    I ran my own business for several years until the tax law changed and I could no longer make enough money to offset the increased taxes (thank you, Supreme Court and the IRS.) There are plenty of people out there who would start up a new business if the strangleholds were removed.

    I listened to Bush’s speech in Cleveland today on the radio and one of his answers to the question how are we dealing with poverty in the US talked about education and encouraging property ownership. I’d like to see it encourage self-employment. That’s what the government can and should do (other than get out of the medical insurance business, but that’s another rant): encourage small business growth rather than increasing my taxes.

  3. I agree with the article, but I also agree with Naomi. Social Security Disability is a joke. It’s practically impossible to convince them you’re disabled. Until they get a better system for determining who’s disabled, moving back the retirement age is going to cause a lot of problems.

  4. I feel your pain. I don’t mind the idea of reducing taxes and the size of government — I think we’ve made it too complex, and too involved. That’s a problem on both sides of the aisle.

    It is a hotbutton issue for me to leave the mess for someone down the line to clean up, which is one of the things that annoys me so much about the current administration. Dropping taxes is fine, but doing so while greatly increasing the national debt is just silly.

  5. The most effective way to reduce the shortfall in Social Security is to raise the ceiling on taxable wages. You could go a step further and eliminate the ceiling while lowering the FICA tax rate and still ensure solvency into the next century.

    But as life expectancy continues to increase, at some point we’ll still have to extend the retirement age. Otherwise we will eventually have people drawing Social Security longer than they spent contributing to it.

  6. Look, the Social Security “issue” (whether any will actually manifest or not) can be addressed fairly easily:

    Lift the cap on Social Security taxes, which stands now (I think) at $92k.

    Think: If someone today makes $92,000, they pay 12% to Social Security, or $11,040. If someone makes $102,000, their burden is capped at $11,040, so they pay only about 10.8%. If someone makes $200,000 they also pay $11,040 or 5.52%.

    If we raise the cap on the tax, we extend the potential Social Security shortfall until the end of this century. If we remove the cap entirely, we can fund Social Security for infinity (as presently estimated).

    Sound pretty adult-like to me. One wonders if any of this can be accomplished by the infants in charge in Washington right now.

  7. Cindy, basically your argument is “taxes are bad, I want less taxes.”

    So how would you cut Social Security to pay for the tax cuts? Or would you prefer to leave that problem to your grandchildren?

  8. Cindy:

    “the rich ARE paying everything collected…”

    And this has to do with anything that I wrote above how?

    Inasmuch as that top 1% of Americans own somewhere in the area of 35 – 40% of the nation’s wealth, that they pay 34% of the taxes is not, shall we say, shocking news. Likewise that the poor pay a smaller share than the wealthy is not shocking news.

    You seem to be confusing a general discussion for the need for politicans to be grownups with money with a call to class war. Speaking as someone in the top 5% of income nationwide, that’s not something I want. What I would like is more fiscal sensibility from Washington and a willingness from the citizenry not to pass on debt to the next generation simply because it’s easier.

    As for what Social Security was originally for, seems the 1935 Social Security Act was explicitly written with retirement income in mind, so I’m not precisely sure where you’re coming from with that “fact” there, Cindy.

  9. You’re right. I know so many people who go for low-paying jobs because they don’t want to pay taxes.

    People take low paying jobs for plenty of reasons, including poor choices for education, bad luck/circumstances and the local economy.

    Cindy’s point is that we need to encourage certain behaviors that will increase income. Depending on Congress to increase the minimum wage isn’t self-dependency. That’s what we need to encourage.

    Glad to see the crawdad back, John, even if it is scary-looking.

  10. To say someone isn’t motivated to make more money because they would have to pay more taxes is pretty lame.

    I know of people who think they will lose their SS benefits if they work after their retirement and earn over a certain amount. So it’s not precisely taxes, yes, you’re right, but people do make financial choices based on outside forces like taxes and idiot rules from Social Security.

    I closed my business half because the rules for a home office changed in such a way that I could not deduct it, which meant a huge jump in my federal taxes. I had other reasons, but I might have continued for another year had the rules not been changed.

    Another example is when a married couple has two incomes and is pushed into a higher tax bracket by one partner’s income. I know my father wanted my mom to quit for years because the increase they paid in tax wasn’t worth what she brought in after taxes.

    So, my take is that yeah, some people do make decisions based on taxes.

  11. Speaking as someone who earns more than the SS cap, I don’t see any reason why I (or anyone else) should pay a smaller percentage. Do I enjoy the extra takehome during the last part of the year? You bet! Do I think it’s fair? No way!

  12. Midwestern Progressive writes:
    Look, the Social Security “issue” (whether any will actually manifest or not) can be addressed fairly easily:Lift the cap on Social Security taxes, which stands now (I think) at $92k.
    I don’t see how this, by itself, will fix anything. Sure, you’re bringing more money into the program, which sounds good at first. But currently, the amount of money you receive from SS is based on the amount of money you’ve paid in over the years. There’s no cap on the benefit other than the inherent one that results from the cap on each years income subject to SS tax. Removing the cap on SS taxes today removes the cap on SS payments tomorrow, and the result is a system that’s still underfunded in the long run.In order to get the benefit you’re looking for, you’d have to put in place a SS benefit cap when you remove the cap on SS taxes, but I never see that point brought up.

  13. Hmmmm, reading the last sentence of the article – leads straight to Old Man’s War. Except maybe it should be compulsory instead of a volunteer thing.

  14. Grown ups think ten, twenty years ahead. They consider the long term consequences of their actions. Children generally worry about right now. “I want that piece of candy now”. Politicians are the same way. What will make the voters happy now so I can get elected and I will sell them out in the future for what I can get now.
    Regarding the Social Security jungle I have personal experience. I have been fighting them for 3 years on behalf of a veteran I met at a homeless shelter. He has Primary Progressive MS, the worst kind, and despite years as a pipe fitter, welder, and truck driver he was homeless because of the effects of his disease. Now he has to fight for the money he paid in the system and Social Security is resisting him all the way. It is a nightmare full of corruption as doctors paid by the government failed to even mail in their diagnosis of this man, resulting in another denial.
    Now regarding who pays taxes. Read John’s Essay “Being Poor”. (I’m sure he will provide a link as I’m not literate enough to) Those who have much and will be hurt the least pay the smallest proportion while those who struggle to pay the rent, buy food, and just survive pay the largest. The poor don’t want to be poor but poverty breeds poverty. There are some long term answers but few have what it takes to implement them. This is the world I work with and have gained an understanding of.
    Again it takes long term thinking to break the cycle that traps generations in poverty though there are the impressive few who struggle out of the mire and rise above their adversity.

  15. Geez, Cindy, every time there’s a discussion about taxes, someone recycles the same lame argument about the rich paying the lion’s share of the nation’s taxes. Of course they do: that’s the way a progressive tax system works. They also happen to make most of the money, in great part due to the infrastructure and opportunities available in this country, much of which depends on the existence of a strong, competent central government (you know, that thing we’re supposed to believe is inherently evil). And if you don’t think that’s the case, try leaving the US and making money in some part of the world where the taxes are lower. Best of luck finding such a place, and even better luck living there.

  16. John, the neat thing is that the generation before us, being larger and having more votes, will probably happily stick us with the bill regardless of how adult we choose to be.

    Cindy’s point is that we need to encourage certain behaviors that will increase income.

    Because “you will have more money” is not enough encouragement for people to increase their income?

  17. IMHO, the biggest problem with Social Security (SS) is that it pays current obligations out of current revenues. That is a result of it being a government program. Private pension plans invest current revenue against future obligations and, therefore, benefit from compound interest accumulation over time.

    It’s possible to correct the problem with SS without raising taxes, or the revenue cap, or the retirement age. That was the idea behind last years proposal to allow individuals to divert up to 4% of their 12.8% SS contribution into private IRA accounts. That would force some portion of the current SS surplus to be diverted into the private sector economy where it would benefit from compound interest accumulation. As that segment of the SS surplus grew it would offset rising future obligations against the SS ‘trust fund’. That plan had so many advantages to it that I wish that the government had done that 20 years ago (when I started working).

    I was absolutely dumbfounded when GWB brought up the failure to implement any solution last year and the pols on the Democratic party side of the aisle applaudedf themselves. It escapes me how any pol can see the failure to solve a problem as a good thing. I am not trying to blame only the Democrats. There were too many GOP pols that didn’t have enough spine to act on a solution, seeing it easier to just kick the problem on down the road. It’s precisely that lack of ‘maturity’ that, I so heartedly agree with John, is the problem.

  18. “I don’t see how this, by itself, will fix anything. Sure, you’re bringing more money into the program, which sounds good at first. But currently, the amount of money you receive from SS is based on the amount of money you’ve paid in over the years.”

    Nope.

    As I stated, based on current funding and projected future funding and an potential shortfalls (if one believes that those are coming), we can entirely finance any projected shortfalls by raising or (preferably) eliminating the cap on Social Security taxes.

    Any other “projections” or short-sighted claims (“there’s no cap on the benefit”) fail the reality test.

    Sorry.

    Lift or eliminate the caps, and we can all stop talking about “projected shortfalls” and start dealing with real issues like Medicare.

  19. John – what you say certainly sounds good, except it’s based on a false premise: we’re only leaving our debt to our children if we believe our children won’t be able to borrow to pay for it.

    As it turns out, FDR didn’t leave the debt for us to pay. He ran up a big debt, but we didn’t pay it! Instead, we found that many countries in the world insist on lending us money, no matter how large our existing debt is. Unless we have some reason to believe this won’t happen again, talk of saddling our children with an undue financial burden is just hype.

    Now, before everyone rushes in to call me an idiot, I’m **NOT** suggesting, even for a second, that this is sound fiscal policy. Endlessly increasing the debt ceiling is not the best way to run our economy, and service charges on the debt (i.e., interest payments) do eat into our tax base, but that’s nothing compared to having to pay it down in any significant way.

    As for social security, it’s a very complex problem that isn’t solved with something simple like increasing the retirement age or raising the taxable salary cap. The only idea I’ve ever heard that seems easy to implement and guaranteed to help is to make social security checks optional, and providing wealthy people some incentive (say 50 cents on the dollar as a tax deduction?) to forego their checks. With a rising number of wealthy people in the country, some percentage that don’t really need it anyway might kick some money back to the government out of altruism or for some other financial benefit.

  20. Brian, please note that other countries are not rushing to give us money. Borrowing implies that, sometime, somebody will have to pay it back–which was kinda John’s point.

  21. Midwestern Progressive wrote:Any other “projections” or short-sighted claims (“there’s no cap on the benefit”) fail the reality test.Here’s a Social Security document showing how to calculate your benefit based on your yearly income. I don’t see anything on it about a maximum benefit, only caps on the income subject to SS tax. Please point out to me where the limit is (or perhaps it only exists in your “reality”?).

  22. Mythago:
    Brian, please note that other countries are not rushing to give us money. Borrowing implies that, sometime, somebody will have to pay it back–which was kinda John’s point.

    Correct. That’s why I didn’t say they were rushing to give us money. I said they were rushing to lend us money.

    Under normal circumstances, you wouldn’t lend money to someone who was already hopelessly in debt, for fear they’d never be able to pay you back. In the case of US Government bonds, however, not only have we never defaulted, but other countries continue to buy them every year, effectively loaning us money to pay the previous lenders’ interest payments.

    Until there’s any sign of that stopping, the incentive to seriously look at paying down the debt will be sadly low.

  23. Tim: It was perhaps a bit childish for the Democrats to applaud the defeat of Dubya’s privatization initiative. But there is no doubt that leaving Social Security alone was far better than what Dubya and his incompetent minions had in store for it.

  24. I’m 39 and, like you, I would be perfectly willing to pay down the national debt and shore up the Social Security system… if I thought it would stay clean once we cleaned it up.

    I just don’t have faith that our government wouldn’t just rush right out and spend (in some way) the payments we made on these obligations.

    Gallup ran a poll some years ago, when I was under 30, that seemed to show that people in our generation were more likely to believe that UFOs had visited Earth than that they personally would ever see a dime of Social Security. I’m not surprised.

    Just cynical.

  25. Under normal circumstances, you wouldn’t lend money to someone who was already hopelessly in debt, for fear they’d never be able to pay you back.

    Under normal circumstances, you have to worry that they will go bankrupt, will have no assets as collateral, and will have no one they can strong-arm for money. None of those things are really issues for foreign investors. They don’t care if it’s Generation Y paying the bills, and there’s no International Bankruptcy Court that will wipe out America’s debts.

  26. I’m going to be 63 in a few weeks and I’ve been complaining that the Social Security system was a giant Ponzi scheme since I was in college… Politicians back then would lie about it and they are still lying about it today.

    I’m planning on putting in at least five more years in my current line of work (assuming I’m not outsourced to Bangalore or some such) and even then I figure I’ll be cutting back on employment, not totally retiring… so my income from work plus savings plus Social Security will mean my Social Security pension will be taxed because those scumbags in Congress will say I’m rich (ha!) and then as more and more Baby Boomers retire, especially those who have never bothered to put anything into their 401K plans and who have lived high on the hog via credit cards and refinancing their houses, they will cut back on my Social Security to take care of the “deserving” retirees, and then, when I’m too friggin’ old to work and I’ve exhausted my saving making up for the Social Security cuts, then they tell me sorry, the Social Secuity Lockbox is empty. And I’ll be really pissed off because they could have done something about it ten years ago or five years ago or today, but they’ll wait until twenty years from now. Yeah, I’ll be pissed but I’ll also be poor and broke and out of luck and my grandchildren will be stuck with the bill.

  27. I’m somewhat impressed… usually people who use “right wing” as a generic insult the way that you tend to do also tend to be the people who think there’s no problem with Social Security and even if there was, we could ignore it and it would go away (cf. the Democrats in Congress). Glad to see you’re not one of them, anyway. :)

    Oh, and while the “Cindy” poster was, well, wrong about a lot of things (Social Security designed for helping WWII veterans? what?), it is true that there’s a top X% that makes about 33% of the country’s income and pays 50% of its taxes. (87.6% of statistics are made up, including those — I looked the numbers up last week actually but now I can’t find them again, but that’s the general idea). I personally don’t think that’s a good thing. And I’m not anywhere near the top there… I make about the median income for the country, which is rather below the median income for the area I live in. But I don’t think that I deserve to take other people’s money just because they’re more successful (at making money) than I am. *shrug*

    Anyway, that’s not really the topic of your post, so I’ll stop the digression. But I agree with you that we need some grown-ups in government… and really everywhere. The whole concept of personal responsibility has fallen away in our culture, and having what amounts to children in government positions is just a reflection of that. But voters want to not have to make any decisions, they want the government to take care of them no matter what, and they don’t want to hear about any problems with that. So they vote for people who promise to give them money (or whatever) and don’t mention that that can’t work indefinitely. In 1994 it looked like maybe voters were fed up with that idea, but as it turned out, not so much, and so now we’re left with Republicans who don’t actually act like it. (Which is why I get a bit annoyed when you keep railing on about the evil “right wing” when talking about our current Congressional Republicans — they keep increasing the size of government programs and adding new things. There’s nothing “right” about them. Maybe they talk like it, but they certainly don’t act like it.)

    ah well, whatever. Really, I came here to say that I read Ghost Brigades over the weekend when I was on vacation, and it was excellent. Can’t wait for more. :)

  28. Except…. The trustees run three projections each year – high, middle and low cost, where middle is projected to be the likeliest. These are proper projections, and they include every factor anyone here is likely to think of, and everything else besides.

    The worst case scenario that the actuaries projected last year was that the total proportion of GDP required to fund Social Security fully would, over the next eighty years, rise from 4.5% of GDP to a 6.5%. That’s a significant rise, but not an unaffordable one.

    And that’s the worst projected case. And the evidence to date is actually that the best projected case has historically been the most accurate (http://www.davidlanger.com/article_c67a.html). And what does the best projected case say – that Social Security is, without any structural changes, benefit reductions or tax raises, solvent for the next eighty years.

    So why the perpetual fear? Whilst Social Security is funded out of present revenues, it’s run at a massive surplus for years, and those surplus revenues are invested. In US Treasury bonds. Through which other areas of government spending are funded. The worry at the top isn’t that Social Security benefits can’t be fully funded through the program’s own revenues, it’s that the progam will stop stop subsidising other spending.

  29. Jp beat me to it. And although he’s right that the best-case projection is most likely, even in the worst case projection it’ll be okay until around 2035.

    The most risky thing about Social Security is that it invests in the US treasury. In a much shorter timeframe (~10 years?), it’s going to need to start redeeming those investments. That’s going to be a problem if we’re spending 20% of our budget paying interest on the national debt.

    The best way to shore up Social Security is to reduce/eliminate the budget deficit. And Cindy, I hate to tell you, but cutting your taxes will *not* accomplish that.

  30. Cut spending to balance the budget

    A friend of mine (he’s the sort of person who reads the entire Federal Budget for fun) figured out that we could balance the budget if we eliminated ‘optional’ spending by the federal government–for example, the entire USDA, HUD, the FDA, and basically everything except the Department of Defense, Homeland Security, most of the Department of Justice, and the Treasury. Cut everything else out and the spending evens out.

  31. SS is good until the late thirties if the money is payed back to wage earners. The Republicans don’t want this, they want people earning modest amounts to pay for the upper classes. By the forties there wil be some decline in payments.

    But note a lot is hypothetical. If the economy does well we can subsidize the old, if not times are harder.

    The Medicare drug bill alone will cause far larger deficits than SS.

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