[Speed Gibson,
Sunday March 6, 2005 at 9:42pm]
Deciphering the Star Tribune's Code
I appreciate this morning's effort to provide a base for discussing Social Security, specifically as to the reforms sought by the Bush Administration. I also appreciate the risk the Minneapolis Star Tribune takes in publishing such specifics, given the intensity of the debate so far. But while I think this was a good article overall, there were enough problems in the analysis to make me think this should have been placed in the OpEx section.
First off, Staff Writer Eric Black points out that the word crisis is a bit much, as used by both President Bush and former President Clinton. He cites the dictionary definition of crisis and the current cash flow figures. Fair enough; point made.
Next, however we read:
I wouldn't have used the word scam in this context; it's either an asset or it isn't. Scamming is a human activity. Writer Black holds his cards up, but his later use of "redeeming" and "cashing in" plus the sidebar statement that "The Social Security trust fund currently holds bonds with a value of $1.7 trillion" (emphasis mine) implies he's in the asset camp .
Let's use the dictionary technique again, to look up trust fund. Merriam-Webster says (in this context): a property interest held by one person for the benefit of another. First, note that the property (cash) must be held. That is not the case here; the money is spent on other government programs. Second, note that a trust is a two party transaction. That is also not the case here. Since you as either a taxpayer or recipient have no specific or even general claim on this "trust fund" there is no second party. There is only the Federal Government. Intra-government spending is of no account to either a worker paying taxes or a retiree receiving benefits.
A good analogy would be a married couple, where at the beginning of the year the wife "invests" $1,000 in her husband's trust fund for spring rest and relaxation. He gives her a "bond" paying 5% per annum, then spends the money on Twins tickets, golfing, new jogging apparel, maybe a cold brew or too. He "redeems" the bond at the end of the year, paying her $1,050. What just happened to Mr. & Mrs Jones, Inc? Absolutely nothing. At no point during this transaction did their net worth or liquidity change as a result of bundling these expenses into a "trust" fund.
Remember the new "Official Cost of Government" where we were supposed to use Personal Income Growth, not the Consumer Price Index to gauge government spending? Now, we are told that because the birth rate is now low, we don't have as many children to raise, and therefore our "total dependency" is currently declining. It will raise later in the century but still fall short of 1960 levels.
The only source cited for this "Total Dependency" approach is the Economic and Policy Research think tank, who by embracing Paul Krugman can safely be considered a liberal institution. The large graphic with a vague "those who defend ... its current form" reference implies a much broader acceptance of this metric, but names no one else. Allow me to translate: since you have fewer children, you can afford higher Social Security taxes.
Finally, under the sub-heading "If you are working" we have the oft-repeated misconception that: "The payroll tax takes 6.2 percent of your wages and an equal amount from your employer." Once again, if you follow the money, you realize that you, the employee, really pay both halves, over 11% of your true gross income. The only advantage to you is that the employer portion is intrinsically not subject to other income taxes.
All in all, this article is still a worthwhile read, even if it does probably belong in the OpEx section. As I've said to those who would try to boycott or blogswarm the StarTribune into submission or bankruptcy, we can still learn from such articles. For example, the point about "total dependency" is helpful both intellectually and as a heads-up for what our opponents will be saying later in this debate.
On balance, I give Staff Writer Eric Black a B.
First off, Staff Writer Eric Black points out that the word crisis is a bit much, as used by both President Bush and former President Clinton. He cites the dictionary definition of crisis and the current cash flow figures. Fair enough; point made.
Next, however we read:
There's a colossal side debate about whether the Social Security Trust Fund contains real assets (what could be a safer investment than a U.S. bond?) or is a giant scam (because you can't save for the future by lending money to yourself and spending it).
I wouldn't have used the word scam in this context; it's either an asset or it isn't. Scamming is a human activity. Writer Black holds his cards up, but his later use of "redeeming" and "cashing in" plus the sidebar statement that "The Social Security trust fund currently holds bonds with a value of $1.7 trillion" (emphasis mine) implies he's in the asset camp .
Let's use the dictionary technique again, to look up trust fund. Merriam-Webster says (in this context): a property interest held by one person for the benefit of another. First, note that the property (cash) must be held. That is not the case here; the money is spent on other government programs. Second, note that a trust is a two party transaction. That is also not the case here. Since you as either a taxpayer or recipient have no specific or even general claim on this "trust fund" there is no second party. There is only the Federal Government. Intra-government spending is of no account to either a worker paying taxes or a retiree receiving benefits.
A good analogy would be a married couple, where at the beginning of the year the wife "invests" $1,000 in her husband's trust fund for spring rest and relaxation. He gives her a "bond" paying 5% per annum, then spends the money on Twins tickets, golfing, new jogging apparel, maybe a cold brew or too. He "redeems" the bond at the end of the year, paying her $1,050. What just happened to Mr. & Mrs Jones, Inc? Absolutely nothing. At no point during this transaction did their net worth or liquidity change as a result of bundling these expenses into a "trust" fund.
Remember the new "Official Cost of Government" where we were supposed to use Personal Income Growth, not the Consumer Price Index to gauge government spending? Now, we are told that because the birth rate is now low, we don't have as many children to raise, and therefore our "total dependency" is currently declining. It will raise later in the century but still fall short of 1960 levels.
The only source cited for this "Total Dependency" approach is the Economic and Policy Research think tank, who by embracing Paul Krugman can safely be considered a liberal institution. The large graphic with a vague "those who defend ... its current form" reference implies a much broader acceptance of this metric, but names no one else. Allow me to translate: since you have fewer children, you can afford higher Social Security taxes.
Finally, under the sub-heading "If you are working" we have the oft-repeated misconception that: "The payroll tax takes 6.2 percent of your wages and an equal amount from your employer." Once again, if you follow the money, you realize that you, the employee, really pay both halves, over 11% of your true gross income. The only advantage to you is that the employer portion is intrinsically not subject to other income taxes.
All in all, this article is still a worthwhile read, even if it does probably belong in the OpEx section. As I've said to those who would try to boycott or blogswarm the StarTribune into submission or bankruptcy, we can still learn from such articles. For example, the point about "total dependency" is helpful both intellectually and as a heads-up for what our opponents will be saying later in this debate.
On balance, I give Staff Writer Eric Black a B.