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

Voters
91. You may not vote on this poll
  • Socialist and Against

    10 10.99%
  • Socialist and For

    1 1.10%
  • Democrat and Against

    21 23.08%
  • Democrat and For

    6 6.59%
  • Republican and Against

    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. #31
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    Re: Social Security Fix

    But there will be no increased cost for these workers. Employers can simply move the needed 7% from salary to the FICA tax and the end cost is the same. Employers of workers earning under the $106K level have been doing this all along.
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  2. #32
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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    Here is my proposal:

    Allow workers to opt into a partially privatized system, where of their 7.65% FICA expenditures, 5% goes into a private TSP-style account; and the Employers match follow the same. the remaining 2.65% (or, when you count the match, 5.3%) will go straight into SS, but it will be revenue for which SS will never see a liability. the cost for opting out is that part of your pay continues to go to pay for others, but the upside is that you get a combined total of 10% of your annual income going into a retirement account that belongs to you, and grows tax-free. Social Securities' revenues will instantly drop, but nowhere near as severely as their liabilities. To ensure solvency in the adjustment period (and to make it politically palatable); lift the cap. We can lift the cap on only the worker (and not the employer) if we want to encourage job-creation; or lift it on both if we need the revenue to ensure solvency, or if that's the only way to get the thing passed; here is room for compromise wiggling. Higher paid workers will see more of their money leave in the form of taxes, but those making less than $604,000 will get back even more in the form of ownership of personalized accounts (assuming the employer cap isn't lifted, and that's not figuring for the added benefit of those accounts growing tax-free), and so they will be willing to make the trade. Perhaps another compromise point would be to raise the cap to $604K. Poorer workers can either spend their lifetime building far more wealth than they ever would have seen under Social Security if they are younger, or keep the guaranteed program benefits if they are older.

    ta-da! the American people and the Government are left better off.

    From a practical standpoint, that plan would work as long as the additional revenues from lifting the cap made up for the temporary loss due to people pulling their 5% out. In the long run, workers would be far better off than they are under the current system.

    From a political standpoint, the plan is dead in the water. The Liberals aren't going to like the idea of privatizing part of SS, and the conservatives aren't going to like raising the cap. There aren't enough in the center to make it pass.
    "Donald Trump is a phony, a fraud... [he's] playing the American public for suckers." Mitt Romney

  3. #33
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    Re: Social Security Fix

    Quote Originally Posted by Dittohead not! View Post
    From a practical standpoint, that plan would work as long as the additional revenues from lifting the cap made up for the temporary loss due to people pulling their 5% out. In the long run, workers would be far better off than they are under the current system.

    From a political standpoint, the plan is dead in the water. The Liberals aren't going to like the idea of privatizing part of SS, and the conservatives aren't going to like raising the cap. There aren't enough in the center to make it pass.
    Its not really that I am against the idea of privatization. Its that for SS to be privatized it requires it to be converted to a fully funded system. You are correct, that the long run prospects of such a system are better, but the costs that would have to be incurred to transition from PAYG to a fully funded system are huge. You won't get people to vote for it because it screws over the generation that is voting for it. If you want private accounts why would you not just favor slowly phasing out SS all together?
    Last edited by drz-400; 11-15-10 at 02:08 PM.

  4. #34
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    Re: Social Security Fix

    Quote Originally Posted by drz-400 View Post
    Its not really that I am against the idea of privatization. Its that for SS to be privatized it requires it to be converted to a fully funded system. You are correct, that the long run prospects of such a system are better, but the costs that would have to be incurred to transition from PAYG to a fully funded system are huge. You won't get people to vote for it because it screws over the generation that is voting for it. If you want private accounts why would you not just favor slowly phasing out SS all together?
    cpwill proposed eliminating the cap in order to make up for the temporary shortfall. I'm not sure if that would be enough, though. It really doesn't matter, as it is not politically viable.
    "Donald Trump is a phony, a fraud... [he's] playing the American public for suckers." Mitt Romney

  5. #35
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    Re: Social Security Fix

    It would be enough if you also froze benefits levels to where they are today plus a modest inflation allowance.

    2/3 of Americans support that in poll after poll.

    here is just the latest taken on election day that measures the support for SS

    http://www.democracyforamerica.com/poll
    Last edited by haymarket; 11-15-10 at 05:00 PM.
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    Re: Social Security Fix

    I propose that SocSec be converted into a systems like the state of Ohio has for its teachers.

    Ech month generates revenue equal to x% + y% of your gross pay, where x% comes from the employee and y% comes from the employer. x% is a pre-tax deduction.

    The employee has three options for this revenue:
    -All of the $ goes into a 'defined benefit plan' where you lose control of the money but are guaranteed a certain benefit at retirement.
    -Al of it goes into a 'defined contribution plan' where all ov the money goes into a 401k style account
    -x% goes into the latter and y% goes into the former.

    Its all about choice.

  7. #37
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    Re: Social Security Fix

    Quote Originally Posted by haymarket View Post
    But there will be no increased cost for these workers. Employers can simply move the needed 7% from salary to the FICA tax and the end cost is the same. Employers of workers earning under the $106K level have been doing this all along.
    economists are in near agreement that all of FICA taxes (the employer and employee section) come out of compensation, this is true; what you are missing is that many people are earning more than 106,000 now; and people who would like to make that much in the future.

  8. #38
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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    economists are in near agreement that all of FICA taxes (the employer and employee section) come out of compensation, this is true; what you are missing is that many people are earning more than 106,000 now; and people who would like to make that much in the future.
    What do you mean that I am missing this fact? Now you have lost me and I have no idea what you mean by that.
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  9. #39
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    Re: Social Security Fix

    Quote Originally Posted by Dittohead not! View Post
    From a practical standpoint, that plan would work as long as the additional revenues from lifting the cap made up for the temporary loss due to people pulling their 5% out.
    yeah, i have no idea how to go about checking that. even if we saw a temporary deficit though; i think the long term gain would probably more than outweigh it.

  10. #40
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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    Here is my proposal:

    Allow workers to opt into a partially privatized system, where of their 7.65% FICA expenditures, 5% goes into a private TSP-style account; and the Employers match follow the same. the remaining 2.65% (or, when you count the match, 5.3%) will go straight into SS, but it will be revenue for which SS will never see a liability. the cost for opting out is that part of your pay continues to go to pay for others, but the upside is that you get a combined total of 10% of your annual income going into a retirement account that belongs to you, and grows tax-free. Social Securities' revenues will instantly drop, but nowhere near as severely as their liabilities. To ensure solvency in the adjustment period (and to make it politically palatable); lift the cap. We can lift the cap on only the worker (and not the employer) if we want to encourage job-creation; or lift it on both if we need the revenue to ensure solvency, or if that's the only way to get the thing passed; here is room for compromise wiggling. Higher paid workers will see more of their money leave in the form of taxes, but those making less than $604,000 will get back even more in the form of ownership of personalized accounts (assuming the employer cap isn't lifted, and that's not figuring for the added benefit of those accounts growing tax-free), and so they will be willing to make the trade. Perhaps another compromise point would be to raise the cap to $604K. Poorer workers can either spend their lifetime building far more wealth than they ever would have seen under Social Security if they are younger, or keep the guaranteed program benefits if they are older.

    ta-da! the American people and the Government are left better off.

    how much better off?

    welllll, let's do a quick example:

    Joe graduates High School and goes to work, making 25,000 a year. Not anyone's idea of incredible pay, but there you are. Joe gets' a 2% raise every year to account for his increasing talent, experience, etc. The 10% of his income goes into a mix of funds that matches the S&P 500 Combined Annualized Growth average since 1982: 7.98% (after you account for inflation). If Joe retires nice and early at 62; his retirement fund will be worth $1,030,110, and if placed into an annuity / conservative account that generates a 5% annual return, his monthly benefit will be $4,292. That would be slightly less than his last monthly paycheck of $4,979; but still quite livable. If Joe works until he's 65, his monthly benefit will climb above his monthly income to $5,473; and if he decides (as most of us probably will) to delay retirement to 68, he's looking at a monthly retirement check of $6,966.

    And remember, Joe isn't exactly one of society's higher paid workers.

    But he also had the advantage of time. Let's say instead Joe went to two years of college, and got an associates before entering the workforce to earn that 25,000; and let's say that instead of 2%, Joe turns out not to learn new skills that well, and his annual raise above inflation is actually 0.5%. We're stacking the deck a little against ole Joe, but he still seems to come out okay; his monthly benefit at age 62 is $3,050; at age 65 it's $3,875; and at age 68 it's $4,915. It's worth noting that under this model, the most Joe ever made was $31,672 in a given year; and that his monthly retirement benefits at age 65 represents a $1,200 monthly pay increase over his monthly income. Even if Joe retires early at 62 he will have more in income off of his account than he would from working; and the longer he chooses to keep working, the greater, obviously, his return is.

    AND ALL THIS WITHOUT COSTING OLE JOE A SINGLE RED CENT. since the money was cash he was losing to taxes in the first place, his take-home pay wasn't reduced one iota; but because we partially privatized social security, Low Income Worker Joe can retire a millionaire.

    OR, if he didn't want the 'risk' of the marketplace, he could have chosen to stay with regular social (in)security. average monthly payout: about $1,100 dollars. or, roughly 1/3rd of what Joe made in our worse case scenario at age 65.


    BUT WAIT!!! WHAT IF THE MARKET TANKS!!!

    Markets recover. If the market tanks right as Joe was planning on retiring, he can work for an extra year while it rights itself, or simply choose to draw less from the account in order to leave more in there to ride the upswing. OR, if Joe makes the worst decision possible, at the worst time possible and withdraws all of his money while the market is at the low point on the trough (say, a 40% drop, similar to what we just saw), to purchase a 5% annuity... then his monthly income in our worse-case scenario at age 65 will still be more than twice what he could have expected from Social Security.
    Given that Republicans are claiming they will be offering entitlement reforms in their upcoming budget proposal; i figured this could use a bump. I still think that making people financially independent in such a manner as to bring in new revenue with no liability attached to them would be a powerful wealth building and debt reduction tool.
    Last edited by cpwill; 02-26-11 at 12:41 AM.

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