View Poll Results: Your Identity and For/Against this SS Reform model

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  • Socialist and Against

    10 10.99%
  • Socialist and For

    1 1.10%
  • Democrat and Against

    21 23.08%
  • Democrat and For

    6 6.59%
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    2 2.20%
  • Republican and For

    22 24.18%
  • Libertarian and Against

    9 9.89%
  • Liberarian and For

    9 9.89%
  • I am for it, but with a particular modification (explain)

    11 12.09%
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Thread: Social Security Fix

  1. #301
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    Re: Social Security Fix

    Quote Originally Posted by JoeTheEconomist View Post
    Based on what? Low wage workers can receive as much as 9% real returns according to the Social Security Administration.
    according to the Social Security Administrations' Calculators, Low Income Joe's monthly benefit would be around $950 a month.

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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    according to the Social Security Administrations' Calculators, Low Income Joe's monthly benefit would be around $950 a month.
    Here is your statement. "monthly benefit at age 62 is $3,050; at age 65 it's $3,875; and at age 68 it's $4,915." I am curious when Joe started work and what his starting pay was. I assume that you are talking about someone who retires in 2012 or someone born in 1947. He hit 18 in 1965, when the $25,000 of 2012 was comparable to about $3,400. You are saying he is going to have almost $4,000 a month at 65 in 2010. Is this the guy you are talking about? How much was saved and what is the rate of return you are expecting on the retirement account.

    We did a comparable figure for someone making 2/3rds median income (about 38K in 2012). They had roughly $600,000 of lost savings, on which they could expect to draw 5% or 30,000 per year. That was invested in the actual S&P, dividends included, net fees. Just about what they are making today. But that is actual SS taxes rather than 10% flat.

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    Re: Social Security Fix

    We are deeper into numbers than I normally get. The role our group plays is about keeping the debate honest. In your presentation you said that Joe will not lose a cent. You are aware that EITC is designed to compensate lower-wage workers for payroll taxes. If you do away with payroll taxes, you will do away with the EITC. He is likely to lose a lot of money. SS is quite a good deal for the low-wage worker, and without massive subsidies you are unlikely to match it.

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    Re: Social Security Fix

    Quote Originally Posted by JoeTheEconomist View Post
    Here is your statement. "monthly benefit at age 62 is $3,050; at age 65 it's $3,875; and at age 68 it's $4,915." I am curious when Joe started work and what his starting pay was.
    ... I explained that all in my post. do you read what you are responding to?

    Middle Income Joe starts working at age 18 and makes 25K a year, growing to a little over 63K a year by the time he retires if he does so at 65.
    Low Income Joe starts working at 20, makes 25K a year, which grows to a little under 32K a year by the time he retires if he does so at 65.

    Both Joe's see a superior return under all circumstances with the cpwill plan than they do with traditional Social Security. The closest we have come is Low Income Joe seeing back-to-back 2008 style market crashes in the two years before he retires, leaving him withdrawing in the middle of the second trough, and gave him a benefit that was only a couple of hundred dollars higher than he would have gotten from Social (in)Security.
    Last edited by cpwill; 04-06-12 at 11:40 PM.

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    Re: Social Security Fix

    Quote Originally Posted by JoeTheEconomist View Post
    We are deeper into numbers than I normally get. The role our group plays is about keeping the debate honest. In your presentation you said that Joe will not lose a cent.
    that is correct - since Joe's money was already being lost, his take-home pay remains the same

    You are aware that EITC is designed to compensate lower-wage workers for payroll taxes. If you do away with payroll taxes, you will do away with the EITC. He is likely to lose a lot of money. SS is quite a good deal for the low-wage worker, and without massive subsidies you are unlikely to match it.
    I don't do away with payroll taxes. I redirect a portion of them. No one has called for altering the EITC (at least, certainly not in this thread). And SS is a crappy deal for low-wage workers, who are overly dependent upon it, despite the fact that it gives them less benefit than those who in turn need it less. Low Income Joe never makes even as much as $32,000 a year - how much do you think he has saved privately for retirement? yet his monthly check is $950? that's what he has to survive on?

    Irrespective of what "your groups purpose" is, if you're going to throw around claims about the superior returns that SS gives our lower income workers to privatized accounts, you'd better be ready to back up that claim with numbers. I'd be fine with including a Chilean-style guarantee into the program. Because the odds of the government having to pay out are extremely low - Chile has had it's system for three decades and has yet to have a single instance where the return generated by a privatized account was lower than it would have been under their previous traditional SS-style system.

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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    ... I explained that all in my post. do you read what you are responding to?
    I do. I may misunderstand. "and his annual raise above inflation is actually 0.5%" When you adjust for inflation, the starting wage has to be closer to $3,500 rather than $25,000. In 2012, 31, 000 is at the lower end of the wage scale. In 1965, $25,000 would have put you in the top earner categories rather than a low-wage worker. The person that you have describe isn't lower earner. If he starts with $25,000 in 1965, .5% above inflation would be close to $200,000 per year.

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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    Irrespective of what "your groups purpose" is, if you're going to throw around claims about the superior returns that SS gives our lower income workers to privatized accounts, you'd better be ready to back up that claim with numbers.
    These aren't my numbers. I take what SSA produces. If you want to look at their reports, I am happy to point you that way. I am not saying you are wrong, but it is either your numbers or those of SSA. According to SSA, Social Security is a very good investment for lower-income workers particularly those married with kids.

    EITC was created to reimburse lower-wage workers for high burden of payroll taxes. That is when taxes were taken and given to someone else. You are planning to keep the EITC despite the fact that these workers would be paying themselves.

    You are telling me that your plan helps low-wage workers. I can show you reports from SSA that will tell you that is almost impossible. Maybe their reports are wrong. Mind you, SS is insurance. SSA's reports factor in the idea that some of these workers get nothing. The return that of low-wage workers who actually reach retirement is even higher. Maybe SSA is lying.

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    Re: Social Security Fix

    Quote Originally Posted by JoeTheEconomist View Post
    I do. I may misunderstand. "and his annual raise above inflation is actually 0.5%" When you adjust for inflation, the starting wage has to be closer to $3,500 rather than $25,000. In 2012, 31, 000 is at the lower end of the wage scale. In 1965, $25,000 would have put you in the top earner categories rather than a low-wage worker. The person that you have describe isn't lower earner. If he starts with $25,000 in 1965, .5% above inflation would be close to $200,000 per year.
    no - I kept all numbers constant.

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    Re: Social Security Fix

    Quote Originally Posted by JoeTheEconomist View Post
    These aren't my numbers. I take what SSA produces.
    if you will note, I linked what SSA produces, on the SSA's own site using their own calculator. It does not back up your claim that it is a superior return for low-income workers.

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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    if you will note, I linked what SSA produces, on the SSA's own site using their own calculator. It does not back up your claim that it is a superior return for low-income workers.
    Your link is not an economic return it is a monthly projection. To get economic returns you have to add factors like birth date and whether someone is married. What you need to see is what would an inflation protected annuity of $950 cost when someone turns 65. You ought to take a look at the actual formula because my guess is that the link you gave uses assumptions that are completely inconsistent with the worker you have described.

    Here are the money's worth ratios from SSA. They tell you what the present value is of future benefits. These reports show SS in a favorable light in terms of discount rate. Like you I don't argue with the rates I just ask for sources.

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