- Category: Opinion
- Published on Tuesday, 25 August 2015 15:07
- Written by Jim Bardwell
Security of Social Security
This month marked the 80th anniversary of Social Security. President Franklin D. Roosevelt signed the Social Security Act into law in August 1935, with the goal of giving “some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
Since that time, some $15.2 trillion in benefits have been paid. In June 2015, more than 64.7 million people received Social Security payments (including Supplemental Security Income). The majority of them (about 43.5 million) were age 65 or older, while 14.3 million were disabled (under age 65). A total of $72.7 billion dollars was paid out, with an average monthly benefit of $1,221.
Social Security came about in the midst of the Great Depression. After a decade of relatively sustained prosperity and optimism during the 1920s, the stock market collapsed in 1929. The next few years would bring a banking panic and a severe drought that turned the Great Plains into a “dust bowl.” Corporate bankruptcies, foreclosures, and closings combined to create unemployment rates in the 20%-30% range. Half of the persons age 65 and over were dependent on others for their support, with approximately one in six receiving public charity. Moreover, the combined calamity in equity markets and financial institutions had claimed most or all of the savings of many. The goal of Social Security was to assure that future generations of retirees would not face a fate of poverty and dependence.
Social Security was essentially a “pay-as-you-go” system at the outset, with collections from workers and employers used to make payments. From a conceptual standpoint, Social Security originally benefited from a phenomenon which has been called the “biological rate of interest,” with approximately 40 people working for every eligible recipient. Most people did not live to retirement age, and those that did had a relatively short life expectancy beyond that point. In addition, the vast majority of women did not work outside the home and were therefore not eligible for old-age benefits. Thus, the taxes could be kept very low (2% applied to low base income levels at the outset), and early recipients received an average rate of return of approximately 25% on their contributions.
Since those early days, much has changed, and many now worry (with good cause) about the program’s sustainability. Dependents and survivors were added to the program in 1939, and disability insurance was added in 1956. Benefit increases have occurred on many occasions, and payments are now indexed to the cost of living. (Medicare has also been implemented, but it relies on a separate tax levy.) The biggest changes, however, have been demographic and societal in nature.
Advances in medical technology have extended life expectancy considerably and will continue to do so in the future. The result is more people becoming beneficiaries and collecting payments for a longer period of time. The dynamics of the Baby Boom also are affecting both collections and payments. As the large Baby Boomer generation (those born in the high birth rate yeas from 1946 through 1964) entered the workforce, female participation in the workforce was also rising. The result was a large group of people to support retirees and others in the Social Security system.
However, the tide is now beginning to turn. The oldest Boomers began reaching retirement age in large numbers in 2011, and the fundamental demographics that made the system work initially will begin to accelerate in the opposite direction. Instead of 40 workers supporting each Social Security beneficiary, we may ultimately reach a level of only two workers per recipient.
The threats regarding future viability have led to periodic tweaking of the system. One of the most significant changes was to move away from the “pay-as-you-go” philosophy and begin accumulating surpluses each year into a trust fund. The fund has been growing for a number of years and now stands at about $2.8 trillion. Income into the program from Social Security taxes, income taxes on benefits and interest is estimated to total of $884 billion this year, while payments and administration are expected to total $859 billion, leading to another $25 billion into the trust fund. However, we are nearing the end of the surplus years.
Around 2019, the system is projected to begin to pay out more than it collects in income as Baby Boomers reach retirement and the growth rate of the workforce declines. Interest earnings will make up the shortfall for a few years, but then it will be necessary to dip into the principal balance of the trust fund. By 2034, the available funds are expected to be completely exhausted. Without the trust fund, amounts coming into the program fund only about 79% of benefits.
Needless to say, a more than 20% drop in social security payments is to be avoided. It is also clear that meaningful reform should be implemented sooner rather than later. What is more difficult is determining the nature of reform. Over time, various potential solutions have been debated ranging from partial privatization to higher taxes to more stringent income tests and even higher retirement ages. The ultimate solution will probably involve a combination of these and other measures. No solution will be easy, but every year we wait only makes the situation worse. We can only hope that bipartisan agreement in Washington can be reached well in advance of the crisis we all know is coming.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). ; He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.
- Category: Opinion
- Published on Friday, 21 August 2015 22:07
- Written by Jim Bardwell
School used to be about learning and playing and growing.
It still is, but now there is a lot more at stake. Test scores rule districts, stress out kids, teachers and parents, and determine a school’s reputation. They also, to a degree, reflect the dedication of a system in helping students reach their potential.
What makes reaching that potential a gargantuan task in many cases is the fact that many students no longer come into the school speaking fluent English. Many have never had a book in their hands until they start school. Some, God bless their hearts, find their first genuinely attentive, concerned adult at school. A few kiddos, unfortunately have been taught entitlement at the expense of respect and their ability to learn. For a very few the discipline they receive at school will be their first. And the school is held accountable for educating them all.
It is easy to criticize schools and teachers, and without question that criticism is sometimes deserved. BUT, I have personally seen teachers spend hours they didn’t get paid for working with students. I have seen teachers and administrators provide food, clothing and guidance for kids who needed it more than they sometimes wanted it.
One of the toughest jobs in the world is to be a teacher or principal. An educator is responsible for ensuring that their students not only learn the curriculum, teachers have to make sure their students are safe, healthy, cared for and accountable. You know, what most families used to do.
Once upon a time many years ago I was teaching a World History class in a nearby district. When I lectured I walked the aisles and tried to engage the students. This day one of my students had his head down. I touched his shoulder and asked him to sit up. He leaped out of his desk at me.
At that point a Buckeye linebacker named Brent jumped between us and wrapped up my attacker. Later that linebacker played for Rice while my attacker eventually, I am sad to say, ended up in prison. Their home lives could not have been more different.
The linebacker’s family assumed he would go to college. The attacker’s family had him employed in the family drug dealing business.
‘Ed’ did not know who I was when he jumped at me. He did not know where he was. He was flying high on PCP, an hallucinatory drug.
I was one of two teachers this kid actually cared about. When he came down from that drug he was deeply apologetic. He was sincere.
That school year a coach and I worked hard to get ‘Ed’ into athletics. He was gifted athletically, smart and good looking. It didn’t matter. He had ‘easy money’ and the ‘respect’ that drugs and ‘power’ brought him.
One afternoon when I was alone in my room on my conference period ‘Ed’ ran into my room and into my arms and begged me to stay with him. He said that the police were coming to get him and he would not be back. He was right.
The principal frantically ran into my room and I reassured him it was okay. That ‘Ed’ wasn’t going anywhere and that I would stay with him. Before we left my room with the principal to wait on the police I pulled out a Living New Testament that I had in my desk and gave it to ‘Ed’.
Before he was sent to Huntsville he sent me the message that he was “reading that book” I gave him.
I never heard from him again.
I think of ‘Ed’ often and my heart breaks for what could have been.
- Category: Opinion
- Published on Tuesday, 03 March 2015 19:23
- Written by Jim Bardwell
- Category: Opinion
- Published on Friday, 21 August 2015 22:02
- Written by Jim Bardwell
“…and Justice for All”
Courts and the Economy
The founding principles of Western civilization rest on the premise that governments are created and financed collectively in order to provide services to society that cannot be easily obtained in the private sector. In any modern economy, these “public goods” span a diverse spectrum, including public health and safety, national defense, infrastructure, environmental protection, public education, and safety-net programs. In capitalist nations, the ability to protect property rights and enforce contracts is also an essential element of effective and sustainable governance.
Obviously, one of the most critical institutions required to secure this time-honored and proven framework for prosperity is an independent system of adequately staffed and funded courts. Public safety can only be sustained through a robust criminal justice system in which laws are properly enforced. Similarly, individuals and businesses cannot effectively make investments and transact commerce without a viable mechanism to provide confidence that assets and agreements will be properly recognized and preserved in a predictable and timely manner. This phenomenon dates at least to the Middle Ages, when the merchants of Florence developed a crude system of courts to facilitate the purchase and transport of wares from Nice. Then and now, contracts must be protected for commerce to flourish. During that same era, St. Thomas Aquinas wrote extensively about the proper way to determine a “just price” for goods and services, a concept that bears a remarkable similarity to the issues that the judiciary must now grapple with in many contexts.
By the time of the American Revolution, the fact that the king’s patronage controlled judgeships and affected court rulings was a primary grievance leading the colonies to seek independence. It is little wonder that the Declaration of Independence, the Constitution, and the Bill of Rights all focus extensive attention on the courts and the rule of law, and that the US Pledge of Allegiance concludes with “…and Justice for All.”
Every court system must evolve and expand to accommodate economic and demographic growth, as well as the changing nature and character of business activity. The sheer increase in people and production will in and of itself place more demands on the judiciary. This pattern is repeated and magnified as society grows more complex. For example, an economy driven by technology and intellectual property requires exponentially more judicial infrastructure resources than one based on agrarian production. Property rights, ownership, and contractual obligations are much simpler to define, interpret, and enforce for crops and livestock than for modern products embodying thousands of patents and trade secrets and which are subject to attack by electronic means. Illegal activity now encompasses cybercrime, multinational drug cartels, identity theft, and many other sophisticated elements of society that were unknown in the past.
Similarly, urbanization, the globalization of commerce, and greater concentration of business activity demand a more expansive and responsive system of courts. More people create the need for additional transportation and education infrastructure. Greater productivity requires enhanced utilities and communication capabilities. Correspondingly, a larger, more urbanized, and increasingly sophisticated global economy generates notable challenges in law enforcement and the protection of rights, thus compelling more robust judicial infrastructure. In short, economies can only prosper by (1) increasing the quantity and quality of productive resources or (2) using existing resources more efficiently. The court system is essential to both mechanisms.
Despite this undeniable reality, the infrastructure of justice has not automatically been well maintained. Many state and municipal courts throughout the country are woefully underfunded, a trend that appears to be intensifying.
Simultaneously, delays in filling vacancies in the Federal courts and the failure to expand the number of judgeships to keep pace with increases in the population and the level and sophistication of production processes are compromising the essential framework for social progress and prosperity. Just as a failure to maintain an adequate network of roads, bridges, rails, utilities, and communication to accommodate growing needs will limit prosperity, a lack of sufficient judicial infrastructure retards economic and individual potential and frustrates societal advancement.
One of the most significant representations of this phenomenon is reflected in the Federal courts presently serving the US District Court for the Eastern District of Texas (Eastern District), a region which stretches from refining and petrochemical complexes on the Gulf Coast to the technology corridor in the northern Metroplex. Caseloads have more than doubled since 2009, thanks in part to rapid population and economic growth in Collin and Denton counties. The inadequacy of judicial infrastructure in the Eastern District, which is among the most strained in the entire US, will predictably constrain economic growth over time. This outcome is unavoidable in the absence of corrective action.
On the other hand, investing in the judicial infrastructure can not only improve quality of life, but also enhance future prosperity by reducing uncertainties and time required to resolve business disputes. We recently studied the issue and found that filling the two positions now vacant in the Eastern District would add almost 78,200 jobs as of 2030 compared to a baseline situation reflecting current infrastructure. If the vacant positions are filled and two additional judges are added as recommended by the Court Administrator, the benefits would increase to approximately 148,400 net incremental jobs as of 2030. (The study is available for complimentary download on our website at www.perrymangroup.com.)
Without additional judges, the current difficulties in the Eastern District and a number of other districts around the country will only become worse in the future, with caseloads rising, judges increasingly overworked, criminal and civil cases delayed, and people and businesses unable to resolve disputes in a predictable and efficient manner.
If a critically strained judicial infrastructure is not addressed, “…and Justice for All” -- citizens, businesses, and those who protect them -- will, over time, become less and less attainable. If this stressed infrastructure were to crack or collapse, the economic disruptions could be calamitous until a functioning and predictable system could be restored.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com).; He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.