Alex Lawson of Social Security Works met up with the Republican Co-Chair of the President's deficit commission, former US Sen. Alan Simpson on June 19 outside the meeting places of the commission's working groups. In this post, I will only post the video and the transcript - there will be no editorializing. For now, I just want you to watch the video and read. If you need a little refresher course on how social security exactly works (the inlays and the outlays), see my post from earlier today.
Lawson: Senator, how are you? How'd it go today? Meet any folks on social security today? I just wanted to follow up -That's all. The transcript is provided as a public service, as well as to make discussion easier later.
Simpson: [inaudible] focus on solvency.
Lawson: And what about adequacy? Are you focusing on adequacy as well?
Simpson: Sure, we have to take care of the [inaudible] in society. [inaudible]
Lawson: Well, I just wanted - that's what I wanted to ask you.
Simpson: Let me give it to you before you ask. We're trying to take care of the lesser people in society. [inaudible] and do that in a way without getting in all the flash words that you love to dig up like 'cutting social security' - which is bullshit. Not cutting anything. [We're] trying to make it solvent. It will go broke in the year 2037.
Lawson: Well what do you mean by broke? Do you mean that the surplus is going to go out and then it'll only be able to pay 75% of benefits?
Simpson: Would you listen to me instead of babbling? In the year 2037, instead of getting 100% of your check you're going to get about 75% of your check. That's if we touch nothing. So if you'd like that, fine. You'll be picking the chickens yourself when you're 65. So we want to take care - we're not cutting - we're not balancing the budget on the backs of senior citizens. That's bullshit. So you've got that one down. So as long as you got those two things down that you can't play with anymore - we're not balancing the budget of the United States on the backs of poor old seniors and we're not cutting anything, we're stabilizing the system.
Simpson: Now you go ahead and ask whatever you want.
Lawson: (talking over) Thannk you for being so frank. But my question is, raising the retirement age is actually an across the board benefit cut. So -
Simpson: There are 15 different options being discussed in here today. Why nail one of them? Because you like to get one - one that pisses your people off.
Lawson: No, I was actually going because Alice Rivlin was just on CNBC saying that that was one of the favorite methods.
Simpson: There are 15 of them in there.
Lawson: Uh huh.
Simpson: All of them have to do with stabilizing the system, which we're told is insolvent. It's paying out more than it's taking in.
Lawson: Right now?
Lawson: What about the $180 billion in surplus that it brings in every year?
Simpson: There is no surplus in there. It's a bunch of IOU's.
Lawson: Ok, that's what I wanted to actually get at.
Simpson: Listen $2.5 trillion of IOU's which have been used to build the interstate highway system and all the things people have enjoyed since it was set up.
Lawson: Two wars, tax cuts for the wealthy -
Simpson: Whatever, whatever. You pick your crap and I'll pick the real stuff. It was to do with the highway system; it was to run America. And those IOU's in there now, there's not enough coming in every month. You're paying in every month for me. Appreciate that, I really do.
Lawson: Which is how the system was set up, right? It's actually set up so that the current generation funds the retirees.
Simpson: When I was your age, there were 16 people paying into the system and one taking out. Today there're 3 people paying into the system and one taking out.
Lawson: But isn't that the good news?
Simpson: [In a few years] there'll be 2 people paying in - what's good news about that?
Lawson: Didn't they plan for that? Which is why they actually -
Simpson: Of course not. Because they thought we'd retire - they thought you would die at 57. That's why they set the age at 65. If you can't get through this stuff, then why do you spread this crap? This thing was set up when life expectancy was 57 years. That's when they said 65 is the retirement age. Now the life expectancy is 78 or whatever it is. And so we have to adjust that and make it work for the future people like you in the United States.
Lawson: But here's one question on that, but thanks again for being so frank. Life expectancy is not equally distributed across the income spectrum, right?
Simpson: True, we know that.
Lawson: The life expectancy gains is actually a 5 and a half year's difference between the wealthiest -
Simpson: We know all that, we talk about that. We talk about everything. Everything you know, but, but you know if you just want to use flash words and -
Lawson: No, no flash words. I just wanted to zero in on a few things, and you've hit most of'em. But -
Simpson: Just use honesty.
Lawson: I am. I'm being honest. The worthless IOU's has been actually - that goes all the way back to 1936 [[actually, 1939]].
Simpson: They're not worthless. They're IOU's and they're -
Lawson: Backed by the full faith and government -
Simpson: That's right.
Lawson: Full faith and -
Simpson: You got it. Full faith and credit of the US.
Lawson: Credit. There you go.
Simpson: That's absolutely true. But -
Lawson: So they're bonds, just like any other bonds.
Simpson: That's right. But -
Lawson: That the government has to pay back.
Simpson: But there're not third people involved. It's the government and the government.
Lawson: Well except it's actually the government and the citizens, right? The government doesn't own the bonds [sure it does, social security administration does - it's part of the government]. It's actually the government owing
Simpson: Let me just say it in a way so your [inaudible] will understand this - where you can go and be able to help. There's not enough in the system by the month to pay in - pay out what comes in. In other words, there is more going out than coming in. That happened 3 or 4 weeks ago. So what do they do? They go to that trust fund and say, "We need the IOU's out of there." They say, "Oh can have'em but you gotta pay for'em." So you're taking a double hit on your own government. It makes no sense. The government goes and says, "Hey here's that $2.5 trillion IOU's. Now we need some money out of that system because we haven't got enough to pay this month" and they say, "Great." So the government gets a double hit. What's the word for that?
Lawson: But it's what I'm wondering about. Thanks so much Senator.
Simpson: Anyway. Oh, I'll be glad to visit with you.
Lawson: That'd be great, because we obviously have a very differnet understanding of the system.
Simpson: We are all involved in one thing, and it's not secrecy.
Lawson: No no I understand that. It's just in my understanding from actually looking at the 1983 commission, they actually started pre-funding the retirement of the baby boom by building up that huge surplus.
Simpson: They never knew there was a baby boom in 83. That's just the point.
Lawson: But actually they knew there was going to be demographic issues when they set up social security.
Simpson: They never dreamed that the life expectancy would go from 57 years of age to 78 or 75 or whatever. Who would dream that? No one. They just died. People worked. Social Security was never a retirement. It was set up to take care of poor guys in the depression who lost their butts who were getting butchered [inaudible] 43% of their wages [inaudible]. It was never a retirement; it was income supplement.
Lawson: Well it's actually an income insurance right, it's a wage insurance program to replace lost wages due to disability or old age, which was - actually - but it's - the reason it's definitely an insurance program, meaning that the people own the insurance, right? They're giving money in, in expectation that it's their money to come out.
Simpson: That's right. And I was going to get there -
Lawson: So that's why I -
Simpson: And they are going to get their money, but right now, to get their money, which has all been used and consist of treasury bills - the government has to go to get it out of there and pay it, and say, "Here's some money for you," so that you don't diminish the $2.5 trillion. But you got your government putting up money which increases the deficit to get this money out to go to the beneficiary - to make it work.
Lawson: But that's not social security that's increasing the deficit. It's still bringing in more money than goes out.
Simpson: When the government of the United States has to take separate money out of some stack to get the IOU's out of social security, that's a double hit, and that increases the deficit. Believe me.
Lawson: But what I'm telling you is that social security is separate though from the general budget, right? So social security - it's totally in the green. It's actually -
Simpson: It wasn't. Just 4 weeks ago, there wasn't as much coming in as went out.
Lawson: Except you'r enot calculating the interest paid on the bonds. If you do include that, it's still in the green this year.
Simpson: You can go through all the sophestry and babbling that you want to.
Lawson: It' snot sophestry. It's just what the SSA says. So I'm just going on the numbers.
Simpson: Read the report of the Social Security Administration. One that was given out. Have you got that copy?
Lawson: I'd love a copy of what you've seen.
Simpson: I'll have a guy give that - you need -
Lawson: That'd be fantastic. Thanks so much, Senator.