My talk at OLLI on October 1st

Audience reaction to Social Security reform was surprisingly receptive.

Yesterday, I spoke at the Osher Lifelong Learning Institute (OLLI) at California State University Monterey Bay (CSUMB). I typically give these talks twice in the spring and twice in the fall. This year is no exception. Last spring, one of my OLLI associates proposed that I speak twice on economic issues during the presidential campaign in the fall. (The second lecture is on October 8th.) I agreed, although I was a little nervous. Why do we feel anxious? Because I know how even very reasonable people (and OLLI’s audience is generally very reasonable) get excited about certain candidates.

So what I did at the beginning of the presentation was to show the following slides.

Disrespect the candidate.

solve the problem.

When I showed you the slide, I said, “One good reason to do that is because I think the problem is much more interesting than the candidate.” This got a lot of nods and a few laughs.

I talked at length about federal spending, federal taxes, the federal deficit, and I showed you some scary numbers for the federal government. Congressional Budget Office. Then I realized that according to the CBO, between 2030 and 2034, Social Security spending, excluding Social Security revenues, will add 1.2% of GDP to the annual budget deficit on average, and Medicare spending, excluding revenues, will add 1.2% of GDP to the annual budget deficit. He pointed out that it would add 2.4%. Net revenue. So these two programs alone would add 3.6% to GDP. This is more than half of the projected deficit as a percentage of GDP. Without them, we would have been in a better place.

Next, I took a deep dive into Social Security and explained some points. The first was what motivated one of FDR’s advisers to create Social Security.

W.R. Williamson, an actuarial consultant with the First Social Security Commission, said Social Security is extending the federal income tax to low-income people “in a democratic way.”

I filled in the background and pointed out that the income tax at the time was a “class tax” and it was only during World War II that it changed to a “mass tax.” Surveying a room of about 30 to 35 people, I suggested that in the mid-1930s income distribution, none of them paid income tax.

I then explained the fact that Social Security was a pyramid scheme and was clearly designed to be a pyramid scheme.

I shared the following quote from comedian Dave Barry:

I say let go of the flow. [Social Security] Replace this system with one where you add your name to the bottom of the list, send some money to the person at the top of the list, and then you send the money. . . Oh wait, that’s our current system.

—Dave Barry, “The election may be decided by who kisses the most mouths.” miami heraldSeptember 24, 2000.

Then I quoted Paul Samuelson celebrating it as a pyramid scheme. I quoted from the chapter on Social Security in my 2001 book. The joy of freedom: The adventures of an economist:

MIT economist Paul Samuelson has added intellectual support to these policies. “The good thing about social insurance is that actuarially [italics Samuelson’s] It’s unhealthy. ” Samuelson’s argument was that if real incomes were growing rapidly, each generation could receive more from Social Security than they paid out. Social Security’s critics attacked it as a pyramid scheme, but Samuelson soundly defeated them in 1967 by: blessing That’s one thing. Samuelson wrote, “The Growing Nation is the greatest Ponzi game ever devised.”[1]

[1] Samuelson’s famous quotes are below: newsweek, February 13, 1967, quoted in Derthick, p. 254.

I then quoted Franklin D. Roosevelt explaining that a Ponzi scheme almost guarantees that Social Security will never be abolished.

[T]The horse tax was never an economic issue. They are politics through and through. We are putting salary contributions in there to give contributors a legal, moral and political right to receive a pension…tax dollars are being put in there so any politician can Social Security programs cannot be abolished.[1]

[1] From Arthur M. Schlesinger Jr. Roosevelt era, Volume. 2, The arrival of the New Deal (Houghton Mifflin, 1959), pp. 309-310, referenced in Martha Derthick. social security policy planning; Washington, DC: Brookings Institution, 1979, p. 230.

I then showed a photo of Hoover’s colleague Mike Boskin and noted that his committee set up by the U.S. Senate had done the following: report In December 1996, the Consumer Price Index claimed to have overstated the annual inflation rate by 1.1 percentage points. Then I did some calculations. “If Congress and the President had begun setting cost-of-living adjustments (COLAs) at CPI -1.1 percentage points in 1998, Social Security benefits would have been 32% lower in 2033. (The calculation is as follows: : 0.989^35 = 0.68. ) The Social Security crisis would have been resolved that way. Next, I noted that the Bureau of Labor Statistics made some adjustments in response to Mr. Boskin’s committee. Boskin, in my article. A concise encyclopedia of economicsas a result, estimated that the CPI overestimated inflation by 0.8 to 0.9 percentage points.

So I redid the calculation: 0.992^35 = 0.75. Therefore, your Social Security benefits would be reduced by 25%. Once again, the crisis will pass.

There were many other highlights of my talk. But what I especially liked was that this audience, at least 85% of whom are on Social Security, seemed to be very open to this.

That makes sense. Who would go to an education class without a certificate? Answer: A person who wants to receive an education.