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How to fix Social Security in one graph


"The revenue loss over the next 75 years just from extending the tax cuts for people making over $250,000 -- the top 2 percent of Americans -- would be about as large as the entire Social Security shortfall over this period," write Kathy Ruffing and Paul N. Van de Water at the Center on Budget and Policy Priorities. "Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat."

We do have fiscal problems in this country: health care, for instance. We have to get growth in that sector down or we'll bankrupt the country. But that's not the case with Social Security. Social Security is just a question of priorities. And the legislators who are saying that we can extend the Bush tax cuts without offsets but that we need massive benefit cuts in Social Security are showing where their priorities lie, not stating a sad economic reality.

By Ezra Klein  |  August 31, 2010; 10:37 AM ET
Categories:  Social Security  
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Not extending the top-tier tax cuts wouldn't fix Social Security, because that money wouldn't be spent on Social Security.

Posted by: Kevin_Willis | August 31, 2010 10:33 AM | Report abuse

No it would probably be spent on defense or wars.

Still, no matter which way you spin it, it represents new debt if you extend tax cuts for the wealthy.

Posted by: lauren2010 | August 31, 2010 10:44 AM | Report abuse

Now it all makes sense. So if I have money, and my neighbor needs money, it's okay for the government to take my money and give it to my neighbor?

Posted by: daveredhat | August 31, 2010 10:50 AM | Report abuse

This talk of "extending the tax cut" is really starting to annoy me. The current tax regime has been in place for 10 years. Why is Clinton's tax regime the natural order of things? Man up and call it a tax hike.

Posted by: theo2709 | August 31, 2010 10:56 AM | Report abuse

Great graph, Ezra! Clarifies a simple, palatable fix.
It would be interesting to change the title: instead of 'Cost of Extending Tax Cuts', 'Revenue from Expiring the Tax Cuts'.

Posted by: LoriWisconsin | August 31, 2010 11:04 AM | Report abuse

Saying "extending the tax cuts" or calling it a "tax hike" is immaterial. THe question is how to fix the long term budget deficit and therefor national debt while in the short term providing economic stimulus to reverse the worse recession since the great depression.

If you're pissed about the phrase "extending the tax cuts" you can blame Bush (again) for passing them for a limited period.

Posted by: NeilSagan | August 31, 2010 11:04 AM | Report abuse

theo2709, I'm sure you're aware that the Bush tax cuts used a procedural move in order to get passed which required a ten-year sunset. If they could have passed it as a permanent change to the tax rates, they would have. They didn't, so the tax cuts are a temporary reduction.

Calling it a tax hike is simply either disingenuous or ignorant.

Posted by: MosBen | August 31, 2010 11:05 AM | Report abuse

I should also add that I don't think there's anything "wrong" with how the Bush tax cuts were passed. It was a new way to use the rules, and maybe not wise in the long term, but not "wrong". Still, you have to live with the decisions you make and Republicans can't whine about a tax hike when this return to normal is a result of their own choices.

Posted by: MosBen | August 31, 2010 11:09 AM | Report abuse

Allowing the tax cuts to expire would exacerbate the situation as yet more capital is drained from the private sector into government coffers. The already flat GDP would be nosed into decline. Are democrats really ready to sink the ship to save the lifeboats?

Posted by: daveredhat | August 31, 2010 11:09 AM | Report abuse

You cannot really be that ignorant, Theo. Republicans wrote the sundown into the Shrub tax cuts, with subterfuge in mind. They didn't want the anti-revenue and deficit effects to be scrutinized on a normal 10 years out basis. So, you know, man up and admit, this was pretty vile chicanery on the part of the GOP, and now it's backfiring on them.

Posted by: aprilglaspie | August 31, 2010 11:09 AM | Report abuse


Great stuff. And thanks for setting L. O'Donnell straight on COUNTDOWN last night. Bravo.

Posted by: BurningFeet | August 31, 2010 11:25 AM | Report abuse

Can someone explain why a single person making $199,000 is not rich, but a married couple making $250,000 is rich?

Posted by: donhalljobs | August 31, 2010 11:32 AM | Report abuse

Ah yes, the unbiased analysis from the folks at CBPP. Let me guess what their preferred method for 'fixing' social security is?

Posted by: novalifter | August 31, 2010 11:42 AM | Report abuse

"...Tax Cuts Exclusively for Upper-Income Taxpayers Roughly Equals Social Security Shortfall"

A fact that is pointed-out at minute 4:25 of this sexy little animation, right here:

Posted by: Lee_A_Arnold | August 31, 2010 11:53 AM | Report abuse

Ah, this from the CBPP that rolls 'interest costs' into the cost of tax cuts.

Naturally it fits their priorities.

The CBPP claims that programs like Medicaid are 'paid for' while the tax cuts are deficit financed. One could just as easily claim that Medicaid is deficit financed while the tax cuts are paid for.

Posted by: krazen1211 | August 31, 2010 11:56 AM | Report abuse

Ah, this from the CBPP that rolls 'interest costs' into the cost of tax cuts.

Naturally it fits their priorities.

The CBPP claims that programs like Medicaid are 'paid for' while the tax cuts are deficit financed. One could just as easily claim that Medicaid is deficit financed while the tax cuts are paid for.

Posted by: krazen1211 | August 31, 2010 11:56 AM | Report abuse

Ezra, you do not understand Social Security. To fix Social Security by bringing in outside revenue changes the very nature of Social Security and makes it less sustainable. You MUST either raise Social Security taxes, or cut Social Security benefits, to actually fix Social Security, rather than transforming it into a welfare program, as you suggest.

Note also that by taking revenue away from the general fund and putting it into Social Security you actually make our budget problems worse, because you're not decreasing our SS Trust Fund liability, but you ARE taking away money from the general fund that we need to pay off the bonds held by the Trust Fund.

Putting two numbers next to each other may look cool and make you feel superior, but it makes for poor policy, and it doesn't even actually add up in the end.

Posted by: pudgenet | August 31, 2010 11:59 AM | Report abuse

Have the bush tax cuts become just another variation of the "doc fix?" Where we are fighting every year about what to do with them, because if nothing else Republicans are consistent. Economy bad? Cut taxes. Economy good? Cut taxes. No matter the underlying economic situation the Republicans will always have a rationale for why they should be extended. That's why Zandi has this all wrong, or is being disengenuous, by saying they should be extended for a year. Because if they cave this year it becomes that much harder to say next year that they are bad for the deficit and need to end. I can only hope the administration and the dems in congress will hold their ground on this.

Posted by: nonfictiondad | August 31, 2010 12:07 PM | Report abuse

are these numbers based on static scoring or dynamic scoring?

Posted by: cdosquared5 | August 31, 2010 12:13 PM | Report abuse

To the extent the benefits of Social Security largely flow to individuals who aren't upper income taxpayers, it doesn't follow that the shortfall in the program should be made up exclusively by upper income taxpayers.

That said, Ezra's right that the Social Security shortfall is peanuts compared to our challenges with public health care spending.

Posted by: justin84 | August 31, 2010 1:02 PM | Report abuse

Congratulations DaveRedHat on making more than $250,000 per year! How do I know that you make more than $250,000 a year? If you don't then you are the one getting the transfer and your comment really doesn't make sense.

Posted by: Prosperity2008 | August 31, 2010 1:35 PM | Report abuse

The way to fix Social Security is to reduce the FICA tax, because cutting taxes increase revenues.

Posted by: Hieronymous | August 31, 2010 1:58 PM | Report abuse

Just wait until Joe six-pack, married with a 2 kids and earning $35K, gets hit with a tax bill bcause the child credit expires...!

You Demoncrats will wish you were in Iraq!

Posted by: numbersch13 | August 31, 2010 2:11 PM | Report abuse

Just wait until Joe six-pack, married with a 2 kids and earning $35K, gets hit with a tax bill because the child credit expires...!

You Demoncrats will wish you were in Iraq!

Posted by: numbersch13 | August 31, 2010 2:11 PM | Report abuse

"Just wait until Joe six-pack, married with a 2 kids and earning $35K, gets hit with a tax bill because the child credit expires...!"

Just wait until he hears that while Democrats supported extending the credit, it expired because Republicans insisted on tax breaks for income over $200,000. Yeah, that will look real good!

Posted by: dasimon | August 31, 2010 2:22 PM | Report abuse

I don't care what study takes place, the tax cuts that the wealthy enjoyed for the past 10 years were not there before that and our country did just fine, especially when Bill Clinton's administration had a budget that was not only balanced, but in the black by $200 billion! This is one clue that shows how these tax cuts have hurt the country. When Bush got in he also started bleeding red at the rate or $300 to 400 billion per year, leading to several Trillion more in deficits by the time he was done. So how did Bush go from a $200 billion dollar surplus under Clinton to a $400 billion dollar deficit per year under himself as President. Has anybody thought that giving $500 billion a year away to his rich friends had anything to do with it. duh. So this money that wass given to his rich friends is responsible for the budget deficit in this country.
Did they produce anything with this windfall of $5 Trillion? Well, there was 1% more jobs from the time that Bush got into office and when he left. So that proves that the rich do not invest more when they have more, only that they waste more on stuff that nobody should own, while everybody else has to suffer for it.
As far as Social Security, if the richest 2% of Americans give back that $5 trillion that they got in tax breaks over the last 10 years then that would be solvent. So would the health care field because there would be that much more for medicare for the aged. So stop the tax break for the very rich and give it to the 98% that haven't had the benefit of that break for 10 years. Then go back to the system that we had under Clinton, who balanced the budget. Remember, if you want to play you have got to pay!

Posted by: builder7 | August 31, 2010 2:32 PM | Report abuse

A really, really easy way to fix Social Security: remove the cap on payroll tax, don't increase benefits, and reduce all income tax brackets above $108,000 by exactly 12.4%.

This will have no effect on any taxes that anyone pays. Yes, it's an accounting gimmick, but since we've decided it's okay for other things to take funds from Social Security but not vice versa, this entire problem is exclusively the fault of accounting gimmickry.

And it'll be good for people to see and understand that the effective top tax rate is lower than that on the middle class.

Posted by: FormerSwingVoter | August 31, 2010 2:46 PM | Report abuse

I debunk the Trustees' GDP assumptions and ergo your graph here:

I am not necessarily arguing that the tax cuts shouldn't sunset, just pointing out that your numbers are optimistic and may be off by 100%+.

Jason Ruspini

Posted by: JasonRuspini | August 31, 2010 7:17 PM | Report abuse


While the trustees assumptions may indeed be over optimistic, the GDP growth assumption for 2010-2030 is only 4.9%/yr. That would be consistent (a little bit below actually) the long run trend in nominal GDP growth over the 1987-2007 period and implies something on the order of a 2.4% growth / 2.5% price inflation split. I'm not sure that's a reckless assumption although it may indeed be too high.

Lower nominal GDP growth also means lower benefit payments, because lower GDP implies lower wages and benefits are indexed to wages (if lower nominal GDP growth than expected is accompanied by lower than expected inflation as well, the annual COLA will be reduced too). Note that GDP is pegged to be $36.3 trillion in the low cost scenario and $41.8 trillion in the high cost scenario, as opposed to $38.6 trillion in the intermediate case.

Posted by: justin84 | August 31, 2010 9:36 PM | Report abuse

Oh please. Don't republicans love a flat tax? Everyone pays the same rate? Make the SS rate a flat 7.5% on every dime every U.S. citizen makes. No cap. Fixed. And don't say the wealthy don't need SS. Just ask a bunch of Bernie Madof victims if SS wasn't nice to have after they lost their posteriors. And come to think of it...that's exactly why it was enacted. So if you lost it all you didn't have to sell apples to eat.

Posted by: DamnProg | September 5, 2010 11:15 PM | Report abuse

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