Erica Laursen’s new book about the recent (last 30 years) history of Social Security is a compendium of prior research that provides valuable historical and political perspective on the evolution of a program that is about to abet in the bankruptcy of this country.
As with other books I mark pithy passages as I’m reading and the first three tell a disturbing tale:
A fundamental paradox of Social Security is that while it was perhaps the most populist program the federal government ever created, welcoming all American workers as participants regardless of need, crucial decisions about it were always made by a remarkably small group of policymakers. Congressional committee chairs, actuaries, and a few influential outside policy strategists managed the evolution of the program, always in near-total isolation from the public. (page 26)
That year (1972), the Social Security Administration’s actuaries projected inflation to grow by 15% between 1973 and 1977, versus 12% wage growth, for 3% net inflation. The actual result was a shocking 41% inflation and 1% wage growth. (page 41)
More urgently, the 1977 amendments were built on another set of forecasts that went wrong. Government economists, it seems had still not yet stopped the wild economic swings of the 1970s. Carter’s claim that Social Security was “sound” for another fifty years depended on predictions by the program’s trustees that inflation would rise a cumulative 28.2% from 1977 to 1982, while real wages would increase 12.9% and the unemployment rate would hover around 5.9%. In reality, inflation more than doubled the trustees’ estimate, reaching 60%; real wages declined 6.9%; and the unemployment rate hit a cumulative 6.7%. Meanwhile, the beneficiary population was expanding fast: from 16.8 million recipients in 1962 to 31.9 million in 1982. Retiree payouts, as a result, continued to balloon, from $71.3 billion in fiscal 1977 to $135.3 billion in fiscal 1982……There was probably no way the Carter administration or the economists and actuaries at Social Security could have predicted the dire effects of the second oil shock of 1979. While their economic forecasts may have been optimistic, these were based on historical trends, just as they always had been. (page 45)
A program designed and run in secret by insiders working off of bad assumptions. Is it really that hard to predict where it’s headed?
Burypensions Blog 
Posted by Eric on December 3, 2012 at 7:35 pm
The government’s response is to continue on the road to hyperinflation. Germany did this to repay debts for WW 1. What little is left of the US dollar will continue to be destroyed and social services repaid in confetti to a moronic and an obese population base, fixated to television sets, which spew propaganda about a slow recovery in progress.
Eric
Posted by Anonymous on December 4, 2012 at 2:32 pm
Very true indeed!! Except they will ne fixated to smartphones they can’t afford not tv’s . lol
Posted by Larry Littlefield on December 3, 2012 at 7:36 pm
Well, does the book include the Reagan era deal to raise regressive payroll taxes to “Save Social Security” while cutting the progressive income tax? Or is Mitt Romney correct, and the regressive payroll tax does not exist?
Posted by skip3house on December 3, 2012 at 8:11 pm
I disagree.
Social Security is easily perpetuated by the several actions already circulating, but needing political will.
Social Security surplus has been used as a regressive tax to fight wars, and reduce taxes on the wealth otherwise needed.
A slight change not mentioned would be to hold cost of living increases to about equal for all, figured on somewhere near the lowest recipients. Bread prices increase the same for all………
Posted by Anonymous on December 4, 2012 at 2:34 pm
I agree 100% with Eric. Except for the part about tv,instead the obese will all be on smartphones they can’t afford while they ignore their kids all day.
Posted by Eric on December 5, 2012 at 10:01 am
Sorry, I am too dumb and far too old for a smart phone. I have recently graduated from a rotary dial phone. That took a whole lot!
The discussion of the fiscal cliff shows that even Obama is warming up to the idea of a “chained” consumer price index whereby inflation is politically wiped clean from the figures thus adding to the destruction of the elderly on fixed income. It is a one two punch, no interest on CDs and no cost of living adjustments due to lies.
So even if retirees win the cost of living adjustment issue, it is a loser from the start since food and energy are already omitted and the reflection of the already fictitious consumer price index only gives credit for approximately 60% of that number in NJ.
Time to eat Cheerios for the main meal!
Eric
Posted by Anonymous on December 5, 2012 at 12:55 pm
Once again correctamundo. Eric. Wait’ll the next generation nears retirement age, what with their lack of pensions, whittled down social security, and delpleted 401K’s that were “all tied up in staying alive” due to depressed wages in their careers, this generation will suffer much more in old age than their predecessors in the 2 generations before. . A consequence of stripped benefits and a “keeping of with the Joneses” mentality that pervaded the first half or so of their careers when times were good.
Posted by Tough Love on December 5, 2012 at 1:08 pm
And yet the taxes paid by THOSE Private Sector workers (with miniscule pensions, if any) are called upon to support the very rich pensions promised Public Sector workers.
Not fair. Public Sector Pension must be very significantly reduced ……………….. for CURRENT workers.
Posted by Anonymous on December 6, 2012 at 6:37 pm
TL sounds like a….TL sounds like a……TL sounds like a …….TL sounds like a……….broken record. “very rich” your words. Is that a dollar amount to you or a standard of living- what do you define as rich? Or very rich? millionaires? Please show me how many public retirees can afford to live in rich neighborhoods on their “very rich” pensions. Or really how many middle class private sector employees(career men like you or me, not including bellhops and part time work, etc.) that can’t afford to stay in their homes? I would probably venture to say that life for a 75 year old public employee in most cases is not that much different from a 75 year old private sector employee who enjoyed a middle class standard of living. As the last poster and Eric pointed out, that will begin to change for both privates and publics(both still part of the human race i beleive despite the references that publics are pigs-like their are none in the private sector) over the coming decades.
Posted by Tough Love on December 6, 2012 at 6:52 pm
Yes, I do repeat things …. with everything I say being accurate.
And when I say “very rich”, I am generally referring to the pension promised a Public Sector worker when compared to a Private Sector worker making the SAME pay, retiring at the SAME age, and having the SAME years of service. Doing so makes it the PROPER apples-to-apples comparison.
And yes a rather modest $20K Public Sector pension is “excessive” if the pension of the comparable Private Sector worker is typically $10K.
Posted by Anonymous on December 5, 2012 at 12:09 pm
Why not do away with the COLA entirely? Is that not one of the cures for unsustainable public pension plans?
Posted by Tough Love on December 5, 2012 at 1:16 pm
A good start (but hardly a cure), but should be combined with:
(1) full retirement ages no less than 65 (62 for police)
(2) full actuarial reductions of 6%/yr. for early retirement
(3) “pensionable compensation” based on the average of the last 3 years BASE PAY only
(4) retiree healthcare subsidies equivalent to what Private Sector Taxpayers typically get …. NOTHING.
(5) no PHONY disability retirements … meet SS’s definition … annually !
Posted by Tough Love on December 5, 2012 at 1:17 pm
And of course a formula factor no greater than 1.25% per year of service (generous by Private Sector standards).
Posted by Anonymous on December 6, 2012 at 6:58 pm
TL,
I beleive he was referring to SS not public(or private) pensions. But anyway, the COLA is already gone(probably for a long time) . 1)Retirement age is 65 now except for police and fire , 62 is too old for cops on the beat. 57 would be better. 3) there should be NO early retirement before that age , the pension should be frozen and not be able to be collected until that age requirement is met(combined with some years of service requirement) if someone wants to pack it in early. 3) pens. compenstation is already last 3 yrs and now last 5 for new employees-OT has never been included in this compensation, nor has sick time– it is base pay only. 4) there are many muicipalities who do not offer retiree health care. With the 65 yr old requirement in effect, this is really not a big expense for either party(of course that will change when Medicare changes) as medicare is the primary insurer anyway. 5) there is a huge problem with PHONY disabilities. That standard should be high, but cuts shouldnt be made to people truly disabled as a result of the employment. Fact is, most publics live in middle class homes and try to raise families just like their private sector counterparts. There are some fat cats at the top along with sweetheart deals. But lets not make this out to be like every public employee has it made in the shade while all private sector workers toil all day to pay for it and get nothing in return.
Posted by Tough Love on December 6, 2012 at 8:45 pm
You said the the retirement ages is now. I though that was only for new workers … too little too late.
Actually early retirement at earlier ages is Ok as long as (as you said) we don’t pay for pre-Medicare age healthcare costs, and the pension reduction per year of age you begin to collect earlier than age 65 is the full actuarial reduction of 6%/yr so there is ZERO Taxpayer subsidy for the early retirement.
If there must be SOME retiree healthcare subsidy, it should be AT MOST 50% of the cost of a MODEST (not Cadillac) Plan (with copays, deductibles, and coinsurance comparable to Private Sector coverage). And that 50% should only be for those with a full 35 (or more) years of service, with a proportionately smaller subsidy for less service.
It’s way past time for Public Sector workers to STOP getting a better deal … on the Taxpayers’ dime.
Posted by Tough Love on December 6, 2012 at 8:51 pm
I left out 65 from the end of the 1-st sentence above.
Posted by Eric on December 5, 2012 at 11:06 pm
Tough Love:
Do not worry about reforms. Politicians will never make hard decisions. As I said, in Weimar Germany all of the marks together for the entire country could not purchase one newspaper. This problem in the US will take care of itself. We in the US will be far worse off than Weimar. Our printing press for the world’s reserve currency has kept us going long into overtime, but the die has been cast long ago. It began when Nixon took us off of the gold standard in 1971. He really did not have much of a choice.
Hopefully, you have a house in the country and are there when the SHTF.
I am not smart enough to know when and am too smart to guess.
Eric
Posted by Tough Love on December 6, 2012 at 12:26 am
That’s not the type of “solution” I’m hoping for.
Much more palatable would be a full rollback of Public Sector Pension & Benefit promises to a level no greater than that granted the average Taxpayer by his/her employer. The resulting multi-$Trillion savings would be a great (and justifiable) start to addressing this nation’s fiscal ills.
Posted by Eric on December 6, 2012 at 12:32 am
Tough Love:
Better have that county home, just in case.
Eric
Posted by Pat on December 6, 2012 at 1:29 am
I think the comment was to do away with the social security cola, not just the public employee cola, which is already being done.
Posted by Anonymous on December 6, 2012 at 7:02 pm
Don’t question TL, he knows everything there is to know!!!!!!!!!!!!!
Posted by Tough Love on December 6, 2012 at 8:53 pm
No, not everything, but without doubt a great deal more than you.
Posted by Anonymous on December 7, 2012 at 1:19 pm
I beg to differ
Posted by MJ on December 6, 2012 at 10:03 pm
I think that TL’s overall point is that the “employees” should not be making more than the employers (taxpayers). With California setting the trend for municipal bankruptcies due to overly excessive salaries, benefits and pensions and spending sprees with no thought to the future, there is simply no way to pay for it and like it or not the pensioners will feel the full brunt of it. Since California has always been a trend setter, a lot of other states will not be far behind. Anybody notice a pattern here? Nothing but a lot of worthless IOUs.
Posted by Tough Love on December 6, 2012 at 10:32 pm
Yes .. for reasonably “comparable” employees, “Total Compensation” (cash pay plus benefits plus pension accruals) should be as close to equal as is practicable in the Public and Private Sectors.
Today, while cash pay is just about equal (in the vast majority of occupations), the Taxpayer paid-for share of Public Sector Pensions & Benefits are ALWAYS multiples greater in value at retirement than that of their Private Sector counterparts.
Taxpayers should NOT be paying for this excess.
Posted by Pat on December 7, 2012 at 12:46 am
Some thoughts on TL-
1. She does state the same opinion over and over, which is interesting since she is mostly preaching to the choir on this site. I would suggest she contribute some new information every once in a while.
2. I disagree with her premise that public pensions match those of current private pensions. While it seems to have its merits, private pensions have been butchered down to nothing over the years by needy and greedy employers, while the publics have been protected by the unions. She is advocating a race to the bottom, where eventually no one will have any type of pension except the rich.
3. I think she is avoiding the topic of ending social security colas. Maybe she feels a sense of entitlement after paying into the system after so many years. But she does not have to worry, it will never happen!
Posted by Tough Love on December 7, 2012 at 1:08 am
Responding .. …..
(1) Yes it’s true. Thee is only so much to say and I hope the repeated thoughts educate new readers. While repetitive, they are always accurate.
(2) I’m guessing that you disagree because you are a Public Sector worker and motivated by self-interest. What you call a race to the bottom, I call a financial rape of Private Sector Taxpayers by the greedy Public Sector Unions & workers and accommodating (bought and paid for) politicians.
(3) As far as I know the only discussion regarding SS COLAs is a possible change from the Standard CPI to the Chain Weighted CPI. The effect would be negligible in any given year but have a modest cumulative impact over a 20-30 year retirement. It could be problematic for those with the lowest incomes. And I do believe this change (or other of equal or greater financial magnitude) will take place. SS just needs some modest financial “shoring up”, but Medicare and the unfunded Pensions of States & Local Public Sector workers are in “basket case” shape. The revenue side cannot be raised sufficiently to fix these problems. The benefits side must be reduced … for CURRENT beneficiaries.
Posted by Anonymous on December 7, 2012 at 1:24 pm
OMG!! TL i apoligize for thinking that you were male. I will make corrections in the futere. I did not know.
That $20K pension that you talk about is for some their only source of “pension” type income as they are ineligible for SS. When you factor in the $10K private pension plus SS the compensation is much more alligned. I am shocked that you would agree to 50% post retirement beifits coverage. Maybe like the grinch your heart grew three sizes that day. LOL
Posted by Tough Love on December 7, 2012 at 8:23 pm
Anonymous, what if that Public Sector worker also rec’d $10K in SS benefits ? Do you agree that their $20K (vs the $10K pension for the comparable Private Sector worker) is excessive ?
Posted by ericlaursen on December 9, 2012 at 2:48 am
Greetings from the author of the book highlighted in this post. One thing mystifies me: My book is informed by (among other things) over 150 interviews with key players in the Social Security debate, including many who are no longer alive. I won’t go into the many twists and turns that my original research sheds new light on. But to call my book “a compendium of prior research” is way uninformed. If you want to talk about programs “run in secret by insiders,” you’d do better with the military-industrial complex.
More to the pojnt, the three passages highlighted here don’t tell anything like the story this very selective reading claims they do. First, I argue in The People’s Pension to restructure Social Security along more directly democratic lines. But that’s to protect it from the flim-flam of conservative calls to privatize or otherwise gut the program, not because there was anything wrong with the people who managed Social Security in its decades of expansion. In fact, they were probably some of the greatest public servants this country ever had. It just doesn’t make sense to run it that way anymore. If you want to talk about
Second, bad economic assumptions in the 1970s are not a reason to believe that Social Security is somehow unsound. They are what they are. No one can see perfectly into the future. Meanwhile, in the present, 21 million people would be living in poverty without Social Security. If current trends remain in place, today’s younger workers will need Social Security even more, because other sources of retirement income (pension, home equity, etc) are drying up. We need it, and it’s worth paying for. More than the Bush tax cuts, for example. End of story.
Posted by burypensions on December 9, 2012 at 9:12 am
Mr. Laursen,
I apologize for labeling your book before finishing reading it but my intention was to praise it by calling it a compendium of prior research. It’s valuable and at 750 pages I’m sure there would be much new research. However I’m only up to about page 100 (you write very well and it’s one of those books that I ‘milk’ since I’m enjoying the process of reading it) and only noted all the references cited and jumped to that conclusion.
As to the efficacy of the program I have a different view, for now. If there are 21 million people (the aged) it has kept out of poverty I see 21 million people (the young) it may be keeping in poverty. There’s also the social aspect of generations being taken care of by parents that they, in turn, take care of as they age. I see Social Security as intruding on that unwritten generational contract. Plus there’s the fraud aspect (10 million on SS disability?) that comes with government programs (from what I’ve witnessed in Union County).
I could be wrong though. I look forward to finishing your book and educating myself.