There is a disconnect between how the general public understand Social Security solvency and how certain economists do. And I fear some of this disconnect was fully planned. Social Security 'Crisis' is in the popular imagination related to the Trust Fund at some point becoming 'bankrupt' which in turn translates into 'Social Security won't be there for me'. This is of course nonsense, as long as there is a payroll deduction Social Security will be able to cover a certain percentage of the current scheduled benefit. That percentage has varied over time but now sits at 78% of a scheduled benefit in real terms 160% of what similarly situated retirees get today. Which works out to a check 25% better than what my Mom receives. Only if we define solvency as '100% of scheduled benefits' without examining how the schedule is adjusted for Real Wage increases over a worker's work life can this outcome possibly be considered a 'crisis'. But that is to take this from the point of view of the potential beneficiary. If instead we turn around and just take a strict interpretation of 'solvency' as meaning 'TF Ratio of 100 minimum through the 75 year actuarial window (or alternately over the Infinite Future Horizon)' then we are free to tinker with the schedule itself. Which of course is what LMS does, it proposes a package of benefit cuts and increases in retirement age scored by the SS Actuaries at 2.7% of payroll equivalent (Table 2). Strictly speaking simply accepting this package would more than restore Social Security to sustainable solvency as defined. As of course would simply accepting the combination of a 1.5% across the board increase in payroll tax plus an increase in the cap (for another 1% payroll equivalent). If the actual goal was 'sustainable solvency' then either would work. As it is LMS effectively doubles up by proposing a 5.2% payroll equivalent fix to a problem then scored at 1.92% and now at 1.7% or if you accept the validity of Infinite Future projections 3.7% at the time the plan was drafted and 3.2% (personally I don't see the real world utility of this PV calculation for considering policy, it just seems to privilege the interests of the 22nd century to those of the current universe of wage workers). LMS has some fairly praiseworthy policy goals, none of which have any particular relation to the popular notion of what 'crisis' entails. Nor does it particularly explain why these policy goals need to be financed entirely by wage workers, nor how actual worker economic interests are advanced by the institution of PRAs. Because in context the outcomes depicted in Table 1 of LMS are pretty disappointing for most categories of workers. For that matter that 129% result for wealthy widows probably pales compared to individual investing of the money falling between the current cap and the one proposed under LMS. Particularly when it comes in the form of full annuitization with no rights of inheritance. Not exactly the Ownership Society promised by the President when he elevated this issue back in Nov. 2004. The devil is in the details and on examination it would seem that LMS fails the fundamental test at the heart of any economic transaction, which is to say: 'What is in it for me?' If this is a reasonable question to ask when arranging a Golden Parachute for a CEO then it would seem to be a reasonable question for a wage worker to ask. So I am asking. Why should wage workers buy in?

Why should wage workers or taxpayers one or more generations from now buy in? Because we decided to make promises today with their incomes instead of our own? Because we'll all be out of the workforce and claim we are "surprised" that taxes have to be raised to support us? Because there will be a lot of us and we'll vote our elderly pocketbooks? Based on current projections, someone has to buy in. To some degree, that should be today's taxpayers. In LMS, the only tax base is payroll. Not quite half of the new money that comes into the LMS plan comes from raising the payroll tax cap without raising benefits due to the higher earnings. That's a step toward a more progressive tax system. Others could modify the plan to include revenues from some other source, like the income or estate tax, if that was viewed as an improvement.

"I don't think most people would care about a small net claim, but the projections for Social Security currently indicate a net claim of 1.7% of taxable payroll over the next 75 years and 3.2% of taxable payroll over the infinite horizon." Once again strictly speaking Social Security faces no net claim and has no unfunded liability over either the 75 year window or the infinite horizon. Under current law as I understand it at the point of Trust Fund depletion absent positive action the benefit will be cut to a point currently projected as 78% of the schedule. To call this a crisis is to make implicit claims about relative political power between beneficiaries and workers as that point approaches. Perhaps retirees and those approaching retirement will be able to overwhelm the current interest of younger workers to maintain current utility of their paycheck, but perhaps not. The demographics would seem to indicate a sharp turn against Boomer political power in the years after 2027, which is about where current projections put Social Security failing the test for Short Term Actuarial Balance. At that point Boomers will be sitting in an age range from 63 to 81 and hardly in a position to argue that a problem starting 14 years out is a huge priority. Gen X & Y face a simple choice. Does the prospect of a potential reset in retirement benefits in 2041 currently scored at 1.7% really justify taking a guaranteed 2.7% cut in benefits to be offset or not by a PRA funded largely by a 1.5% payroll tax increase as well as a huge surtax on the successful in the form of an increase in the cap? Or would you rather keep that money in your pocket and simply grow the economy at comparable rates as your Boomer colleagues did? (Because the poor economic numbers of the late sixties and the seventies were not our fault. If Boomers were in the workforce at all we were more likely to be flipping burgers, waiting tables or working as lifeguards. Instead we hit the workplace in full force after 1986, you think we would get more credit for the subsequent economic growth.)

My 20:16 clearly crossed with your 20:15 but I think addresses the point pretty well. But changes in projections have drained much of the force out of the following: "Because we decided to make promises today with their incomes instead of our own? Because we'll all be out of the workforce and claim we are "surprised" that taxes have to be raised to support us? Because there will be a lot of us and we'll vote our elderly pocketbooks?" Those promises are not really promises. They are contingent projections of what the current system would deliver if and when. LMS itself makes similar promises when it talks about 'Expected Yields on Mixed Portfolio', it too is talking about future claims on future incomes, it is just that a portion of that comes in the form of dividends and capital gains rather than a straight transfer. In the end you are still talking about divvying up the gains of future productivity. "there will be a lot of us and we'll vote our elderly pocketbooks". An argument that was pretty powerful in 1997 when Trust Fund Depletion was scheduled for 2029 and shortfall in 2012. You had the recipe for a perfect political storm, Boomers at that point would have ranged in age from 65 to 83 at depletion and 48 to 66 at shortfall. Those elderly pocketbooks would have corresponded with what are historically prime voting years. Time shift shortfall five years and depletion twelve? Well shortfall doesn't actually hit the bottom line for those of us who will be 53 to 71, after all the initial gap is small and about half of us are out of the workforce. As for depletion we will be 77 to 95 and the mortality tables will not be our friends when it comes time to measuring electoral clout. Every year that passes drains more and more force out of a narrative that has as its key assumption 'selfish Boomers'. We are not the problem, Boomers hit the workforce between 1968 and 1986, most of us have been exposed to that 12.4% rate all of our working lives, we have pushed the date that Social Security can pay all of its bills right over the demographic hump, that Gen X & Gen Y are whining because they are being called to get their slacker asses off the couch and grow the economy like we did is hardly our problem. Table V.B2: Additional Economic Assumptions On balance Boomers are more sinned against than sinners here.

Bruce Webb, Well and clearly stated about Social Security. Even AARP needs to take notice. Perhaps Andrew can post on the General Fund crisis instead?

"Solvency" is only a meaningful concept with regard to our OVERALL fiscal balance (or imbalance). "Solvency" of one program with a dedicated tax in isolation is meaningless, except as an administrative matter and insofar as any deficit or surplus of that program is part of the OVERALL fiscal balance/imbalance. Social Security (SS) "solvency" is irrelevant to the question of whether or not we should change policy to reduce projected SS spending. Money is fungible one way or another. If there is any lack of SS "solvency" based on the current funding structure (current SS FICA tax rates and applicable income), that could be addressed by raising SS FICA taxation or supplementing SS FICA with revenues from other taxes (general fund) or cutting projected spending. Even if one projects a lack of SS "solvency" under the current SS tax structure (funded only with that dedicated tax at current SS tax rates and applicable income), that alone is not a sensible argument for cutting projected SS spending. Even if one projects infinite SS "solvency" under the current SS tax structure, that is not an argument AGAINST cutting projected SS spending as we seek to address our unsustainable OVERALL long-term fiscal imbalance. We could reduce this future spending, lower the SS FICA tax rate or income limit and offset that tax cut with tax increases elsewhere, resulting in revenue-neutrality (no net tax increase) but a reduction (i.e., improvement) of our OVERALL fiscal imbalance. As with almost all fiscal policy decisions, our decision on whether or not to cut projected SS spending should be informed by the trade-offs identified and quantified by economics (positive/negative effects of various levels and types of taxation, various levels and types of spending, and various levels of debt) and ultimately by our values/morals/priorities. The big picture -- the OVERALL budget -- is the proper scope for considering those trade-offs.

Brooks, Since shading of facts and figures and spinning creates a cloud of fluff, it would be nice to actually do that kind of discussion not only behind closed doors which DC staffers appear not able to do either, but in public as well. How do we get there?

rdan, I'm no expert on how we get there, if what you mean is either figuring out how much we need to cut spending and raise taxes, or if what you mean is how to achieve fiscal responsibility politically. My general thoughts, for what they're worth, are that we (the public) should: - Debunk the myth on the right that "tax cuts generate higher revenues" (i.e., that there is some free lunch; that we can have our cake and eat it, too) - Acknowledge that our current fiscal course is unsustainable, that the solution to our long-term fiscal imbalance must involve both substantial cuts in projected spending (including cuts in entitlement benefits and/or eligibility) and higher taxation. - Get away from this nonsensical focus on the degree of Social Security "solvency" as the basis for deciding whether or not to cut projected spending as part of our effort to solve our fiscal imbalance. (See explanation in my previous comment upthread.) continued in next comment...

- Support some means of healthcare reform that will significantly reduce the "excess cost growth" of healthcare, particularly that pertaining to Medicare and Medicaid but which may involve the private sector as well. I haven't really researched this issue yet, so I don't have advocate any policies in particular yet. I assume, though, that we will have to accept actual sacrifice (e.g., what procedures/treatments/drugs are allowed under what conditions, or longer waiting periods for particular services, etc.) rather than being able to achieve significant cost savings without any sacrifice, purely through efficiencies. - Support efforts to raise public awareness about the long-term fiscal challenge and the consequences if we delay sacrifices to address it. (spread the word re: blogs like this one, organizations like the Concord Coalition, etc.) - Support efforts like this to force Congress to either act responsibly or be revealed more publicly as irresponsible, hopefully changing their political calculus and making it more politically costly to avoid fiscal responsibility than to endorse the needed (but unpopular) sacrifices to achieve it. - Push for a more rational analytical approach -- or at least explanation -- regarding our Iraq policy. It seems that Democrats don't want to really address the costs/risks of leaving (or substantially reducing our presence) and Republicans don't want to really address the costs/risks of staying and the question of why/how the outcome will be better if we stay longer and leave (or substantially reduce our presence) later (i.e., will our continued effort prevent or mitigate the disaster they envision if we were to leave now, or just delay it after costing us more in terms of lives and money). Even strategy, for lack of a better word, has, at least for most of the war, been dumbed down terribly by partisanship. See diary I wrote one year ago (essentially pre-"surge", pre- Sunni "Awakening", and pre- Sadr "ceasefire", but it still applies to at least a large ! degree) and follow-up diary a few months later. I don't know if I've answered your exact question (or given you much more than you wanted!), since I'm not perfectly clear on what you're asking, but that's my best shot. Please let me know if I've missed what you were asking.

One of the bullet-pointed paragraphs from my prior comment keeps getting blocked for some reason. I’m going to try a shorter version of it one sentence at a time to try to find out what the problem word or punctuation was. Below is first sentence from that paragraph. Inform ourselves via data and expert opinion beyond just that of experts who share our respective ideologies or political agendas.

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I don't know why the rest of that paragraph keeps getting blocked. Anyway, the point of it was basically to seek information, ideas and opinion outside of one's own ideological group. It seems that increasingly people are spending much of their time with partisan sources and communities, and that not only leaves people with innacurate or incomplete pictures, but also makes people less inclined to compromise.