Social Security Part 2

The previous blog post addressed some of the misconceptions regarding individuals' social security benefits. Let's look now at one of the myths about how the program is run overall.

As mentioned in Part 1, Social Security is and always has been a pay as you go program. In other words, current benefits are paid out from current contributions (i.e. payroll taxes, aka FICA taxes, aka Social Security taxes). Money for individual retirees isn't sequestered in personal accounts. Until fairly recently an annual surplus was created due to contributions exceeding benefit payouts. These funds were held in what is referred to as the Social Security Trust Fund. Most people understand that much. However many people harbor the misconception that the Trust Fund is similar to a bank account with a pile of money setting in it, waiting for Social Security checks to be distributed. 

By law, any surplus must be invested in interest bearing US Treasury bills. Just like when your bank uses the money in your savings account to make loans at interest, the Social Security administration is using the money in the Trust Fund to earn interest. Not only is this required by law, but it makes good fiscal sense to put the funds to work. The Social Security Administration could theoretically invest in the stock or bond market, with all the attendant risks, but instead, the money is invested in securities backed by the full faith and credit of the US government. The government is required to, and does, pay back the bills with interest when they mature or when the payouts exceed the contributions. 

It could be looked at, pejoratively, as nothing more than an IOU that hasn't been paid back so that Congress, or the President, can "raid" the Trust Fund, leaving it unable to meet its obligations. While it's true that the cash that is freed up each year when contributions exceed benefits is used as part of the general fund, that's an incorrect way to look at it. The government typically runs an annual budget deficit, meaning that tax receipts are exceeded by expenditures. These deficits are covered by borrowing in the form of government bonds. If some of that borrowing can be from itself rather than from private individuals or even foreign governments, wouldn't that make more sense? 

One of the pervasive myths is that a President or Congress, usually one that the spreader of the myth doesn't like, "stole" money from the Trust Fund in order to fund a war, or a social program, or whatever action the myth spreader is against. It's true insofar as some of the money used to pay for whatever nefarious project we're talking about came from cash obtained by selling Treasury bills to the Social Security Trust Fund. But it's untrue in that this happens every year when there is a surplus in Social Security contributions vs payouts. It's partially true that it's not been paid back, but it's untrue since it's not supposed to be paid back until the instruments mature. In each of the years since the Trust Fund has been running an annual deficit the general fund has been making up the difference by redeeming Treasury bills and/or paying interest. 

They will keep doing this until there are no more Treasury bills to redeem. That's when we'll have a problem, not because money was stolen and not paid back (it was borrowed and will have been paid back) but because the annual deficits finally used up the accumulated surpluses. Even then, based on the projected contribution levels, the Social Security Administration will be able to pay around 70% of benefits just from payroll tax collections. Congress will then need to decide how to handle it. Reduce benefits? Political suicide. Increase payroll taxes? Probably not popular. Start collecting payroll taxes on 100% of income, not cutting off at a certain point. Something will need to be done, but the coming crisis isn't because someone you didn't like stole money and didn't pay it back.

Social Security Part 1

I've blogged about this before, but occasionally I have to re-address the topic. 

One of the misconceptions about Social Security is that it's "your" money that "you paid into" in the same way that the money in your bank account or 401(k) is yours. 

Another is that it's not an "entitlement". let's start with "not an entitlement". 

People who are anticipating receiving social security benefits often like to draw a distinction between their benefits and what they disparagingly call "welfare" benefits. Some of them don't even like the term "benefits". And there is a distinction. Benefits such as SNAP, or TANF, are strictly need-based, while social security benefits are based on lifetime wages. Both are termed "entitlements". "Entitlement" is a term of art that simply means that you are entitled to the benefit if you meet the requirements. The benefits are written into law and are cannot be defunded if the current Congress doesn't like them. Future Congresses can reduce benefits or change requirements, and have done so several times over the years. 

The idea that because you "paid into" social security leads some people to believe that any benefits that are less than the amount of FICA taxes that you have paid over your lifetime has been stolen from you. people wonder aloud "where that money went". This misconception arises from the belief that each person has an account, where the money you paid in is tracked over your working life and when you retire, is paid out from that account. It's true that they amount that you receive as social security benefits upon retirement derives from a formula based on your highest earning years, which is related to the amount you paid in social security taxes, but is not identical to it. Social Security has always been a pay as you go system. Current retirees' benefits are paid from current wage earners' payroll taxes. The amount that current retirees "paid in" has long ago been used to pay for a previous generation's benefits. As far as recouping what you've paid in payroll taxes, an extremely long-lived person could conceivably receive more in benefits than they paid in taxes over their working life, while someone who died before retirement age would receive nothing (although a surviving spouse could receive benefits equal to what the deceased would have received). The person who died early doesn't have a surplus of unused money and the centenarian doesn't stop receiving benefits when what they "paid in" runs out.  

You may pat yourself on the back that your social security benefit was earned (which it was in part) which makes you better than a SNAP or TANF recipient, but it's still a "benefit" and it's still an "entitlement". 

I Just Can't Bring Myself to Be Optimistic

The future of American democracy doesn't look very good. I'd like to be optimistic, but despite bright spots here and there, there's little reason to be. 

Let's not fool ourselves though; participatory democracy was never very high on the to-do list of the rule-making class in this country. It shouldn't be a surprise to anyone that there wasn't a right to vote in the original version of the Constitution and that white, male landowners were generally the only ones who could vote. The post-Civil War 15th Amendment prohibited denying the right to vote on the basis of "race, color, or previous condition of servitude", but women still couldn't vote until the 19th Amendment was ratified. Jurisdictions quickly put laws on the books that effectively denied Black Americans the vote by imposition of poll taxes, literacy requirements and even violence. It wasn't until relatively recently that the dominant parties' candidates stopped being chosen in the proverbial smoke-filled rooms and primaries became the rule for choosing candidates. But we have fooled ourselves. We have convinced ourselves that our system is strong and resilient enough to resist the attempts by dishonest politicians to corrupt it. We thought if we just cajoled enough like-minded people to get out and vote, then we could at least elect people who somewhat represented our interests. There's so many things wrong with our assumptions.

First of all, the system itself is weighted. It was designed to be weighted. The Senate gives equal representation to every state, no matter the population. When the Constitution was written each state was more or less its own separate country, its own culture, sometimes with little in common with the other states, so the Senate was designed so that the more populous states couldn't dominate the smaller states. Senators for many years weren't even elected, but were appointed by each state's legislature. Of course the House of Representatives, ostensibly representing populations, was weighted in favor of enslavers, since enslaved people were counted as 3/5th of a person, even though they couldn't vote. The undemocratic nature of Congress spilled over into presidential elections, since the electoral votes that each state had was based on the number of members of Congress. In recent elections we've seen how the Electoral College distorts the results. In the last six elections, we have had two where the losing candidate received more votes than than the winner, and at least one where a few thousand votes in a handful of swing states could have changed the results, awarding the presidency to the candidate with almost 8 million fewer votes. 

The current population distribution makes this tilted system even worse. Democratic leaning voters, in general, tend to be clustered in urban centers, while Republicans dominate the rural areas and smaller states. Even though the current Senate is divided evenly, 50-50, the Democratic half represents 40,000,000 more Americans. This is never going to change. You might think that this would be offset by the House of Representatives, where representation is by population, but in many states the House delegation is becoming increasingly undemocratic. In many states the state legislature has control over how district borders are drawn. A party that has control of the redistricting process after a census can, and often does, draw the district lines in such a way as to maximize the chances that their party will remain in power. (Both parties do this, but in recent years Republicans provide the most egregious examples). You can see this in several states that have elected Democrats to statewide offices, yet retain a Republican majority in their legislature and a majority in the Congressional delegation. Often the party in power controls a much higher percentage of seats that the percentage of votes received. By not only gerrymandering the Congressional districts, but the state legislative districts a party can theoretically remain in power indefinitely. 

Another anti-democratic feature that we saw several times in recent years involved Republican legislatures reducing the power of Democrats who had defeated Republicans in statewide races. This happened to at least two Republican governors signing laws on their way out to limit their successor's authority. Perfectly legal, if shadily unethical. This predilection of Republican lawmakers to craft laws to retain power has been picking up steam since the 2020 election. I'll get back to that in a moment after a brief return to the US Senate.

The United States Senate has a institutional rule called the filibuster. It used to be a way for a bill's opponent to delay a final vote on a bill he opposed by talking it to death. Since it took 3/5th of the Senate to effectively end the filibuster by ending debate, this meant that there was always the danger of a bill being sunk by minority opposition. In recent years the requirement that a filibusterer take the floor and speak has morphed into a bill needing 60 votes to pass if the opposition merely signals their intent to filibuster. In theory the filibuster ensures that there is broad support for a bill and that a slim majority cannot run roughshod over the minority. In theory. In practice it has become a tool for obstruction. Exceptions to the filibuster have been carved out over the years - it no longer requires 60 votes to confirm federal judges or Supreme Court Justices for example, but in general a minority as small as 41 Senators can kill a bill. Currently, Democratic initiatives are being held up due to united opposition by 50 Republicans and reluctance by several Democrats to eliminate the filibuster. 

One of the hallmarks of our system, even at its nadir, was the concept of a peaceful transfer of power. Even when we were more of an oligarchy than a Democratic Republic we could always congratulate ourselves on the fact that the loser always gracefully stepped aside and made way for the winning candidate. This all changed in 2020 when President Trump not only refused to concede, but stirred up his many supporters by claiming that it was really him that won. And not only won, but won by a landslide. He claimed victory on Election Night while votes were still being counted in closely contested states and spent virtually every day through Inauguration Day and beyond casting doubt on the results, refusing to attend his successor's inauguration. This could have been chalked up to a whiney rantings of a petulant loser if not for the fact that thousands (if not hundreds of thousands) of his supporters believed him. Some were so convinced by his easily debunked lies that they attacked the US Capitol in an attempt to stop the counting of the electoral votes, the last (mostly symbolic) step in the lection of President Biden. 

Since last January 6, Republicans have been busy changing the rules, throwing up roadblocks to voting, purging voter roles and reducing the types of identification needed to register. They have been rewriting election procedures, taking authority for vote counting out of the hands of trained professionals and giving it to legislatures and other partisan bodies. Officials who refused to listen to Trump's entreaties to "find" votes were punished by having their authority curtailed, or by being primaried. All over the country people who vociferously called the last election stolen have been elected to local and state lection boards. The former president continues to call the election stolen, calling for some unspecified action to prevent it from being stolen again. Over a hundred members of Congress voted to not accept as valid electoral votes for President Biden in swing states and continue to back up Trump's lies. With all of these actions, some in plain sight, some hidden away, how can we be sure that these believers in the Big Lie won't do more to overthrow an election than they did in 2020? 

Then there's the purely political. Due partly to a razor thin majority and constant obstruction from Republicans, President Biden 's administration is being perceived in many quarters as failed or incompetent, peeling away support that might make the difference in the 2022 Congressional elections. What will happen if the Republicans turn over enough seats to regain the House majority? Impeachment? What about the Senate? With Republicans in charge Biden can say goodbye to confirming any federal judges, let alone any Supreme Court vacancy that might come up. 

The biggest reason that our democracy is in danger is the credulousness of so many Americans - willing to believe lies, indulge in conspiracy theories and vote against their own interests. That's the main reason why democracy is all but dead.