Social Security not as broke as we thought

Hoplite said:

Will Social Security be there for today’s young workers? | Analysis & Opinion |

An interesting take

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...how is that an "interesting take" in any way? He's just repeating facts that are common knowledge and is rehashing "solutions" that don't actually solve anything.

It's true that SS has a $2.5b "trust fund," but it also has $16b in unfunded liabilities. $2.5b ain't ****. In addition, removing the cap wouldn't actually do anything to fix SS's problems, as it would increase liabilities in tandem with its revenues.

RightinNYC said:

...how is that an "interesting take" in any way? He's just repeating facts that are common knowledge and is rehashing "solutions" that don't actually solve anything.

It's true that SS has a $2.5b "trust fund," but it also has $16b in unfunded liabilities. $2.5b ain't ****. In addition, removing the cap wouldn't actually do anything to fix SS's problems, as it would increase liabilities in tandem with its revenues.

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This is probably the easiest of the long term problems the federal government has to fix. We have had this type of problem before, revised the formula and the system got healthier again.

Fixing the problem, either by adjusting FICA or the age of retirement should be considered no different than an insurance company making changes due to an actuarial change.

The government will also have to be smarter in how it collects FICA. For example how they track incomes of people who sell on ebay etc. Are those people paying the FICA on all of their earnings, probably not.

pbrauer said:

An IOU is a promissory note, a security is actually an asset and payable upon demand. Daily FICA inflow is used to buy securities and the money is put into the Treasury, when benefits are paid money from the Treasury is used pay the SS administration for the securities they hold. The resulting monies are distributed as benefits.

If they were IOU's, they could remain that way forever and never paid. The claim that the SS Trust fund is a bunch of worthless IOU's is BS.

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It is the government. Where will they get the money to pay the securities?

from RightinNYC

In addition, removing the cap wouldn't actually do anything to fix SS's problems, as it would increase liabilities in tandem with its revenues.

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Yes, if we also allowed the level of benefits to rise in direct proportion to the amount paid in. However, that is not what I and many other advocate. I favor removing the cap on income levels for FICA taxes but freezing the benefit levels to the maximum paid today plus a modest inflation adjustment as needed in years to come.

If you do that, then popping the cap does indeed solve the problem because it infuses the system with massive amounts of new monies but does not increase the liabilities. Of course, then we probably get into a whole new battle about the nature of the program but it does solve the pure financial shortfall problem.

from ptif219

It is the government. Where will they get the money to pay the securities?

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taxation. I think that is the normal way that government raises needed revenues.

haymarket said:

from RightinNYC



Yes, if we also allowed the level of benefits to rise in direct proportion to the amount paid in. However, that is not what I and many other advocate. I favor removing the cap on income levels for FICA taxes but freezing the benefit levels to the maximum paid today plus a modest inflation adjustment as needed in years to come.

If you do that, then popping the cap does indeed solve the problem because it infuses the system with massive amounts of new monies but does not increase the liabilities. Of course, then we probably get into a whole new battle about the nature of the program but it does solve the pure financial shortfall problem.

from ptif219



taxation. I think that is the normal way that government raises needed revenues.

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You mean steal from peter to pay paul

No. Allow me to expand a bit ......what I am saying is for the duly elected government to exercise one of the powers given to them by the US Constitution and levy taxes to save a program that is wildly popular with the people it represents. Sounds radical and dangerous, huh?

washunut said:

This is probably the easiest of the long term problems the federal government has to fix. We have had this type of problem before, revised the formula and the system got healthier again.

Fixing the problem, either by adjusting FICA or the age of retirement should be considered no different than an insurance company making changes due to an actuarial change.

The government will also have to be smarter in how it collects FICA. For example how they track incomes of people who sell on ebay etc. Are those people paying the FICA on all of their earnings, probably not.

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It's not actually that simple, for the reason I mentioned above. Increasing FICA increases future liabilities as well. Increasing the retirement age helps to a degree, but you'd have to adjust the underlying formulas in that case as well.

haymarket said:

from RightinNYC

Yes, if we also allowed the level of benefits to rise in direct proportion to the amount paid in. However, that is not what I and many other advocate. I favor removing the cap on income levels for FICA taxes but freezing the benefit levels to the maximum paid today plus a modest inflation adjustment as needed in years to come.

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As you note, what you're proposing is a fundamental change to the entire character of the SS program that would make it just another income transfer system. I mean, that's fine, but it's not SS. You could also fix the problem by just instituting welfare for poor/middle class old people funded from general revenues, but I wouldn't really call that "fixing SS" either.

haymarket said:

simple math
pop the $106K cap on taxable income for FICA contributions
problem is solved

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sadly it is not. you still have to dramatically reduce payments, especially when you score the effects of that cap removal dynamically.

ptif219 said:

It is the government. Where will they get the money to pay the securities?

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printing presses.

RightinNYC

I have noticed that those on the right who oppose SS take two stances that they attempt to keep independent of each other.

The first is that the numbers indicate that SS cannot be sustained because the money going out is much more (or will be much more) than the money going in. So if we do nothing to correct this the program will collapse.

Then they also maintain that we cannot freeze benefits which increasing the level of contributions beyond the current $106K per year because in your words

what you're proposing is a fundamental change to the entire character of the SS program that would make it just another income transfer system. I mean, that's fine, but it's not SS.

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Lets be real here. Do right wingers opposed to SS really a rats behind about preserving the historical purpose and structure of the program? C'mon now - admit it. You all could not care less about that. You only bring it up when the pop the cap and freeze the benefits solution is brought up.

Did you ever see the comedian Kevin Meaney do his "I don't care" routine? He takes some issue of the day and the normal response to it and then prances around singing "I don't care, I don't care, I don't care" over and over again. It is funny and it makes a point.

And that is mine regarding your objection to changing the nature of the program.

p.s. And as long as we save it I really do not care what you call it. If Wealth Redistribution floats your boat - thats fine with me. If you feel Satanic Socialistic Stealing from the Rich makes it for you - I will salute that one also. And if you want to rename it in honor of Karl Marx or even Groucho Marx - you have my seal of approval. As long as the program is saved. I think W. Shakespeare said something about a rose that would apply here.

haymarket said:

RightinNYC

I have noticed that those on the right who oppose SS take two stances that they attempt to keep independent of each other.

The first is that the numbers indicate that SS cannot be sustained because the money going out is much more (or will be much more) than the money going in. So if we do nothing to correct this the program will collapse.

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Correct.

Then they also maintain that we cannot freeze benefits which increasing the level of contributions beyond the current $106K per year because in your words

Lets be real here. Do right wingers opposed to SS really a rats behind about preserving the historical purpose and structure of the program? C'mon now - admit it. You all could not care less about that. You only bring it up when the pop the cap and freeze the benefits solution is brought up.

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I don't think you're understanding my point. I'm not saying that we shouldn't raise the cap but withhold the increase in benefits for rich people because of some need to keep the program historically true. I'm saying that if you do that, what makes SS different from any other welfare program? At least in its current form, there is some semblance of evenhandedness about it. I don't think we need to keep increasing the number of social programs paid for by high-earners.

p.s. And as long as we save it I really do not care what you call it. If Wealth Redistribution floats your boat - thats fine with me. If you feel Satanic Socialistic Stealing from the Rich makes it for you - I will salute that one also. And if you want to rename it in honor of Karl Marx or even Groucho Marx - you have my seal of approval. As long as the program is saved. I think W. Shakespeare said something about a rose that would apply here.

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And I think the program is fiscally unsound and that your proposed 12.4% surtax on all income over $106k will do far more damage than it's worth.

And I think the program is fiscally unsound and that your proposed 12.4% surtax on all income over $106k will do far more damage than it's worth.

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First, please demonstrate how increasing massive amounts of money into the system is fiscally unsound?

Second, so it is acceptable and fair to place this tax on the total income of the lower 93 to 94% of income earners but it is not fair or acceptable to do so on the total income of those in the upper 6 or 7% because of some vague assertion that it will do more damage than its worth? How are you going to support that assertion? And worth to who exactly? Perhaps not that upper 6% but I suspect the lower 94% with an enriched SS program will feel the change is just wonderful and worth a great deal to them.

haymarket said:

First, please demonstrate how increasing massive amounts of money into the system is fiscally unsound?

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Please reread what I said. The program is fiscally unsound because of its structure, not because increasing revenues would make it so.

Second, so it is acceptable and fair to place this tax on the total income of the lower 93 to 94% of income earners but it is not fair or acceptable to do so on the total income of those in the upper 6 or 7% because of some vague assertion that it will do more damage than its worth? How are you going to support that assertion?

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When everyone pays that 12.4% tax on their first $106k in earnings, that money is credited toward their retirement. They will (theoretically) get back that money in an amount commensurate with what they put into the system. That makes the program less like a welfare system and more like a mandatory retirement program.

If you stop correlating payments to future receipts, then you're just taxing high earners for the sake of everyone else. That's a very different type of program. Moreover, believe it or not, a 12.4% surtax on all income over $106k would have a pretty big impact on the economy. Congress is currently up in arms about the prospect of a 8% increase on income over $250k, so I'm not sure why you think your proposal has a chance in hell.

And worth to who exactly? Perhaps not that upper 6% but I suspect the lower 94% with an enriched SS program will feel the change is just wonderful and worth a great deal to them.

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And I'm sure that most people would be happy if we murdered the 500 richest people and distributed their wealth to the rest of the country in the form of McRibs and lap dances. Doesn't mean it's a good idea.

Hoplite said:

Social Security not as broke as we thought

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...and Terri Schiavo wasn't as dead as people thought but that didn't stop her from being finished off. SS should be ended immediately.

from RightinNYC

The program is fiscally unsound because of its structure, not because increasing revenues would make it so.

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could you provide the numerical evidence of this statement please?

When everyone pays that 12.4% tax on their first $106k in earnings, that money is credited toward their retirement. They will (theoretically) get back that money in an amount commensurate with what they put into the system. That makes the program less like a welfare system and more like a mandatory retirement program.

If you stop correlating payments to future receipts, then you're just taxing high earners for the sake of everyone else. That's a very different type of program.

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Meaning no disrespect to you - I could not care less if that changes the nature of the program in some eyes. It is of no consequence to me. If it saves the program and makes it economically viable for decades to come, then it is fine with me and an excellent use of the governmental power to tax.

And I'm sure that most people would be happy if we murdered the 500 richest people and distributed their wealth to the rest of the country in the form of McRibs and lap dances. Doesn't mean it's a good idea.

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Is someone actually proposing this or is these just over-the-top hyperbole?

haymarket said:

could you provide the numerical evidence of this statement please?

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Are you seriously asking me for evidence that SS is fiscally unsound?

Trustees Reports

Start with the trustees reports and work from there.

Meaning no disrespect to you - I could not care less if that changes the nature of the program in some eyes. It is of no consequence to me. If it saves the program and makes it economically viable for decades to come, then it is fine with me and an excellent use of the governmental power to tax.

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And I don't think that neverending expansion of welfare programs on the backs of high earners is a good idea. So I guess we will have to agree to disagree.

Is someone actually proposing this or is these just over-the-top hyperbole?

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I'm pointing out one of the flaws in your "most people will be happy so it's a good idea!" logic.

Where in that linked to report does it discuss eliminating the cap on FICA taxes while freezing benefits at the current level to make SS fiscally sound over the next decades. Because that is the program I am advocating to make it so.

For you to say that SS is not fiscally sound and then for me to give you a change which will make it fiscally sound and then for you to come back and say but its not fiscally sound now - is beyond silly.

RightinNYC said:

It's not actually that simple, for the reason I mentioned above. Increasing FICA increases future liabilities as well. Increasing the retirement age helps to a degree, but you'd have to adjust the underlying formulas in that case as well.

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To 'fix' Social Security all you need to do is raise the cap to a higher amout. To create the trust fund we have today, President Reagan and the Greenspan Commission in 1983 excerated the cap rates.

haymarket said:

Where in that linked to report does it discuss eliminating the cap on FICA taxes while freezing benefits at the current level to make SS fiscally sound over the next decades. Because that is the program I am advocating to make it so.

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And I already explained 4 or 5 times that:

1) I think that would be a very bad proposal for a multitude of reasons, and
2) There is absolutely no chance of that happening, given the fight we see over an 8% increase on incomes over $250k.

You can keep on saying "but my plan would fix it!", but if your plan will never happen, then it doesn't really mean crap. SS could also be "fixed" by raising the tax rate to 25%, but that doesn't mean the program is fiscally sound (or will be).

pbrauer said:

To 'fix' Social Security all you need to do is raise the cap to a higher amout. To create the trust fund we have today, President Reagan and the Greenspan Commission in 1983 excerated the cap rates.

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It's like you missed the entire discussion where we've addressed this repeatedly.

which do you think more likele; reduction in benefits or increasing the cap?

methinks those arguing for decreasing benefits are going to have to increase if not get rid of th cap in order to make it palatable.

fromn RightinNYC

There is absolutely no chance of that happening, given the fight we see over an 8% increase on incomes over $250k.

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That is your opinion. Mine is this. Given a choice between the following

A - allowing the richest 7% to avoid the same FICA tax the rest of us pay and risk their own SS pensions, and
B- taxing all income for FICA at the same levels to save SS for our pensions

the American people will rush to that proposition in record numbers and select option B in a heartbeat. And it will be presented to them this way ... if not by the republicans ... by someone with a voice and with power.

haymarket said:

fromn RightinNYC



That is your opinion. Mine is this. Given a choice between the following

A - allowing the richest 7% to avoid the same FICA tax the rest of us pay and risk their own SS pensions, and
B- taxing all income for FICA at the same levels to save SS for our pensions

the American people will rush to that proposition in record numbers and select option B in a heartbeat. And it will be presented to them this way ... if not by the republicans ... by someone with a voice and with power.

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Let me know when that happens.

RightinNYC said:

When everyone pays that 12.4% tax on their first $106k in earnings, that money is credited toward their retirement. They will (theoretically) get back that money in an amount commensurate with what they put into the system. That makes the program less like a welfare system and more like a mandatory retirement program.

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Social Security in NOT, let me repeat NOT a retirement program, it's an INSURANCE program. This is why investing Social Security funds in the stock market would never work - it's too risky. Social Security pays benefit to people who no long are able to work. It's a safety net that prevents people from falling into poverty.

pbrauer said:

Social Security in NOT, let me repeat NOT a retirement program, it's an INSURANCE program.

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Can you give me some examples of other insurance programs that are guaranteed to pay out monthly benefits until death provided that someone simply survives to a specified age? Thanks.

Moreover, I'm really not sure what you think this argument proves.

This is why investing Social Security funds in the stock market would never work - it's too risky.

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What was the annualized return over the worst 40 years in the stock market's history?

Social Security pays benefit to people who no long are able to work.

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No, SS pays benefits to everyone who reaches retirement age regardless of their ability to work.

It's a safety net that prevents people from falling into poverty

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Once it was. Now it's not.

pbrauer said:

Social Security in NOT, let me repeat NOT a retirement program, it's an INSURANCE program. This is why investing Social Security funds in the stock market would never work - it's too risky. Social Security pays benefit to people who no long are able to work. It's a safety net that prevents people from falling into poverty.

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You do realize if a private company did this type of program it would be illegal. Once again the democrats put their political agenda above the law.