At least that’s what I think it is. I’d never thought of Barbara Ehrenreich as a comic, but her OpEd today is almost, well, funny. (What? You don’t think she was trying to be funny? Well, in that case it’s really funny.)
At any rate her piece is a blast … against that well-known right wing meanie, Bill Cosby. Cosby, as everyone knows by now, has had some harsh things to say lately about how the black community is raising its young, among other things.
As a refresher, here’s one summary of Cosby’s comments from a couple of weeks ago:
In the presence of NAACP President Kweisi Mfume and other African-American leaders, comedian Bill Cosby took aim at blacks who don’t take responsibility for their economic status, blame police for incarcerations and teach their kids poor speaking habits.
….
Cosby said … : “Ladies and gentlemen, the lower economic people are not holding up their end in this deal. These people are not parenting. They are buying things for kids
Selfish elderly Whites are a big problem, bankrupting this country.
Maybe racism is partly to blame, but not White racism (we lost power long ago). Instead Jewish racism may be a problem. Such racism drives counter-productive government policies and also animates much of the media. When I turn on television I see plenty of anti-White-Gentile racism too.
Another target we might be able to blame is lead. Could it be that lead poisoning is affecting the underclass more than we realise? Lead can affect both IQ and behavior.
But of course Cosby is right, bad behavior is the primary driver of poverty, and parents are the primary instillers of behavior.
Cosby is attacking a fundamental part of the white liberal’s ego gratification. They show their goodness by pretending that underclass blacks are equals even though they’re not. If underclass black culture changes so that people in this group do achieve as well as other groups, then the white liberal will lose a reason to feel good about herself.
White liberals have already lost the opportunity to feel good about the academic success of Asian-Americans. They’re loath to lose yet another group.
Oh, c’mon: the elderly whites part is a reductio ad absurdum. She’s pointing out (correctly) that Social Security payments have driven the elderly from the most-impoverished age group in the 1960s to the least. Somehow, the vision of elderly white people living from one Soc Sec check to the next doesn’t get the same reaction as blacks living from one welfare check to the next (leave alone the inaccuracy of the latter picture). Sure, there are big differences: but do they entirely justify the difference in attitude? Maybe Cosby plans to lead a century-delayed return of the Bookerites. OK, it is a lot more valid this time around (IMHO the original Bookerites were no more likely to stop disenfranchisement and lynchings through group self-improvement than the Jews were to stop the Holocaust by sweeping the streets of their ghettos), but maybe not so much so as this blog would think.
It also, I would add, must be very frustrating for people who work in teen pregnancy prevention, or who pay attention to those who do, to see the significant drop in teen pregnancy rates ignored.
“…Social Security payments have driven the elderly from the most-impoverished age group in the 1960s to the least.”
Is this true? Because my mother, and most of Philadelphia for that matter, got left out of the deal. I really don’t see that the elderly are less impoverished than, say, recent college grads.
Or do you mean that the elderly of today are less impoverished than the elderly of 1960? That’s probably true, but you wouldn’t expect the opposite, would you?
In any case, Social Security can’t be compared to welfare. You may not like the terms (I sure don’t), but the terms were set, investments were made, and recipients are getting what they were promised.
Dom
Why don’t we resent elderly retirees who live on Social Security? Because they worked for years and paid into Social Security (and whatever other pensions they have).
Why do we resent single mothers who live on welfare? Because most of them didn’t work for years and pay taxes. They are living with the consequences of unwise choices, notably unprotected sex with an irresponsible man. And we’d be happy to blame the deadbeat dads if we could spot them.
Ehrenreich makes one valid point: The black teen pregnancy rate has declined dramatically, though it remains higher than the white rate.
Fewer black children live in poverty due to welfare reform. However, there remains a crisis in the black family, which Cosby is rightly concerned about. As he said, men aren’t taking responsibility for their families and for their unwise choices, notably failing to get an education so they can qualify for jobs.
The table above is probably unreadable (Source: Dept. of HHS), but the highlight is that in 1959, general poverty rate was 22.4% but for elderly 35.2%; in 1994 the rates had crossed over: general 14.5% and elderly 11.7%. The numbers Ehrenrich used were slightly diferent and presumably carried 1994 forward to 2003 or thereabouts. I’m sorry if this pronounced trend didn’t make it to Philadelphia, although I strongly suspect that it did.
The average Social Security recipient gets back much more in benefits than he or she would have if instead he or she had invested the FICA tax withholdings in any sort of IRA. This is decreasingly true, but holds strongly for the current elderly. Rates are, after all, set by Congress, not by earnings on specific investments.
Incidentally, welfare recipients pay taxes, except we now live in a society where sales taxes and other regressive taxes don’t seem to count morally, compared to the estate and capital gains taxes that only affect the wealthiest. Go figure.
Lazarus says: “The average Social Security recipient gets back much more in benefits than he or she would have if instead he or she had invested the FICA tax withholdings in any sort of IRA.”
Really? How so? The average return on social security “investments” (i.e. taxes) averages 1.23% presently for a two income household with children. It’s approaching zero for my age though that’s fine, I’m a “rich” oppressive white and thus have little moral claim to my own money regardless. Though for argument’s sake, the yield on 10-year Treasury Bonds is presently 4.466%. That’s a zero-risk return with stock or corporate bond yields much higher over a working lifetime. So without the 18th increase in FICA taxes since 1950, exactly how are the beneficiaries going to fare better than they would have investing their own money? Or is 1% greater than 4% in left-wing circles?
In fairness, Andrew does say that his contention is “decreasingly true.” Yes, and racial discrimination against blacks at the University of Michigan is also “decreasingly true.”
http://www.heritage.org/Research/SocialSecurity/images/cda98-01cht2.gif
Isn’t it funny how a Black can lose his blackness quicker than Michael Jackson if he says anything against the Liberal Mantra.
I’m surprised that no one commented on how mean and nasty Barbara Ehrenreich was toward Bill Cosby. Contrary to most of the posts, this was not an article on the effects of social security on the elderly.
As best as I can tell, Stuart’s gif is just a collection of nonsense-numbers. How can you computer the real rate of return on Social Security taxes for someone who was born in 1975? What sort of extrapolation has been made of both taxes he will pay in and amounts he will pay out? Before you compare to T-Bills, by the way, you should check out the fine print that the returns are in constant dollars. The 10-year inflation-adjusted bond, a better comparison than a T-bill, has a current rate of 1.8%. Extrapolating back to my father’s age, he would appear to be making 3½× the annualized rate as he could get risk-free on the open market.
The 18 increases in FICA since 1950 prove my point. It happens, by coincidence, that’s the first year my father worked. His Social Security check is much more than he would have received by investing the same amount in an IRA. I think I’ve seen estimates of double, and certainly nothing in Stuart’s gif, whatever exactly it means, refutes that. And I concede, this is probably not true for either Stuart or myself. (Would it be crass to notice that Stuart’s source also neglects the way Social Security can functions as a low-benefit life insurance?)
Andrew, I’m almost at a loss as to where to start. I notice though that when figures don’t support your cherished orthodoxies they become…a collection of nonsense numbers. Please bear this phrase in mind when next you are tempted to regale us with international treaty support for executing conservative law professors.
But back to social security. Of course they are in constant dollars! Were they not, any comparison would be meaningless. But constant dollars don’t impact an analysis of the growth rate a whit. And yes I guess you would prefer to compare inflation-adjusted bonds at a point of record low inflation. Care to make this same comparison in 1980 with inflation at 14%? Go ahead. Do you think there will never be inflation again, Mr. Greenspan?
In seriousness though, I don’t know what your financial acumen is, but I wonder if you understand the function and make up of inflation-adjusted bonds vis-a-vis their traditional counterparts. The latter offer a nominal rate of return which is comprised of two components, a real rate of return and an inflation premium. As inflation rises this latter component drives nominal yields higher and bond prices lower. Inflation-adjusted bonds were designed to protect against this price volatility to investors by stripping out the inflation premium (by letting it float) and paying only the real rate of interest (the 1.8% you cite).
If you’re still with me, here is where your comparison falls down. You want to strip the inflation component out of the growth rate and use only the real interest rate in your social security inputs, while at the same time leaving the outputs (monthly benefit payments) fully whole in their annual CPI adjustment. You do this, I’m sure not intentionally, by using a a record low inflation point as your 50 year average. That’s not going to fly. No, the simplest and least manipulative way to look at this is what have you and your employer put in and what will you get out, according to the actuarial tables. You then need only a financial calculator (I recommend the old reliable and still excellent HP-12c) to figure the internal rate of return. This is the rate at which your inputs and outputs both equal zero; and it is the rate you are interested in. You can then easily compare this to the investment vehicles available at the time of your inputs and see if their yields exceed the IRR you previously calculated. You can do this yourself if you have the time and inclination.
Let me put this to you even simpler: 4% is better than 1%.
As for your father getting more than he otherwise would have, this is ONLY a function of rising taxes on workers and not any inherent superiority in the system. For you and I to replicate his experience will require ever larger tax increases on current workers (like you and I). But I thought you were against regressive taxation? And of course retirees will be paid more than they contributed if the government raises benefits (and taxes) ex post facto! What point are you making here, Andrew? This is nothing that me, you, or a tree don’t already know. But I thought you were arguing that social security was a better SYSTEM than investing on your own–it manifestly is not.
Stuart, you—not me—compared returns on the 30-year T-bill (nominal interest rate) with rates given in the Heritage Foundation graphs (inflation-adjusted annualized interest rate). This apples-to-oranges comparison makes the T-bill rate much more attractive in comparison to the alleged rate-of-return on FICA taxes than it really is. In other words, 4% interest is not necessarily better than 1% interest above the rate of inflation. At this moment, the 10-year T-Bond yield is 4.46% and the 10-year TIPS yield is about 1.8%. Presumably that shows how the market is discounting inflation over the next 10 years, and if you want to compare the Heritage Foundation nonsense-numbers to anything, you have to compare it to the 1.8%. And as you note, this is a period of low inflation. The comparison gets worse for you as inflation goes up.
Is that clear now?
Once we’re agreed on the numbers, we can move on to discuss whether Social Security is a better system than investing on one’s own. For my first turn, I’ll just mention again that the percentage of elderly in poverty has dropped drastically in the last 45 years and Social Security seems like a likely contributor.
Andrew: You’re right technically, though as always lost in the uptake. Yes, the 4.5% to 1.2% is not completely fair; though it is representative. I should have adjusted it for taxes and inflation (for even more fairness, I’ll use the past 75 years average of 3.1% instead of the much lower rate presently). This puts a one year figure almost precisely at 3% instead of 4.5%. Feel better now about your 1.2%? And once again, I point out that this is the LOWEST risk-free return. I don’t even mention historical returns on equity. But this wasn’t really the point and I hope you’re not overly gratified by highlighting it. The point is that for MOST people, social security is a horrible investment because they can do better elsewhere, even to the point of zero-risk vehicles. The extent of its horridness is contingent mostly on age, income, and life expectancy.
But since you got exercised over a technical point (though I’ll grant you a valid one), I’ll do the same. 1) You say: “In other words, 4% interest is not necessarily better than 1% interest above the rate of inflation.” Yes it is, right up to the point of 300% inflation. But we’re not quite living in Brazil yet, are we?
2) You say: “as you note, this is a period of low inflation. The comparison gets worse for you as inflation goes up.” No it doesn’t. You want to take a stab at what those 10 year Bonds were yielding in the early 80s? 15% at one point. Worse for me? No, actually about the same on a net basis.
3) You say: “if you want to compare the Heritage Foundation nonsense-numbers to anything, you have to compare it to the 1.8%.” Again, no I don’t. I have to compare them to the net cash flow from whatever vehicle I am using in comparison. In the case of the 10-year bond, with 3.1% inflation and a 31% tax take, I compare the Heritage figures to 3% as I mentioned above. Or would you prefer the risk-free yield of a 30-year bond at 5.2% (3.5% net)?
Is that clear now?
One thing I will agree with you on: Social security has undoubtedly lowered the elderly poverty rate, but like all transfer systems, it has merely shifted poverty to the young. How noble.
Now finally since you offered, take your shot on defending social security on its merits, Mr. Charles Ponzi.
I started the correspondence on Social Security, and I apologize for that, since John’s post (an exceptional one) was about Ehrenreich.
I don’t want to continue the thread, but let me get a word in. “The elderly are the least impoverished age group”. The data you give compares the elderly with the general population, not supporting your contention.
I’m not dripping with sarcasm, my tongue is not in my cheek, I just want to know — are the elderly the least impoverished age group?
I ask because the cities I have lived in (Phila, Baltimore, a small town in Indiana) all have a section of mostly elderly people, and it can’t be said they are well off.
And as I look at my mother’s finances, social security was not a good deal.
But in fairness, this is John’s blog, so can we all agree that Ehrenreich made a fool of herself?
Dom
Yes we can.
Thanks Dom for getting us back on track. I was beginning to wonder if Andrew was deliberately filibustering to prevent anyone from stating that obvious point.
David writes:
>>>Cosby is attacking a fundamental part of the white liberal’s ego gratification. They show their goodness by pretending that underclass blacks are equals even though they’re not. If underclass black culture changes so that people in this group do achieve as well as other groups, then the white liberal will lose a reason to feel good about herself.http://www.blackcommentator.com/52/52_connerly.html
I’m not saying that’s illegal. The Ku Klux Klan is allowed to say what they believe, and I respect them, because at least they are HONEST in their TRUE motivations.
–Cobra
And as you note, this is a period of low inflation. The comparison gets worse for you as inflation goes up.
Is that clear now?
传奇私服 球磨机