There Were Some BFD Statements Last Night
Lost in all the in depth pundit discussion of body language and water consumption is the fact that Paul Ryan made some very interesting statements last night.
1. About those tax loopholes Romney will close…
MS. RADDATZ: Can you declare anything off-limits—MS. RADDATZ: Can you declare anything off limits? Home mortgages deductions—
REP. RYAN: Yeah. We’re saying close loopholes on high-interest people—MS. RADDATZ: Home mortgage deductions—REP. RYAN:—for higher-income people. Here—VICE PRESIDENT BIDEN: Can you guarantee that no one—
REP. RYAN: This taxes—VICE PRESIDENT BIDEN:—making less than $100,000 will have a mortgage—
REP. RYAN: This—VICE PRESIDENT BIDEN:—their mortgage deduction impacted? Guarantee?
REP. RYAN: This taxes a million small businesses.
He keeps trying to make you think that it’s just some movie star or hedge fund guy or an actor—
Um, okay. So… Ryan won’t take the mortgage deduction for those making less $100,000 off the table? Because… it’s on the table? That’s news.
2. How about Social Security
MS. RADDATZ: You were one of the few lawmakers to stand with President Bush when he was seeking to partially privatize Social Security.
REP. RYAN: For younger people. What we said then and what I’ve always agreed is let younger Americans have a voluntary choice of making their money work faster for them within the Social Security system.
VICE PRESIDENT BIDEN: You saw how well that worked.
REP. RYAN: That’s not what Mitt Romney’s proposing. What we’re saying is no changes for anybody 55 and above.
VICE PRESIDENT BIDEN: What Mitt Romney is proposing—REP. RYAN: And then the kinds of the changes we’re talking about for younger people like myself is don’t increase the benefits for wealthy people as fast as everybody else—VICE PRESIDENT BIDEN: Martha—REP. RYAN:—slowly raise the retirement age over time.
VICE PRESIDENT BIDEN: Martha—REP. RYAN: It wouldn’t get to the age of 70 until the year 2103, according to the actuaries.
Now, here’s the issue.
MS. RADDATZ: Quickly, Vice President.
VICE PRESIDENT BIDEN: Quickly, the bottom line here is that all the studies show that if we went with Social Security proposal made by Mitt Romney, if you’re 40—in your 40s now, you will pay $2,600 a year—you get $2,600 a year less in Social Security. If you’re in your 20s now, you get $4,700 a year less. The idea of changing—and change being, in this case, to cut the benefits for people without taking other action you could do to make it work—is absolutely the wrong way.
Really? We’re back to privatizing Social Security. That’s news.
3. And given all the Romney abortion flip-flopping/lying of this week, Paul Ryan tells us…
MS. RADDATZ: I want to go back to the abortion question here. If the Romney-Ryan ticket is elected, should those who believe that abortion should remain legal be worried?
REP. RYAN: We don’t think that unelected judges should make this decision; that people, through their elected representatives and reaching a consensus in society through the democratic process, should make this determination.
Bye bye, Roe v Wade. Wanna bet if Team Romney gets the chance to appoint Supreme Court Justices that they’ll suddenly be fine with unelected judges making this decision. Ryan was, and unlike his running mate has always been, very clear on the abortion issue, and since I haven’t heard the Romney campaign quietly walk this back (as is their habit once the TV cameras go off), then I’ll assume this is where they stand – overturning Roe v Wade. That’s news.
So once the press moves beyond the chuckling and water drinking, perhaps they could discuss these BFD statements.
What was Biden’s solution to solve the Social Security issue?
Simple. Don’t elect Republicans who want to privatize Social Security.
Good plan. Do nothing and then when there is no money left blame the republicans.
As long as they take payroll taxes from you and your employer there is money. Republicans (and some Dems) want you to forget that SS has a dedicated tax stream. You can fix SS for a really long time by just lifting the cap on contributions. But if you do nothing, you are left with reducing benefits to seniors — they never go to zero.
Duty: There is no danger of Social Security going bankrupt. A simple lifting of the income cap would “solve” the “problem” into the 2070s. The usual antidote to fear is education. Try it.
I don’t think you know what insolvency (or bankruptcy) means.
There are “balance sheet” insolvency and “cash flow” insolvency. Social Security is “balance sheet” insolvent, because the present value of its liabilities exceed the present value of the its assets. Social Security will be “cash flow” insolvent, once it cannot pay its debts as they become due.
Of course, Congress change social security’s assets or liabilities, thereby making it solvent. Congress can raise payroll taxes (increase assets) or decrease payments (decrease liabilities). But, right now, Social Security IS insolvent.
Also, insolvency is not a precondition for bankruptcy, although insolvency and bankruptcy share a similar (if not the same) connotation. In fact, insolvency is worse than bankruptcy.
Many home owners today are balance sheet insolvent but cash flow solvent (as long as they have jobs). SS is expected to become cash flow insolvent in 2038. We could resolve that insolvency immediately with a 19% cut in benefits in 2038. That means we have 27 years to make some changes in Social Security to avoid a 19% cut in benefits in 2038.
One thing that could be done is to forego (or reduce) COLA. For example, over the last 38 years, COLA increases have total 151.6% with an average raise of 4.0% per year. Over the next 27 years if the average annual COLA raise were reduced by just 1% down to 3%, it would more than make up for the 19% cash flow insolvency in 2038, with the result that Social Security would be solvent infinitely into the future (with some adjustments for changes in population).
Social Security solvency is an issue that must be dealt with but it is a marginal issue in the scheme of things and a relatively small change (i.e capping average COLA raises at 3%) would make the problem completely disappear.
I’m not going to say it’s much to do about nothing, but it’s kind of a small pimple. Getting Congress to do something on the other hand is a large pimple.
No, Davy, you still don’t understand. Social Security is set up so it can only pay out what’s in there. It will reduce benefits, not become either insolvent or bankrupt. And of course politicians 20 years hence won’t have Republicans obstructing the necessary changes, because a large number of them will have died.
If you don’t stop listening to conservatives, you’ll never learn anything about the real world.
Social Security is balance-sheet insolvent and, absent action, will be cash-flow insolvent. If Social Security cannot pay the benefits that the United States has promised to Social Security recipients, then Social Security has failed to pay its debts as they become due, and Social Security is, by definition, cash-flow insolvent.
Even if Social Security reduces benefits on a pro-rata basis, it is still cash-flow insolvent. Also, as far as I know, Congress has not authorized the SSA to reduce benefits on a pro-rata (or any other) basis simply because Social Security is cash-flow insolvent.
We need to act. Right now, the projected shortfall, in present-day dollars, is about $8 trillion. (Some) Solutions (and/or):
(1) Eliminate the Cap on Payroll Taxes
(2) Increase the Social Security Tax
(3) Decrease Social Security Benefits
There is a problem with Social Security. It IS insolvent. There will be consequences. People will, at a minimum, lose benefits. But, the core problem is that Social Security was not designed to redistribute income. It was designed as insurance against, among other things, living too long (i.e., outliving your savings).
By the way, my mentors are liberals and Democrats. And, thinking that Republicans will disappear in 20 years is wishful thinking. The Republicans’ message is self-reliance, even if you think differently. That message resonates with many Americans. Equating self-reliance with social Darwinism is foolish. Most Republicans would teach a man to fish, not let him starve.
Both Republicans and Democrats are alarmists – it’s political theater. With a user name like “geezer,” you should be old enough to know that.
“Even if Social Security reduces benefits on a pro-rata basis, it is still cash-flow insolvent.”
Oh really? Explanation please, since I have just explained how reducing just the COLA would make SS cash-flow solvent in 2038. Please provide a counter explanation for your point.
“Also, as far as I know, Congress has not authorized the SSA to reduce benefits on a pro-rata (or any other) basis simply because Social Security is cash-flow insolvent.”
Of course Congress has done nothing. But is it your assertion that they have nothing because SS is cash-flow insolvent? Where are you getting this information? Again, SS is not cash-flow insolvent. That is a future event projected to happen in 27 years (2038). SS is current cash-flow solvent.
Davey, I respect data, not talking points that no basis in data. I am willing to rejoin the conservation when you come back with data. Ciao.
And the idea of a government program being *insolvent* is plain stupid. Especially a program that has a dedicated tax stream. Insolvency means that there is something there to resolve — assets that can be liquidated to pay something to the people it owes money too. Since US government programs are self-guaranteed, that means that not having enough money to pay full benefits means that the government itself has stopped fulfilling its obligations. Why, of course, we keep reminding folks that the SS fix is pretty easy.
@Dave:
My comment was not a response to you. I was addressing the idea that Social Security is insolvent if the SSA reduces benefits without Congressional authorization. That is, if in the future, Social Security is cash-flow insolvent, and the Administration must pay partial benefits.
@cassandra_m:
There are two types of insolvency – balance sheet and cash flow. You’re confusing a response to insolvency (liquidation) with the condition of insolvency. There are other responses to insolvency besides liquidation (e.g., reorganization, no response).
A government (or government program) can be insolvent, although creditors often lack recourse if a government (or government program) defaults on or repudiates its debts.
I agree that the U.S. government is unlikely to allow Social Security to default. But, I do not agree that removing the cap, without more, will fix Social Security. We need to re-design Social Security so that it fulfills its original goal.
Raise taxes and reduce benefits now thats a plan. Keep moving everybody nothing to see here.
“I do not agree that removing the cap, without more, will fix Social Security.”
Nobody really gives a shit whether you agree or not. The facts are the facts, and your pants-wetting doesn’t change that.
I know, right. Every teabag’s bleakest fantasies should be the basis for public policy, because if they “believe” it, that’s all anyone needs.
@geezer & jason330:
Here are the facts:
http://aging.senate.gov/crs/ss9.pdf
Eliminating the cap works ONLY IF you break the link between contributions and benefits. This solution is “easy” ONLY IF you ignore the politics.
I’m confident that I’m smarter than you and better informed. Are you confident that you have nothing in common with Tea Party extremists?
Ignore what politics? The fact that today’s GOP refuses to vote for any tax increase of any kind?
As I said, in 20 years Grover Norquist and his kind will be long gone. The politics are in the demographics: By 2032, when the crunch is staring people in the face, the GOP will need 71% of the white vote just to break even. Ain’t gonna happen. Enjoy your life in the fulminating minority.
Of course, if the GOP follows the current party ideology and actively tries to wreck the country rather than let the godless socialist marxists gain control, all bets are off.
And I guarantee you are not smarter or better informed.
There is no real link between contributions and benefits now.
And the overwhelming politics are that Americans do not want their Social Security benefits cut. Just because Congress wants to pay more attention to Pete Peterson rather than the people who vote for them doesn’t mean that the politics are difficult. We just have a very big misalignment in interest groups.
@geezer:
You’re a liberal/progressive Grover Norquist. You don’t listen. You’re stubborn. There’s no middle way.
And, you attack anyone who disagrees with you.
And, it’s cute that you think that you’re smarter and better informed than me.
@cassandra_m:
There is a link between benefits and contributions. Benefits are a function of contributions. The cap on benefits is related to the cap on income subject to the Social Security tax.
And you’re right – most people would prefer higher taxes to benefit cuts. But, most likely, the best solution involves both benefit cuts and higher taxes.
The bottom line is that there are some relatively small changes that could be made in SS to mitigate the future 2038 problem. Capping benefits, constraining COLA, increasing contributions, or some mix of the three could be done relatively easy. In the scheme of things this problem is minor. Because of that and because it is future problem, there is little to no will in Congress to deal with it since it is not happening on their watch.
This is no different than corporations who forego strategic growth for short term (the next quarter) profits, because hey, the CEO gets rewarded for the short term and the long term is going to be the responsibility of a different CEO.
When 2038 gets close, there will be much more energy to find a solution, until then politicians get to use or misuse the problem to scare voters. And let’s face it, today’s politicians get more bang for their buck in scaring people than they would get by being farsighted visionaries. Don’t know about everyone else but as much as I like life, I’ll probably be gone by then.
“the best solution involves both benefit cuts and higher taxes.”
Wow, that’s so intelligent and well-informed. Thanks for the dispatch from Obvious Acres.
“it’s cute that you think that you’re smarter and better informed than me.”
Flirting will get you nowhere.
@geezer:
Not much I can say to cassandra_m’s statement. She stated that most people would prefer to keep their benefits – which is right. And, I responded that, despite that fact, the right solution probably involves tax increases and benefit cuts. Not all right answers are non-obvious.
Benefits are a function of contributions.
Tell that to people claiming Survivor’s Benefits. Or those getting SSI.
Most people would prefer to keep those benefits because they’ve been planning on them. Or have them now and can see how inadequate they’d be with cuts. Asking people who are already barely getting by (or who will barely get by on SS when they take it) certainly isn’t the right solution when the simple removing of the income cap will fix it all for a very long time to come. There’s little reason to condemn portions of our elderly population to cat food, when a basic lifting of the cap makes sure they can be reasonably stable for a long time.
Sometimes the right — and the moral — answer is the obvious one. And this idea is certainly supported by majorities of Americans so it is difficult to see how this isn’t the obviously right answer.