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Thursday, July 07, 2005

And another thing

Here's one other interesting detail from the CBO report (link to original post):
Social insurance receipts were about $39 billion, or 7 percent, higher in the first nine months of 2005 than in the comparable period last year, primarily because of gains in withheld payroll taxes of about $34 billion, or 7 percent.
Two thoughts:
  1. If Republicans are going to act like the increase in income-tax revenues is a permanent feature, then they ought to be held to it when it comes to Social Security taxes: surely they will update their projections of imminent financial collapse for the SS system
  2. Pay attention to whether your favorite
    mainstream media sources note the increase in social insurance receipts. If they don't write a letter to the editor asking why their coverage is skewed (and better yet, why it is so focused on short-run swings in any revenue source).

Update: Regarding the first comment on this post, my point here was basically meant to be tongue in cheek. As the title of the earlier post suggests, I don't think anyone should treat these numbers as anything more than the blip-on-the-screen that they are. That said, I disagree with strategery4's second point as a general claim. It depends on whether the higher payroll tax receipts are due only to (say) increased labor supply, or instead to increased productivity. If it's productivity, then the whole wage profile shifts up, and the long-run picture will improve (at least, over the kind of finite horizon that we usually consider).

Regarding the second comment, I think the SCOTUS stuff will totally doom any SS legislation. I've also worried since last Friday that it will suck all the air out of any nascent (ok, that word suggests wishful thinking) move toward a coherent reform platform for the Dems ahead of '06. On the other hand, these guys are so bad at politics that maybe having everyone else's attention focused on an isssue like the Court isn't so bad.


Blogger strategery4 said...

Oh god, stop me before I comment again! What's that? There is no god? OK, then, here goes.

Couple of thoughts here:

1. The Repubs can't really change the story on the SS "crisis" because they've had such a weak case all along. Even with their misleading claims, SS doesn't go "broke" until 2042. This has really undercut their argument for change, as they seem to have realized belatedly. Now they are saying the crisis comes when SS benefits exceed SS taxes (around 2018) but that makes it clear that what we have is a budget problem, not just an SS problem. And of course that budget problem has been made worse by . . . well, you know the list. And emphasizing the earlier date also starts to make current seniors worried about getting their checks.

2. As for the substance, higher payroll tax receipts don't translate into a much better picture for SS in the long run because the higher wages that generated the revenue also make for higher benefit payments down the road. Higher wages also mean higher spending for Medicare and Medicaid (since health has a big labor component). Even so, a bigger economy does help somewhat with the overall fiscal problem.

7/07/2005 10:57 PM  
Blogger Mark Thoma said...

Intelligent comments aroung this place. Makes me worry about bringing down the level of discourse by weighing in, but here goes. Do you guys think the Supreme court drawing the press like flies (and if what you say about two retirements ... ) makes it more or less likely a Social Security reform bill will come to a vote. I can't decide. It's an opportunity to let reform die as attention moves elsewhere and it's also an opportunity to proeed without much scrutiny. And there are probably lots of considerations I haven't noted. Press coverage has been nil, and with today, I don't expect the press to devote much to what they might see as a dying story.

7/07/2005 11:21 PM  
Blogger strategery4 said...

Good question so I'll bite. And to fully reveal that I'm a Slate-o-holic -- not to plug that site but just to admit this is not an original thought on my part -- Mickey Kaus had argued there that the Bushies actually want an SC fight so that SS reform can die a quiet death, which seems plausible to me. I mean, how funny was it that the more Bush campaigned for his plan, the more support fell. The Dems should have offered him open-ended emergency appropriations to keep his 60-day tour going all year.

I think this line of reasoning is also bolstered by the recent development on SS in the House -- specifically, this idea (and I use the term loosely) of using the SS surplus to fund private accounts. As far as I can tell that plan -- which seems to be the only one House Repubs can rally around -- shows that the private account push has devolved into meaningless accounting gimmicks and symbolism.

As you suggest, it's possible this could become the Trojan Horse for more substantive reform, but I think it mostly lets the House Repubs vote for some form of personal accounts without exposing themselves politically, so that they can wait to see if the Senate does anything on SS; if so, then they might be able to pull a bait-and-switch in conference (but that would be a real stretch). Since the Senate has shown no appetite for SS reform and will be the body tied up with the SC nomination fight(s), though, I say this is the beginning of the end for Bush's SS reform plans. There's no way they do anything serious on SS next year, and after that Bush with will be quacking all the way to election day.

7/08/2005 10:32 AM  
Blogger Jonah B. Gelbach said...

Mark--thanks for the compliment. Especially given the high quality of your site....see my discussion of your question in the update above. I hope you'll keep reading.

7/08/2005 10:39 AM  
Blogger strategery4 said...

I have to admit that my tongue-in-cheek meter was on the fritz, but I wasn't trying to criticize you in pointing out the absurdity (or at least fundamental weakness) of the Repubs charges -- on that I think we basically agree.

At the same time, while I also had not thought about the issue of whether it's hours or productivity that's causing the revenue increase, I still think it doesn't matter which it is for SS -- either one means more revenue now, and either one means more benefits later. Checked the SS Trustees' Reports sensitivity analysis (on what they call the "real wage differential," which is basically productivity) and did it have a bigger impact than I'd suggested on the 75-year deficit. But without endorsing some of the goofy infinite-horizon numbers that have been coming out lately -- which I've heard are referred to by internal critics as the "Buzz Lightyear" projections ("To infinity and BEYOND!") -- it does seem to me like a reasonable goal to have the system be in balance in the out-years. That is, unless we get continuous growth in the rate of productivity improvement (and not just a level shift in that growth rate) -- in which case all of our future problems are solved, or at least the economic ones.

7/11/2005 1:33 AM  

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