Hate, Justice, and Mercy

Indeed I tremble for my country when I reflect that God is just: that his justice cannot sleep for ever . . . .” Thomas Jefferson, – Notes on the State of Virginia, Query XVIII[5]

Decades later, Abraham Lincoln also trembled at God’s justice. Lincoln often quoted Jefferson and wondered if the horrific death and carnage of the American Civil War had been made necessary to balance the scales of justice and to “repay every drop of blood shed by the lash of bondsman“.

And 150 years after Lincoln, I tremble too. Indeed, today I am shaking. The events in Charleston, South Carolina this past Wednesday, the murder of nine by-all-accounts loving, upstanding Americans in of all places, a place of worship has moved me and shaken me.

What has disturbed and shaken me the most is not the loss itself of Reverend Pinckney and his congregants, though I feel tremendous loss at our having lost these loving people so soon. It is not the depth of hate in alleged the shooter that has shaken me. I have seen such hate before and I will not respond with hate but rather sadness at the hell this person has lived that led them to such horrific deeds.

What has me absolutely shaking and trembling for our fates is the reactions of so many people to this tragedy. This morning, as I indulged my privilege and good fortune to enjoy a nice breakfast at my hotel, a privilege I know is not available to literally billions of people in the world nor even the vast majority of Americans, I listened to the television coverage. I listened to the voices of “leaders” on television discuss Charleston while they indulge even more privilege and fortune than I. And I returned to my room crying and praying for mercy.

I heard self-proclaimed Christians say that guns are not part of the problem. They said guns are part of the solution. I heard and read NRA leaders advocate for preachers and pastors to carry guns. I was raised a Christian. It is the path to God, spirituality, transcendence, forgiveness, love, and unity that I know best. I do understand these claims and I do not understand. Guns represent only one thing. They have only one purpose. It is destruction. It is the ending of life. Even in hunting, that is it’s purpose. But beyond the purpose of ending life, guns serve another function. For many, for those I heard, guns become an idol. They represent power. These people have replaced God with their guns. You cannot love God and guns too.

I heard other people claim the tragedy was about a “war on Christianity” and not a racist, hate-motivated attack. Such a claim is to deny the stark reality and the shooter’s own words. Such a claim is an attempt to deny the honor that we should be giving these slain loving people. Instead it is an attempt to vainly claim the honor for yourself as if somehow you had been attacked.

Ferguson. Charleston. Cleveland. Baltimore. Charleston again. And too, too many others to count. The evidence is plain. It is our hate. It is our love of guns and destruction. It is our fears driven by ego and alienation that has killed these people. It is our hate and fear and choice not to love that perpetuates the oppression. Only we can end it. Each and every one of us must look inward and truly challenge ourselves to change and own to our contribution.  Do we send the membership fees to the NRA that feed the worship of guns instead of God? Do we not challenge our friends, relatives, and neighbors when they repeat hate and alienation?  Do we return only hate and revenge ourselves when we are hurt? Or do we return hate with love?

God is just.  Or more specifically, God’s world is just. But God is also love and merciful. We are the difference in how God reacts. If we choose love, mercy, and understanding, God is merciful. But when we choose to continue in alienation, God’s justice will out.

I know the language I use here is that of Christianity. As I said, it’s what I know I best. But all the other traditions are the same.  The ways of Islam, Hinduism, the Buddha, and even natural atheism are similar.

You can call it God’s justice, the wrath of Allah, the Tao, Karma, or just natural laws of action-and-reaction. Hate begets hate. Violence begets violence.

There is one way out. We must all look inward. Examine ourselves honestly. And choose to change. We must embrace love.

Yes. I fear for my country at the thought that God is just. But, I am not without hope. Indeed, even in the midst of fear for our future, God has spoken hope and love has shown it is more powerful than any gun.  I have seen the videos of the son of one of the victims in Charleston. His mother’s legacy is love. It shows. Let our legacy be love too.

Finding My Voice – My Teaching With WP Journey

Note: I think I know how my online students feel when they fall behind because “life and work”.  I haven’t been able to participate as aggressively as I wished in #TWP15 Teaching with WordPress, but hope springs eternal.  Here goes my story.

In the video here I explain my journey to teaching with WordPress. I teach economics at Lansing Community College (and occasionally elsewhere).  As a community college professor, that means a lot of classes and few resources. I’ll confess, my journey to WordPress was originally motivated more by a desire to save time and simplify my workflow than by any great goal for improved pedagogy.  The improved pedagogy and learning outcomes happened anyway, whether I was trying or not, which has made it very interesting.  Simpler AND better. We don’t find that very often in higher ed tech.  I cover more of the details of how I progressively got pulled into the WordPress world in this video. It’s a bit long for an embedded video which is no surprise to my colleagues who know I love to talk.  The sound quality isn’t quite what I want, but I hope to edit it and improve it soon. But posted is better than perfect.

As I mention in the video, I’m not claiming to be the world’s pedagogical expert at teaching with WordPress.  I’m still experimenting. I’m trying. And I’m learning myself.  What’s been amazing to me is how things I’ve done because I wanted to save time or improve workflow have also led to better and improved learning by students. They love it.

I’ve actually used WordPress in several different ways as a professor. And in most of my uses, I haven’t replaced the traditional school LMS such as Blackboard, D2L, Moodle, etc. In fact, I can’t completely replace it (yet) because there are some minimum uses of the LMS that are mandated by my school. Don’t get me wrong. I want to eventually replace the LMS as we know them and I think WordPress can help us do that. I just am not there (yet).  So, I want to go over some of my uses and provide some links and screenshots.  I hope to share a little of what I’ve learned and maybe I can help other professors get started.  I want to emphasize how using WordPress can help us as professors to find our voice.

Note: I’m going to use WordPress somewhat generically. Yes there’s other open source tools available to run a website. Known and Jekyll-Git come to mind and if that’s your thing, great. But IMO, WP is the best combination of power, flexibility, supportive community, and stability available.


EconProph.comscreenshotThis is the website where you’re probably reading this right now (unless it’s been syndicated or copied elsewhere which is OK as long as it conforms to the Creative Commons license I assign).  I use this site to collect, curate, and comment on other economics and higher education related material I find on the Web.  It’s my editorial and general publishing platform.  I think all professors need a site like this.  It helps establish an professional voice for the professor. Increasingly academic research discussions and debates are being held on the Web via blogs of the professors.  Certainly they are in economics where journal publications have become kind of “tombstones” as Paul Krugman calls them. It’s where the final resting place for some academic argument lies. While the argument is raging though, the action is on the Web. In the lay world the same discussions are happening on the Web, only they happen in places like Facebook and Reddit.  The problem with  those is that once you post there, it’s not really your voice anymore. They own it. They control it. They can make it disappear. We need to have our own voice and the only way to do that is with our own domains and our own sites.

Teaching-wise, a site like this is really useful for online, hybrid, and f-2-f classes. It’s been many, many years since I’ve needed to copy a hand-out of some form for my classes.  It’s also an excellent way for students to see how their professor engages with the topics and materials.  That builds the professor’s credibility and it models the right thinking for students.  Even if you don’t teach a class with a WordPress, all teaching professors need a site like this.


The next site is my “teaching portfolio” site.  I think of it alternatively as “the world’s dullest site” or “my office in the cloud”.  It’s a great place to collect stuff for reuse later and where others can find or use them – things like vitae, syllabi, presentations, and comments from students.  It also makes a great background/bio/self-intro site for my students.  By the way, with the help of 1 or 2 WordPress plugins, creating and publishing new semester syllabi and schedules becomes a 5-10 minute breeze. It helps them see me as a professor, learn more about my background if they’re interested, etc.  It really builds a professional identity. It also helps me keep track of all the “service” stuff I do that my administration will ask about sometime next year but I will likely have already forgotten. I can embed my current calendar too.

Econproph.net  and macro.econproph.net and micro.econproph.net

Econproph on Macro screenshotI teach the principles courses of economics. Micro in one semester and macro in the other, although lately I’m mostly a macro workhorse.  I teach these courses a lot. Fully online courses (students from 5 continents so far – come on Australia, you can do better).  But also traditional lecture face-to-face class and a 50-50 hybrid version as well.  I use the school’s LMS for grade reporting and any assignment where I want to use the auto-grading and auto-recording of scores features of the LMS. So basically quizzes are in the LMS (and right now discussion forums, too, but those are moving to WP soon).  Everything else is on a single WP site. My “lecture” content, assigned readings, videos, annotated version of the textbook table of contents, worksheet assignments, practice quizzes, and even additional links to explore the topic more.

The benefit for me is great. It’s one place to edit.  Fix a typo in one place and it’s updated in all sections of the course. The editing interface is much better than any LMS. Media storage and embedding is great. And help is only a Google “WordPress how-to …..” click away.

For students the benefits are even greater. IT’s easy to read and navigate on mobile automatically. It’s quicker than most LMS’s. Most important, it’s friendlier to read. WordPress allows and even encourages material to be presented as a narrative. That makes navigating the course easier.  And easier makes more better learning. Instead of the tech distracting from the content, WordPress features the content.

This brings me to idea of story-telling. We learn by stories. Humans always have. It’s part of being human. And a course should be giant story with little stories and analogies embedded in it. WordPress helps you tell stories.  You might want to check out post on Courses as Stories.  The first WP version of my principles courses (what you’re seeing if you’re clicking in summer 2015) started some of this narrative-oriented layout to the course, but version 2.0 in the works will do even more.

compsys.econproph.net and econhist.econproph.net

econhist screenshotMy other two major courses are a little smaller. Unlike the 4 or so sections of macro I might teach each semester, I teach only one section of Comparative Economic Systems (spring) or Economic History (fall) at a time.  These courses are different.  I’ve also setup WordPress sites for them and have all the content on there. However, in these two courses I either have students post their “research papers” and discussions on the course WordPress site, or I provide them each with their own blog and syndicate their course-related content into the course hub site.

The advantage here is improved writing and engagement. Students like becoming creators on the Web and not just passive consumers. They also respond well to the idea that the writing assignments are not disposable assignments that only the professor may ever see.

This format of connected courses has a lot of potential and I know I’m a follower and not so much of a path-breaker in this format. Most of cMOOC style courses have operated this way.




Hello, Teaching With WordPress

Well, it seems that despite having been looking forward to participating in the UBC Teaching With WordPress open course for quite some weeks, I’m a few days late getting started.  Ironically, the delay is due to participation at Miami WordCamp and the necessity to spend a day or so getting my summer session online macroeconomics course started, which is largely taught in the open using WordPress. I have a lot I want to say as well as learn in this course but for now I’ll remember that “done” is better than “perfect and comprehensive”.  So today I’ll settle for a self introduction and a brief overview of ideas I’d like to see discussed in the course.

As my Twitter handle (@econproph) and many of my domain names suggest, I teach economics.  Specifically, I’m Professor of Economics at Lansing Community College in Lansing, Michigan, US. (obligatory: my comments are my own and do not reflect the opinions of the College).  I’ve taught at LCC for approximately 14 years. I’ve taught both face-to-face classes, hybrids (a.k.a blended), and online.  As the years of passed, I’ve shifted to more and more online.  This long time online has also meant I’ve taught with straight HTML pages, Blackboard, Angel, uCompass, Moodle (my own install), MoodleRooms, Desire2Learn, and now I use WordPress as much as I can.

For readers who might not be familiar with U.S. community colleges, especially our Canadian and outside-U.S. friends, let me give a glimpse. I do this because I think we need to keep professors at community colleges, small teaching universities, and even the for-profit schools in mind as we discuss Teaching With WordPress, open resources, and open pedagogy.  In the U.S. roughly 1/2 of all higher ed students attend a 2-year community college.  Unlike Canadian colleges, the majority of US community college students are on a transfer path.  Yes, there’s a lot of tech and career oriented programs at CC’s – they get the media & political attention – but the real action is in transfer. Students take 1-2 years at CC and then transfer to finish at university.  We also get a lot of adults and part-time students. CC’s are big in online.  The school I teach at has 1/4 of enrollment is pure online. We’ve been doing it since 1996. Average age of students at CC’s tends toward 26-28.  The faculty teach. They don’t do much research. They teach a lot. Typical full-time load is 32 semester credit hours per year. That’s 8-11 semester long courses each year.  Many full-time faculty teach even more. Most faculty, in fact, often as much as 80% of the faculty are adjunct (sessional or part-time).  Oh, and the IT support at most CC’s is minimal at best and too thin to contemplate much WordPress stuff.  They’re often stretched to the max keeping folks enrolled, the money counted, and Blackboard/D2L/Moodle running.

So what’s that have to do with Teaching With WordPress?  Well, I’m all for openness. I get truly excited about open, connected, domain of one’s own, PLE’s, and all these concepts. But I’m also painfully aware how limited and insignificant the efforts of those of us who “teach with WordPress” are. For the dominant number of faculty, teaching with WordPress is a pipe dream, a fantasy. They haven’t the experience, the tools, the support, or the time to climb the learning curve. I know. I encounter fellow faculty all the time that express interest in how and what I do with WordPress. But its’ one thing for me to do it. I used to be strategy and technology consultant in business for 20+ years. I’ve had my own domains and hosted my own stuff for 20 years. Sure I know how to do it. But they don’t and the mechanisms aren’t there to help.  And I want to change that and I hope we (you the readers and me) should talk about it. I think this course is a good step in the direction.

So now on to the preview of some of the ideas I hope to contribute to the course.

  • My Journey: Next week, as I promised, I’ll add a video and some post material documenting my journey to teaching with WordPress.  It started in 2008 when the world went into recession financial collapse (I teach econ, remember).  I’m now not only a teacher using WordPress, I’m an evangelist that helps folks at other schools get started.
  • Voice of Our Own:  The wonderful work Tim Owens and Jim Groom are doing at ReclaimHosting with Domain of One’s Own efforts are fantastic. I love them. But I want to take the idea a little further conceptually. The importance of open pedagogy, open resources, and having a domain of one’s own goes beyond digital identity, keeping education affordable, or even owning one’s data. We, all of us in higher education but faculty in particular, need to assert a voice of our own.  At one time in the distant past and the fantasies of Hollywood script writers, professors were the source of the ideas, the teachers, and the mentors of students. The reality is far different today. Higher ed has evolved to where most faculty are really just teaching somebody else’s textbook. They’re facilitating or grading but less and less of their own voice. At some schools, the online courses are pre-packaged by instructional designers and distant “content experts” at some publisher – a “course in a box”. This is a dangerous path. Teaching with WordPress can help us regain our voice. I know it has given me a voice.  I mean who would ever have thought that a econ prof at a community college in mid-Michigan would be read by people on the other side of the world! But it happens every day (thank you WordPress).
  • LMS of Our Own:  I’ve been thinking for a long time about how to replace and improve on the standard LMS. They are all pretty much the same in concept: Blackboard, Angel, Canvas/Instructure, Desire2Learn, Moodle, etc.  They’re also largely dreaded by faculty and students alike. Conceptually these tools represent the very best of 1998 thinking. Yet, they do perform some critical functions. I’ve long been fascinated wondering what could replace the LMS. Unlike most faculty, I’ve had the experience of helping invent new electronic systems to meet new business models and new needs for 30 years. I even own one of the very first patents in e-commerce (before I got open religion). Very recently (as in last weekend at Miami WordCamp) the pieces are starting to come together in my mind.  I think it’s possible to replace the massive LMS systems with a decentralized network of WordPress-based installs – a kind of “LMS of Our Own” for each professor or department. I hope to share some of these ideas and get some reaction.
  • Connections: One of the biggest barriers I see to the spread of open pedagogy and open teaching is the hierarchical and “silo-ed” nature of higher education.  It results in a lot lone wolf’s who all have to reinvent the wheel. Those of us who have been teaching with WordPress for years have gotten pretty good at helping students make connections – connections with the Web, with ideas, with each other, and with the course hub.  But collectively we the faculty of higher ed are pretty lousy at connecting with each other. We’re organized work-wise into departments, colleges, and institutions, usually with people with whom we don’t always have much in common.  I’m struck by the time several years ago when a professor (actually chair of a very, very small program – indeed the only undergrad program of its type in the state) “inherited” a course at the last-minute due to resignation of an adjunct. That’s a common scenario: “spin up this course you’ve never taught with 2 weeks notice”. The same course was being taught somewhere by someone in the U.S. It would have been nice to be able to instantly find, share, and connect with somebody who had taught the course. A jump-start assist would have been nice. But it was too hard to find.  We need a better way to establish and maintain connections with each other.  Perhaps this course can help begin that.

I’m looking forward to this course. It’s near and dear to my heart and it’s stuff I’ve been focused on for years now.  Let’s go!  (and thanks to UBC for putting this together)

Caring for Children Is Caring for the Economy


Click on image for link to Registration.

I’ll be speaking next week, May 9, to the Arizona Directors Symposium, a professional development symposium for directors, managers, and others involved in early childhood education and early childcare. I’ll be speaking about the macroeconomics of early childcare. The slides are posted below here (you can download the file if you click on the little gear icon).  I’m very excited about this opportunity for two reasons. First, people who work with kids in early childcare programs are often under-paid and under-funded. It’s a real shame because, macroeconomically, the work they do is about as important as anyone’s. In fact our future long-run GDP growth rate depends more on what they do than what happens in Silicon Valley. The second reason I’m excited is because it’s another chance to get the message out about the importance of intergenerational economics. In the past couple of years, I’ve often presented on the importance to the entire economy of intergenerational transfer programs to seniors such as Social Security and Medicare. (see here, here, here, or here) But now I’ve got a chance to talk about the importance of intergenerational transfers to children, especially very young children. Besides the slides here, I hope to write a couple longer posts in the near future as time permits explaining some of the key points I plan to make.

Early childhood education (ECE) and early childcare is one of the very best, if not the best, investment we can make. Research in recent years, particularly research by economics Nobel Laureate James Heckman at heckmanequation.org combined with research at the Harvard Center on the Developing Child and others have demonstrated the power of ECE. Building off of longitudinal, controlled studies of participants in the pioneering 1960’s Perry Pre-School Program in Ypsilanti, MI, Heckman calculates that the annual return on investment is at least 7-10%. Each dollar that society invests in ECE through government funding of programs returns to society as much as $16 eventually. This is a real return, after adjusted for inflation, and lasts for 40+ years. No other investment opportunity pays off like ECE.  Even average stock market returns over 3 and 4 decades fail to achieve this level of return.

The Heckman Curve_v2The reason ECE is so powerful is because very young children’s brains and minds under go such rapid development in the first few months and years. Not only does this sensory pathway and language development provide the foundation for higher cognitive function, it also provides the basis for “emotional intelligence” (EQ).  EQ, or what Heckman calls character, includes the qualities such as persistence, creativity, communication, and social skills that are necessary for success in later education, careers, and life in general. Substantial evidence shows that by providing quality early child education and childcare, society can and does reap a significant increase in GDP. The increase in GDP comes from multiple sources:

  • improved health when the children become adults – lowering social healthcare costs
  • reduced social costs from reduced corrections, incarceration, and victim damages
  • greater participation in the workforce as adults
  • greater productivity as adults.

As our economy moves further through the 21st century we need the kind of healthy, high-EQ adults that ECE produces. It’s truly a win-win all the way around. Further, ECE is a classic economic example of why we must have government social funding of ECE. The economic benefits of ECE are so wide-spread that the bulk of the returns are in the form of externalities, which means that depending upon private decisions and private funding of ECE will guarantee under-investment and an inefficient result. In contrast, if society steps up and invests in ECE, instead of making government budget issues worse, we will in fact improve the long-run budget perspective, improve standards of living, and even make future adjustments to Social Security unnecessary.  That’s how intergenerational economics should work.

A downloadable copy of the Powerpoint file is available and a Google Slides version is also available.

Data and Visualization Resources for Incomes and Inequality

Posting links to two incredibly useful resources for students and people doing research on incomes, income distribution, and income inequality. These resources are useful for both historical data and visualizations as well as cross-country comparisons.

The first is the World Top Incomes Database from the Paris School of Economics. Many thanks to the Paris School and researchers Facundo Alvaredo, Tony Atkinson, Thomas Piketty and Emmanuel Saez. It’s a a tremendous resource.

The second is a tremendous resource also. It’s Our World In Data. It’s a work in progress project by Max Roser,   but it’s already jam packed with great data and visualizations on incomes, health, war and violence, poverty, and food and hunger. And best of all, it’s all CC-BY-SA licensed.  I love it when collaboration and the commons come together to support learning.

So Who Pays For the Government and How?

I’ve always found putting things in historical perspective and looking at the long-term trend of things usually illuminates a lot of policy discussions. It’s easier to see “what’s really happening” if you look at the long-term trend.  Taxes, tax rates, and the government budget are often hot topics of policy debate.  So is the future of the intergenerational social insurance programs such as Social Security and Medicare (also here).

As Paul Krugman has often mentioned, the best way to think of the U.S. federal government budget is to think of the government as “an insurance company with an army”.  But who pays for this insurance company (Social Security, Medicare, Medicaid) and it’s accompanying army?  The distinct trend of the last few decades is that individuals are being asked to shoulder more and more of the burden and that corporations are carrying a less-and-less share. In fact, as this graph shows, the corporations are nearing becoming insignificant in their contribution to the general welfare and maintenance of our government.

The data for this graph is from Office of Management and Budget in this file.


Why SS Is Not “Broke” And How The Trust Fund Works

For at least two decades the “very serious people” in Washington have insisted that the Social Security system is “broke”. They’ve been screaming “bankrupt, bankrupt I tell you!” for so long that unfortunately an entire generation of young people and even middle aged workers are convinced that Social Security won’t be there for them when they retire.

If true, it would be seriously problematic especially since it’s true that to some degree people are living longer (though not as much as the screamers would have you believe). The absence of Social Security would be disastrous since those same young and middle-aged people are finding it near impossible to save adequate amounts for their retirement through private savings and 401K’s. It’s not really their fault they can’t save enough since their real wages have been stagnant or declining for decades and periodic financial markets collapses like the 2001 dot-com bubble and 2008 total Wall Street meltdown decimates their feeble retirement accounts.

decorative image of "no"So let’s look at the question of the viability of Social Security. The short answer is NO. No it’s not broke. No it’s not bankrupt. And no, it’s not going broke in the future. And in fact, it cannot go “bankrupt” in the sense that most people understand “bankrupt”.  The idea that the Social Security system will collapse – will go “bankrupt” – and not be able to pay benefits to beneficiaries is simple false. It is a lie told either from ignorance or to further another less popular agenda. is

The claims that Social Security will go “bankrupt” are based upon three premises that taken together, would appear to bring impending doom.  Closer examination reveals a gross misunderstanding of how the SS system works and a deliberate attempt to play on words to exploit people’s fears. The doom-and-gloomers essentially argue that the following syllogism:

  1. SS is a retirement pension system that depends upon the monies retired workers paid in while younger in order to pay benefits when retired. This fund of monies is called a “trust fund”.
  2. The SS Trustees annual report regularly projects that the Trust Fund will be “insolvent” at some point in the future – usually 18 to 25 years away.
  3. The doom-and-gloomers twist the on woirds to transform two technical government accounting terms “trust fund” and “insolvent” to play on fears of “bankruptcy” and zero balances in retirement accounts.

In reality, only #2 above is true and it doesn’t mean at all what people think it means. The reality is that the fear mongers misrepresent how the Social Security system works. The reality is there are only two ways that today’s workers and young people will not have Social Security benefits available to them when they retire:

  • Congress deliberately decides to break promises to them and end the Social Security program for ideological or class war reasons while the program is still feasible.
  • The U.S. GDP and employment drop to zero. Nobody is working and nobody is producing anything. No food. No shelter. No heat. No nothing being sold. If that happens then payrolls drop to zero and with it payroll taxes for Social Security drop to zero. But that’s probably the least of our worries under this kind of post-apocalypic Mad Max scenario. So this isn’t worth discussing.

diagram of flow of payroll taxes through SS Administration to beneficiariesThe reality is that Social Security in the U.S. is an intergenerational transfer program. It is not dependent at all on the “trust fund”. In fact, if the trust fund were zero, zilch, empty, the system would still be able to pay benefits every month. That’s because Social Security benefits this month are paid from the taxes that workers and employers paid this quarter. Yes, it’s a basically a flow-through transfer system. We take money from today’s workers to pay today’s older people. Yes, so-called millenials (the generation currently in their 20’s) if they are fortunate enough to have found a job in this slack economy and the millenials’ working parents pay taxes each paycheck. To be precise, 6.2% is deducted from their paycheck and then matched with an equal amount from their employer’s pockets. Their tax money is sent to Washington each quarter by their employer.  That money then goes straight to pay the grandparents of those millennials (and anyone else eligible of that generation). The tax money paid this quarter goes directly to pay the monthly benefits of this quarter.

So why would today’s workers give up part of their incomes to pay money to older people?  Simple. Because it’s in their best interest and because the society, through the government, has given them a solemn promise to make sure that no matter what happens in the uncertain future the government will ensure that when today’s workers get older they will be partially supported by the next generation after them. In addition, there are numerous other benefits such as a faster growing economy, more entreneurship, and risk-free retirement accumulation, but I’ll detail those benefits in another post. The key is the intergenerational promise. As long as there are workers and payrolls in the economy, there is money to pay social security benefits. “Bankruptcy” in the popular sense of an enterprise that is no more, that is defunct, and that cannot pay anything is a lie. The claim of impending Social Security bankruptcy is fear mongering at its worst.

But you, the skeptical reader, might ask “what about the Social Security trustees’ assertions of insolvency in 15-20 years”? The Social Security Administration Trustees in their annual report do frequently report of projected “insolvency” of the trust fund – not the system itself. And “insolvency” has a specific legal definition in this context that is vastly different from the popular understanding of bankrupt or broke.

In a nut shell, Social Security is a government entitlement benefit program with a dedicated tax stream. As an entitlement program, people who pay and meet the currently legal defined requirements acquire the legal right to be paid benefits later. Because these benefit levels are legally defined, it is possible to project, albeit with a very fuzzy and changing forecast, what total benefits will be necessary in the future. At the same time, it is possible to project the future tax receipts of the dedicated tax (the FICA payroll tax) assuming no changes to the tax levels in the future and assuming a wide range of guesses about future payrolls in the U.S.  If, these projections indicate that at some point in the future the dedicated tax flow at today’s tax rate and projected future payrolls should result only enough money to pay less than 100% of the amount projected needed to pay the full currently promised benefit, then we have the technical warning of “insolvency”. The most recent report, the 2014 report, projected that this point where payroll taxes will be short of promised future benefits will come in 2033. This is a few years earlier than projected a few years ago, but that’s because Congress lowered the payroll tax for two years in 2013.

The projected “insolvency” means that, assuming all the projections actually come true (a tricky business by itself), Social Security will find itself in 2033 with payroll taxes only being enough to pay for 78% of the benefits we currently project/promise we will pay in 2033.

Even if we do nothing AND all the projections come true exactly as predicted, Social Security will continue paying 78% of the benefit that we are currently promising to people who will retire in 2033. People should keep in mind that the average benefits we are currently promising for retirees in 2033 are substantially larger in real terms than the benefits today’s average new retiree is receiving. So even if we do reach the “insolvency” point, Social Security will continue to pay benefits at a very substantial level when compared to today’s benefits. The future benefit, in real terms, would be greater than 78% of today’s average real benefit.

So what’s all this talk and concern about the trust fund? The trust fund isn’t necessary to pay benefits. The trust fund serves two purposes. The first and primary purpose is it’s the Social Security “checking account” and it’s good practice to have a cushion – especially when outgoing payments might not match incoming taxes each period. And that’s what happens. We like to keep benefit payments a level amount each month. Iimagine grandpa’s panic if the SS check changed each month! But remember that taxes are collected quarterly. The trust fund exists so we can cushion a quarterly income flow against a monthly payment flow.

However, in the last two decades, the trust fund was allowed to build up to very large balances, balances much larger than necessary to match quarterly cash inflow against monthly cash outflow. This was done deliberately. The Social Security system was facing “insolvency” back in the early 1980’s. In fact, it was at one point, only approximately 3 months from technical insolvency, the same kind of insolvency we now project is 15-16 years away. The reason for the impending insolvency in 1983 was because Congress had raised benefit calculation levels in the early 1970’s but didn’t adjust payroll taxes to sufficiently cover them. In particular benefit levels got adjustments for inflation but the payroll tax rate and the cap on taxable payrolls wasn’t adjusted.

Baby boomers pre-paid part of their own retirements by paying excess payroll taxes into trust fund in 1990's and 2000's

Baby boomers pre-paid part of their own retirements by paying excess payroll taxes into trust fund in 1990’s and 2000’s

We survived that brush with insolvency. Politicians from both parties at that time agreed to make an adjustment. They effectively doubled (approx) the payroll tax rate and phased it in. By the late 1980’s and early 1990’s the trust fund had fully recovered to comfortable levels. A comfortable trust fund level is defined as having a cushion in the “checking account” of enough money to pay 12 months’ of projected benefits. But once the trust fund recovered, we had switched to the opposite “problem”. Instead of not collecting enough taxes each quarter to cover benefit payments, we were now collecting too much in payroll tax due to the higher payroll tax rates. In effect, the Social Security system was over-taxing in the 1990s’ and up until today. The result is a skyrocketing “cushion” in the trust fund. Right now the trust fund has over $2.8 trillion dollars of US government bonds in it. That’s a “cushion” equal to approximately 4 years worth of benefits!.  That’s hardly “broke”.

So why didn’t the government lower the payroll tax rate in the 1990’s when the trust fund had recovered? The idea was that the Baby Boom generation, which was working and paying taxes at the time, would start to retire around 2010 and that for a 20-25 years, the period 2010-2035, demands for benefit payments would be higher than they would be after 2040.

Trust fund balance scenarios. A lot depends on assumptions of future growth, population, retirement age trends, productivity, and even technology. - The percent vertical axis represents the trust fund balance as a % of one-year's benefits.

Trust fund balance scenarios. A lot depends on assumptions of future growth, population, retirement age trends, productivity, and even technology. – The percent vertical axis represents the trust fund balance as a % of one-year’s benefits.

In truth the problem was not that there so many baby boomers, but rather that baby boomers didn’t have as many children as their parents. So it was decided that the baby boom generation would be the exception to the solemn promise of younger workers pay for their elders benefits. Instead, the children of baby boomers would partially pay for their elder boomer parents’ benefits and the boomers themselves would partially “pre-pay” their own benefits from their own over-tax payments in the 1990’s and 2000’s. Thus the bubble in the trust fund. It was always intended to rise way up until around now and then to deplete back down to ordinary “cushion” levels.

But now we’re facing a situation where the planned return of the trust fund to more ordinary “cushion” levels has become the basis for a fear mongering campaign designed to convince voters to accept the reduction or elimination of the very successful Social Security program. The reality is there may be a problem in 18-20 years, if all the assumptions about population, labor force participation, unwillingness to adjust tax rates, productivity, retirement trends, and real wage levels all come true. But we dealt with this problem once before when it was only 3 months away. There’s no need to move now to address a moving, uncertain problem in 15-20 years. Further, the rhetoric about “we need to cut benefits NOW in order to avoid cutting benefits in the future” doesn’t make sense.  The reality is we have many options to address, what will in likelihood be a necessary “tweak” to the system. But that is for another post.