Hullabaloo

Wednesday, May 25, 2011

 
"Ask the wizard": Grandpa Simpson babbles nonsense again

by digby


I think that many people believed that George W. Bush and Sarah Palin were members of a new breed of conservative politicians who were mean as snakes, dumb as posts and spoke gibberish instead of English. Not true. They've been around forever:

"The AARP, I mean, come come," [Alan] Simpson said to an audience of Washington insiders. "If you can't understand that when I was a freshman at the University of Wyoming, there were 17 people paying into the system and one taking out, and today there are three people paying into the system and one taking out -- if you can't understand that it was never set up as a retirement program, it was an income supplement which became a retirement, if you can't understand it was never structured to handle disability insurance, it couldn't exist with that burden on it. If you can't understand it didn't take care of kids at 22 going to college, we can't make it."

Simpson went on to reference a recent interview with Huffington Post reporter Ryan Grim, who presented Simpson with evidence that one of the statistics he deployed in his Social Security arguments was misleading.

"Now the great sharpshooters are out there and the cat food commission cats and all those guys using these distorted figures," Simpson told the crowd. "And I always say, look, if you torture statistics long enough, eventually they'll confess."

In truth, Social Security was indeed established as a retirement program.

Lately, Simpson has been fond of claiming that the average life expectancy when Social Security was created was just 63 years of age, much lower than today. But the figure that actually matters for Social Security finances is the life expectancy for people who live to 65, the age at which benefits kick in. That number hasn't changed much since 1940.

In an interview with The Huffington Post following his remarks, Simpson reiterated his attack.

"I was talking about the guy who called me and went through this exercise of sharpshooting," Simpson told HuffPost. "And if he can't understand a couple or three things then there's no help. Forget all the crap he's going through and know that if you -- if 17 people were paying into this system in 1950 and one taking out, today there are three paying in and one taking out. I'd like you to refute that."

Can't someone draw him a picture or something? Or just direct him to the social security administration web site? Here's the explanation of the life expectancy question:

If we look at life expectancy statistics from the 1930s we might come to the conclusion that the Social Security program was designed in such a way that people would work for many years paying in taxes, but would not live long enough to collect benefits. Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women, and the retirement age was 65. But life expectancy at birth in the early decades of the 20th century was low due mainly to high infant mortality, and someone who died as a child would never have worked and paid into Social Security. A more appropriate measure is probably life expectancy after attainment of adulthood.

As Table 1 shows, the majority of Americans who made it to adulthood could expect to live to 65, and those who did live to 65 could look forward to collecting benefits for many years into the future.

Or maybe he could read Nancy Altman's book The Battle For Social Security where she spells out the worker to retiree issue so plainly that even Alan Simpson should be able to wrap his addled mind around it:

… all pension programs that require a period of employment for eligibility, private as well as public, show similar ratios at the start, because all newly covered workers are paying in, but no one in the newly covered group has yet qualified for benefits. The president could just as accurately have said that in 1945, the ratio of works to beneficiaries as 42 workers paying in for every one beneficiary or the equally accurate but misleading ratio from 1937, 26 million workers paying in for about a dozen beneficiaries.

… what is important is not the worker-to-beneficiary ratio at the start of the program but the ratio when the program reaches maturity. Consistent with the meaninglessness of the 16-to-1 factoid, the worker-to-beneficiary ratio was halved to eight workers for every beneficiary within five years, and by 1975, the ratio was where it is today. The 1994-1996 advisory council had not agreed on much, but it made one very valuable contribution. Its report included the appendix that stated that "the fundamental ratio of beneficiaries to workers was fully taken into account in the 1983 financing provisions, and, as a matter of fact, was known and taken into account well before that...

That's right. And as a matter of fact some of the people who created the program are still around to testify about what they intended. Also from Altman's book:

Bob Myers watched Bush on television from his home right outside Washington and stared in disbelief. In 1934, not only could Myers foresee the world as it changed, he had forecast these changes with great specificity. He was the one who had crunched the numbers for Roosevelt's Social Security proposal. Myers and Otto Richter, the senior actuary with whom he had worked, had been extremely farsighted. Myers knew, in 1934, that people in the twenty-first century would live longer and draw benefits longer.

As it turned out, Myers and Richer were a shade too conservative in their projections, believing the percentage of the population that would be elderly in the future would actually be higher than it turned out to be. Specifically, in 1934, he and Richter projected that, in year 2000, 12.7 percent of the population would be age 65 or older. How accurate were they? According to the 2000 census figures, the percentage of those aged 65 and over was 12.4 percent of the population.

So no, these Social Security actuaries over the years have not been total morons who need Alan Simpson to point out that they were total dopes by not foreseeing that people would probably live longer in the future or that there would be more people paying into the system than collecting from it in the early years of the program's existence.

And by the way, the unexpected post-war baby boom was dealt with by having all of us pre-pay a ton of money into the system that would make up for the fact that we were a larger than normal demographic. We invested that money in an unusual financial instrument called a US Treasury bill, the same one that Bill Gates and Lloyd Blankfein and The People's Republic of China buy because they are considered the world's safest investment. It's not like we didn't all do the prudent thing.

Huffington Post concludes with this:

"Repeating a false claim over and over again does not make it true," said Frank Clemente of the Strengthen Social Security Campaign, a coalition over 270 national and state organizations dedicated to protecting Social Security from benefit cuts. "Those who continue to use this canard show they are more interested in tearing down Social Security rather than making it stronger. Social Security has a huge surplus today but a long-range gap in 25 years that can be closed relatively painlessly if the richest two percent of Americans started paying Social Security taxes on all their wages -- like nearly all other Americans do."

Good idea. But they've all threatened to go on strike because it just wouldn't be worth it to them to work anymore and our whole civilization would come down around ears.

Finally, please, someone tell Simpson to pipe down and take his nitro glycerin before he has a heart attack from all the gibberish:

"I know all the stuff [Ryan Grim] goes through. Its like gymnastics! Yes and we've done distributional analysis. Ask him if he knows what that is! Ask the wizard if he knows what distributional analysis is! We did that. And then ask him what we did for the seniors, for the older old and the people who are in poverty. Ask the wizard all that and then get back to me."

He then shouted, "I'm through!" and walked away.

God, if only ...


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digby 5/25/2011 05:30:00 PM |