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January 11, 2005

Blah Blah Social Security Blah

I will have lots more to say about Social Security my own self soon. But in the meantime, here's a roundup of things I've recently found useful:

Paul Krugman's latest column on Social Security.

This account in the American Prospect of why the British privatization of their Social Security has been a disaster. Be forewarned that it's hard to follow, and thus only for SS obsessives. All you need to know is privatization has been tried with horrible results in other countries, England included.

Matthew Yglesias has written a column for the American Prospect in which he makes the same point I did about why future retirees deserve higher Social Security benefits.

Matthew Yglesias also here explains the concept of the "infinite horizon" in accounting. (All of a sudden the Social Security Trustees are using this, in order to make the "problem" look scary.) I didn't understand this at all until he posted this.

And lastly... as you doubtless know, many people say the Social Security Trust Fund is just "meaningless IOUs." The reason they say this is because they want to lay the groundwork for defaulting on the Trust Fund bonds. And the reason they want to do that is because the bonds were bought via the payroll tax, which falls heavily on lower-income people... while the bonds would be paid back via corporate taxes and the income tax, which both fall heavily on higher-income people. As you can see here, the top 5% of households pay 15.4% of the payroll tax, but 49.1% of income taxes. The top 1% pay 4.0% of payroll taxes, but 29.5% of incomes taxes.

So, via MaxSpeak, here's a paper by Dean Baker looking at the consequences of defaulting on the Social Security Trust Fund. His conclusion? A default on the Trust Fund in 2016 would transfer over a trillion dollars from the poorer 95% of American households to the richest 5%. An average household in the top 1% would have "a net gain of more than $730,000." So, you can see why they'd like it.

Posted at January 11, 2005 09:49 PM | TrackBack