Friday, January 11, 2008

S.S. Trust Fund Never Be Totally Depleted: Why -- Reverse Ponzi Scheme S.S.

There is no reason for people in 2041 to take a 25% hit: the income tax that has been "cashing" government owned bonds will simply be reduced by the same proportion that the payroll tax (FICA) will be raised and the party will go on. The clunkiness will simply go out of clunky retirement collections.

The only sensible reason to have a Trust Fund for S.S. is to bridge a temporary shortfall in the payroll tax stream, until Congress raises it a mite (happened twice so far) -- meaning a (say 5 year) bridge should be maintained permanently anyway -- meaning FICA should take over even before the Trust Fund is completely depleted.
S.S. is basically a reverse Ponzi scheme in which each generation gets more than it paid in because of economic growth: if you start your work career at $50,000/yr, you should end doing $100,000 doing equivalent work, 40 years later.

I am sure the wages of my old Teamster buddies back in 804 kept up with per capita growth since I left them in 1970 (back problems). They had just gotten an increase of $18/wk over 3 years from a base of $120/wk ($95 increase on $640/wk in 2007 dollars). They recently raised their defined retirement benefit from $3300/mo to 3600/mo: to more then they were making in wages 38 years ago!

Meantime Chicago cabdrivers now earn half what they earned when I started there 28 years ago (wouldn't catch me cabbing in Chicago now): one 30 cent mileage raise between 1981 and 1997 -- at which 1990 midpoint Chicago began adding 40% more cabs (still adding) while cutting the business seemingly in half with trains to both airports and open limo licenses (the cream) and finally (the coup de grace) free trolleys between all the hot spots downtown (the bread and butter).

The difference between the two segments of labor is bargaining muscle, nothing else -- in the Teamsters supplied by excess testosterone. I remember our local president, Ron Carey, calling a "strike" shouting "I'm not saying there's a dollar there". There was, the very next day: $18/wk instead of only $17. I had the feeling as he called the strike it was just to get strike out of these very militant guys' systems -- with a wink and an nod from management.

Sector-wide labor agreements (as practiced around the OECD world) dispel with the need for testosterone overload and make things easier for employers (around the OECD world) too -- like the minimum wage really does by raising everybody's costs the same amount at the same time. Sector-wide is really the soft solution to the race to the bottom state side.

Get wages back to LBJ era distribution at today's doubled average income and all our poverty and S.S. problems would go away.

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