April 04, 2007

Hello, Allstate: There Is No Social Security Crisis. Also, Your Daily Ecology Minute.

I started my day with the April, 2007 issue of National Geographic, courtesy of the roommate who left it on the living room coffee table. It's a particularly good issue for the ecologically conscious, with a three article special report entitled "Saving the Sea's Bounty." As is being noted in more venues with increasing, but not yet sufficient, alarm, ocean fish stocks and marine ecosystems all around the world are collapsing catastrophically due to overfishing. Major species, beautifully photographed to allow readers to see what's vanishing without our notice, are disappearing left and right.

The recommendations for preserving underwater ecosystem diversity and abundance hinged on two key points: sharply limiting the number of fishing boats and creating no-take marine reserves.

Then there was an article about one of the last remaining stretches of native tallgrass prairie in the Flint Hills of Kansas. A diverse ecosystem maintained by fire and grazing, these praries gave rise to the bountiful soils that stretch throughout the center of the North America continent. The article describes the way the grasses' roots reach down as far as eight feet in some places, forming dense and tangled forests of biomass that dwarf their aboveground, and disposable, leaves.

Imagine such grasses working their will on the raw minerals below them for uncounted thousands of years; supporting and depending on fleets of insects, hordes of microbes and lacy networks of fungal mycorrhizae that rival the grasses in reach and knottiness. Imagine these communities dying and regrowing for all that time, accumulating nutrients and yielding them up, clinging tight to the mineral substrate and adding to it all the ash and surface detritus that could be captured and slowly brought into the realm of the soil.

Now imagine that all this is removed and replaced with row crops that leave much of the ground surface bare instead of covering it obsessively. The roots of crop plants are regularly disrupted and don't grow nearly as big or prolifically as the native grasses, with all that energy going instead into starchy seeds destined for distant corn syrup production plants. Think seriously about that, even for a little while, and you'll begin to get an idea of the magnitude of the soil depletion problem that inevitably results from sustained, mechanized agriculture.

Then, suitably edified, I closed the magazine so that the back cover was facing up. Having nothing else particularly to look at, I took in the little watercolor cartoon in the Allstate Insurance ad on the back. It was suitably cute. I read the ad copy. I thought, "You miserable bastards, keep your hands off my Social Security." For this is the oft-repeated slander, right wing propaganda from the permanent enemies of Social Security as dressed up in the clothes of reassuringly tepid-sounding policy advocacy by your favorite insurance industry retirement planners, they had given to be printed on the back of an innocent magazine in a bouncy serif font:

Average life expectancy in the U.S. has risen to an all-time high. Great news, except that the amount of money people put away for retirement isn't rising at all. How is our nation going to make sure its citizens have the money to retire? Allstate has a few ideas:

Americans will not be able to rely solely on Social Security for a comfortable retirement. In the future, it's projected to cover an increasingly smaller percentage of the average retirement. There's debate as to whether in should be repaired or replaced. But what's clear is we need to reform Social Security now.

2. ... [Advocacy for increased participation in 401(k) plans.] ...

Ultimately, everyone is responsible for their own retirement. It's why we support laws that reward people for saving. Tax-advantaged savings vehicles, like annuities and IRAs, are two examples of products that can help allay Baby Boomers' biggest fear: living to see the well run dry. ...

Eeeek! Longer life expectancy! Decreased savings rates! The well! It's running dry! The richest society on Earth can no longer modestly insure the elderly against utter poverty! Somebody help us spread an ethic of personal responsibility among the indigent masses, please! Ahem.

Is there really debate about replacing Social Security, such that it should be posited as the opposite half of a dialectic about repairing it? No. No, there isn't. Making significant changes to Social Security is about as popular as President Bush, and in case the message wasn't clear to the poll-illiterate members of the establishment media that this is the position of a majority of Americans, people hate that guy. Is Social Security even in a solvency crisis, such that it couldn't be fixed entirely by very modest changes? No. No, it most definitely isn't.

And lastly, a note to the fervent personal responsibility advocates among our longstanding corporate aristocracy who are busy sending U.S. jobs overseas: Savings are down because most Americans haven't gotten a raise since the beginning of this current, glorious economic 'expansion,' while our costs of living have continued to rise. So sod off. And keep your grubby paws away from our Social Security.

We mean it.

Posted by natasha at April 4, 2007 08:21 AM | US News | Technorati links |

Reward savings? With 1% interest rates? And how do those morons confuse a smack with a wet fish and a "reward"?

The Tallgrass Prairie is a preserve that has been reconstructed. The natural prairie had pretty much been destroyed when this project was launched in the 1970's.

Posted by: Scorpio at April 4, 2007 03:15 PM

So let me get this straight... As the ratio of workers to retirees dwindles to 2:1, all it's going to take to fix Social Security are "very modest changes"? Let's try the math on that one.

Today, the ratio of workers to retirees is 3.3:1 and the Social Security tax is 12.4%. This results in a replacement rate of 41%. When (not if) the ratio of workers to retirees decreases to 2:1, the Social Security tax will have to be increased to 20.5% in order to maintain the same replacement rate. That's a 65% tax increase: not what I'd call a modest change.

Under the current law, Social Security only offers a 0.23% above inflation return on investment. Increasing taxes or reducing benefits will make Social Security an even worse deal than it is, today. Raising taxes to the 20.5% required to maintain the current replacement rate will push the return on investment down to 3.35% BELOW inflation. Reducing benefits will have a similarly negative effect.

Is Social Security really that sacred that we have to keep it around even when it offers terrible rates of return? Social Security was a pretty good deal back when the ratio of workers to retirees was over 40:1. But times have changed and the pay-as-you-go scheme just isn't working. The Social Security tax has already been raised 520% since the inception of the program. Similarly, the Social Security base has been increased 130% above inflation. Enough is enough.

Posted by: Bill Woessner at April 4, 2007 07:13 PM

Scorpio - Hmmm. The article's author seemed to be of the opinion that at least a portion of the area in question had been spared the plow because it was very, very rocky. Perhaps this referred to the part of it that's actually a reserve? I can't say I'm an expert, I just read the article.

Bill - Not really how it works, is it? Like for example, we have way more retirees now that back when most people worked in some sort of hard laboring profession and keeled over at 56 like clockwork. But we're more productive, so it all works out. Also, what if we get immigrants? This is the United States, you know, that happens now and again. Your math is simple and reasonable sounding, but not especially relevant.

Social Security is the insurance program we have to make sure that fewer old people starve. Most young people, as I can tell you from watching adventurous friends during my days in Silicon Valley, are no geniuses when it comes to investing. Presuming they have anything to invest in the first place. We can't all be Suze Orman, we still shouldn't have to starve when we get old.

The tax code alteration I personally favor most is eliminating the cap. People who make more than $80K (give or take, it must have been adjusted for inflation since I last looked) currently pay no SS tax on any income above that. That's a pretty significant boost to the solvency picture without affecting most people in the slightest.

And btw, it dang well is sacred. The overwhelming desire to screw around with it is a marginal, minority view and that people will continue to call out as hucksterism. Just because some people have hated it for 60 whole years, since it proves that government can do something good, doesn't make it any more respectable or less venal.

Posted by: natasha at April 4, 2007 10:38 PM

That is precisely how it works. Anyone who claims otherwise has absolutely no clue how Social Security works. The current generation of workers supports the current generation of retirees. Ergo, if you're going to pay retirees 41% of an average wage and there are 2 workers per retiree, the tax rate has to be 20.5%. No way around it. Your claim that productivity will magically save everything is simply incorrect. Social Security benefits are indexed to wage increases, not inflation. So higher productivity simply leads to higher Social Security payouts.

Increasing the Social Security base won't accomplish anything, either, unless you implement it in an extremely unfair way. Social Security benefits are paid in a progressive manner specifically because the tax, itself, is regressive. If you flatten out the tax, it's only fair to flatten out the benefit structure. So while you would collect more money from the wealthy, you'd just pay it back to them in the form of benefits. Unless, of course, you don't increase benefits for people who are suddenly paying more taxes. Because, you know, that would be really fair.

If Social Security is such a great program, why not just let people opt out of it? Obviously, since Social Security is so great, no rational person will opt out. So the program's finances (such as they are) won't be threatened. But of course that's not the case because Social Security sucks. I know plenty of people who would gladly give up all the money they've paid in to Social Security to get out of the system. Sounds like a win-win for the government: they get to keep the money already paid in and they don't have to pay out benefits in the future.

Social Security worked pretty well in the past, back before the taxes were exorbitant and benefits were reduced. But with the current state of the system, Social Security does nobody any favors. The average workers gets less than 1% above inflation return on his money. Everyone can trivially beat that rate of return with a simple money market fund or even a high-yield SAVINGS ACCOUNT. Social Security is a classic case of people voting themselves generous gifts from the public treasury. Of course it's a popular idea. What people don't seem to realize is that WE PAY FOR THOSE GENEROUS GIFTS. Stop the cycle. Stop taking our money and throwing it away. Stop indebting future generations. They deserve better and so do we.

Posted by: Bill Woessner at April 5, 2007 06:08 PM

It has been very interesting to have a Google Alert for Blogs on "Kansas Flint Hills!"
Yours came up today!
We now have a 22 county Flint Hills Tourism Coalition this is the new website: http://www.kansasflinthills.travel/
Our web site is to promote the Kansas Flint Hills; and we are so happy to be in the 22 page color photo spread in National Geographic's April Issue on the Kansas Flint Hills, as a distinctive landscape.

We are really looking forward to the increased interest following that event.
We would appreciate a link from your site, to ours, if you are willing to do so. THANKS!
Best wishes!

Bill ;-)

Posted by: Bill Smith at April 5, 2007 07:54 PM

Bill W - You are a twit. There are links in the post above for a reason. I'd feel more compelled to argue with you here, myself, but the fact that your position is about as popular as the plague leaves me feeling that it would be a waste of my time. And I don't think you'll learn how to sing at the end of it.

Also, I don't appreciate having D.C. based PR hacks spout BS talking points on my blog like badly functioning blast faxes. Dammit Bill, I'm a liberal blogger, not a Washington Times reporter. I don't care what your Beltway Republican friends think about the Social Security that kept my family from losing our house after my father died, leaving three kids and a wife who hadn't held a job in over a decade. Do. Not. Care. This sort of thing didn't amuse me when the moron from the anti-Net Neutrality PR hack group did it, it doesn't amuse me now.

Bill S - I'd be delighted to. Thanks for stopping by and keep up the good work.

Posted by: natasha at April 5, 2007 09:20 PM