As a follow up to my previous message to Tim Richardson in
All_Politics, I will explain how social security is easily made
solvent for the forseeable future.

Economically easy, politically a battle to the death against the
republican hatred for the working class.

One pillar of current republican economic religion is the claim
that the average portion of our economy made up of government
spending has been 20% over the last 30 years. I won't bother to
calculate out the details, I'll just accept that figure, since
the real issue is not whether it's right, but why did they chose
the last 30 years, instead of the last 35, or the last 60? Could
it be because that would make their beloved republican
presidents look so very very bad?

Going back even into the Great Depression government spending
stayed well below 20% of GDP, until WWII when the government
took over almost half of the economy.

Within two years after the war ended govt spending dropped well
back under 20%, only rising to that level two years, 1953
(Korean War), and 1968 (Vietnam War)... UNTIL... Nixon/Ford!

Ford's two years, 1975/1976, to be precise. Even then it stayed
in the 21% range, going down under Carter to the 20% range for
most of his term... UNTIL... Reagan!

Under Reagan govt spending went up to over 23% of GDP, and
didn't see below 22% until his last two years. Under Bush I the
economy played the Reagan gove spending game, fluctuatiing
between 21% and 22% ranges, never seeing less than 21% UNTIL...
Clinton!

Clinton raised taxes on the rich and launched about the greatest
period of economic expansion in the lifetime of any of us, and
maybe the greatest in the history of this country. In doing so
he moved govt spending as percent of GDP down from the
Reagan/Bush over 21% to the 20% range, then down further below
20% until Bush II inherited Clinton's low 18% range.

Note, in no recent case did we cut our way to lower govt in the
economy, but we grew our economy to reduce the govt portion.

Now Bush inherited a spending level at 18.2% of GDP, and an
economy that had seen massive growth. He ran govt spending up to
19% of GDP, flirting with 20% of GDP and breaking that level,
finally in his last budget he left the nation with govt spending
at nearly 25% of GDP.

The key to the solvency of social security is partly in that
brief history of the US economy from the Great Depression to the
Great Depressor. (GWB)

Look at the Ryan/Republican plan. The idea is to fix government
spending at 20% of GDP. Still much higher than much of the 20th
century, but so what.

Ok, next lesson. In 2003 the Bush Social Security Trustees
released their report on the status of social security. They
projected that, when the baby boomers retired in full force,
social security spending would have to go from aprox 4.5% of GDP
to aprox 6.5% of GDP. Remember, back in the early/mid 2000's,
when I posted what I call "The 2% Solution"? Remember, it was
based on that?

Well, the current social security trustee's report shows very
close to the same spending to make social security solvent
through the baby boomer retirement era. And remember, the baby
boomer retirements are a one time, temporary thing. Within about
30 years the overwhelming majority of us (baby boomers) will be
dead, and social security will go back to it's pre-baby boomer
status.

So, to get through that period without cutting benefits we need
to move about 2% of GDP from other govt uses to social security.
If we can get other govt spending back to the Clinton 18%, still
high compared to much of the post WWII 20th century, the
difference between that and the republican 20% is all it takes.

Or, just give us the Reagan 22% and you can have the
Ryan/Republican 20% for govt spending, and still solve the whole
problem. Work out the details anywhere in between, it still
works. Just 2% of GDP gives retirees the social security they
were promised.

Now, if we can get unemployment down to a real rate of less than
5%, this all becomes a cakewalk. And if we can't get it down a
whole lot from its current level, our problem is not retirement,
but the survival of the United States above third world status.

Work it out for yourself. It's not that hard. Other than
breaking free of your inherent prejudices, that is.



BOB KLAHN bob.klahn@sev.org http://home.toltbbs.com/bobklahn

... The problem is jobs... the solution is jobs...
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