Social Security Fix

cpwill said:

what i'm talking about doing is saving these programs for our children and grandchildren.

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NOOOOO!

The nation needs to terminate those programs to save the NATION for our grandchildren and their children. Socialism is a failed dead end and completely unamerican.

Save the nation, ditch the socialism.

Mayor Snorkum said:

PEOPLE do exactly that, all the time. It's called "bankruptcy".

Nations can do that.

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i think you meant to say "nations can't do that"; in which case the answer is, Yes, they can, and they do it regularly. you get to make the call-ruin yourself via hyperinflation, or ruin others via default (after which you can't borrow).

Mayor Snorkum said:

NOOOOO!

The nation needs to terminate those programs to save the NATION for our grandchildren and their children. Socialism is a failed dead end and completely unamerican.

Save the nation, ditch the socialism.

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private savings accounts =/= socialism = state control of the means of production.

cpwill said:

which is why we pop the cap in my plan. as upper income earners will now be recieving a larger percentage of their pay back tax-free than they are losing to FICA, this will give them a net benefit up to $604,000, and thus keep them from engaging in tax-avoidance schemes that tend to depress revenue collection in the face of rising rates. so you get the actual benefit of a real, statically scored, tax hike (this usually never happens).

however, you are probably right that in addition we will have to hike the retirement age a couple of years and/or tie benefits to inflation. which is why i gave the figures in inflation-adjusted terms and provided those alternate retirement dates in my OP

we may face a temporary reverse-flow from the general fund to social security, which would necessitate spending cuts in other areas (Paul Ryan's 2012 budget is a great place to start), but which would also quickly be reversed as people began to retire for whom there was no liability at all. that's what makes this thing sustainiable in perpetuity.

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Popping the cap is probobly a necessity, though it is probobly not entirely fair since many of these people will never see a dime of that back. I believe your plan would be feasable with reduced benefits paid out to SS beneficiaries (not your private accounts but the general ones if you know what I mean), raising the retirement age, etc. Also, a smaller amount being diverted from SS to the private accounts would be needed. You could in theory get the money from other parts of the general fund by reducing spending elsewhere, how feasible this is in reality I am not entirely convinced of.

Also, cpwill, I believe this aspect of investing in the stock market is rarely discussed. While I agree the prospects of such a system are better as far as return, overall health of the economy, etc, You have to figure in the amount of corruption, and cronyism that will arise out of the government investing practically trillions into the stock market. You think companies lobbying for government money is bad now, just wait until the government puts other peoples money up for grabs in the stock market. Basically, you need a pretty objective way for the government to do this type of investing to keep it from becoming a free for all.

cpwill said:

i think you meant to say "nations can't do that"; in which case the answer is, Yes, they can, and they do it regularly. you get to make the call-ruin yourself via hyperinflation, or ruin others via default (after which you can't borrow).

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Yes, the Mayor just noticed that. Thank you for spotting it.

BTW, hyper-inflating the currency when China holds a third of the debt ruins China, too. That'll piss 'em off, big time.

Mayor Snorkum said:

Yes, the Mayor just noticed that. Thank you for spotting it.

BTW, hyper-inflating the currency when China holds a third of the debt ruins China, too. That'll piss 'em off, big time.

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I think that was the point, that is why the US can't simply default on its obligations like you suggested earlier.

cpwill said:

private savings accounts =/= socialism = state control of the means of production.

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Hello?

If it's "private savings accounts" it ain't social security. When someone posts "save the system" they cannot be logically referring to a new plan but must be referrin to the existing failed plan.

If you're referring to something hokey, like when in Calfiornia they'll demolish all but one wall of a structure to maintain the pretense that the building is merely being renovated instead of replaced to take advantage of certain silly tax laws, then admit that just keeping the name isn't "preserving the system".

The individual and only the individual bears responsibility for his future, and no one should be forced to hold their hand, especially not when they can no longer take care of themselves because their hands are busy holding others.

drz-400 said:

I think that was the point, that is why the US can't simply default on its obligations like you suggested earlier.

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THE POINT, as you put it, is that the money is GONE.

Gone means the option of not defaulting does not exist.

The US didn't go bankrupt after WWII left us a debt far higher than the one we have now in terms of percent of GDP, yet now we find people ready to declare bankruptcy. People who consider themselves to be conservatives, no less, and who have managed their own finances conservatively, yet don't want the US government to do the same.

We have to cut back spending and increase taxes in order to get out of the hole we're in. No one wants to hear that, of course, and no one in Washington wants to hear it. They'd much rather blather about how cutting taxes brings in more revenues, and how deficits don't matter.

We have to look at the entire budget, not just "discretionary" spending. it's going to be painful, no question, but not as painful as hyper inflation caused by printing money or as an economic collapse caused by bankruptcy.

The US is too big to fail. Such a default would bring the world economic system down.

drz-400 said:

Also, cpwill, I believe this aspect of investing in the stock market is rarely discussed. While I agree the prospects of such a system are better as far as return, overall health of the economy, etc, You have to figure in the amount of corruption, and cronyism that will arise out of the government investing practically trillions into the stock market. You think companies lobbying for government money is bad now, just wait until the government puts other peoples money up for grabs in the stock market. Basically, you need a pretty objective way for the government to do this type of investing to keep it from becoming a free for all.

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Here's an idea.

Since the government has demonstrated the absolute limit of its competence, trustworthiness, and honesty with it's handling the unconstitutional social security plan, the best plan to move forward is to tell the government to go sit in a corner, read it's constituiton, and realize that the people are perfectly capable of saving their own money if the government got out of the way and stopped making promises of cradle to grave care with money stolen from someone else's cradle.

End social security. The government should do NOTHING more than refuse to tax savings and the interest accrued. That's it. Let the people rule their own lives without the incredibly intelligent people like Nancy Pelosi helping them.

There is a lot more to say about this than you imply. MY future is uncertain. I face a certain degree of risk over the coarse of my life. People benefit from knowing that they have a certain guarantee at the end of it all. Social Security ENCOURAGES people to take risks, and do something productive in their lives. Of course this argument may not be able to justify the massive amount of spending we have now for SS, yet you have to realize that it is whole lot more than just "people ruling there own lives." There is such a thing as risk, it exists.

Dittohead not! said:

The US didn't go bankrupt after WWII left us a debt far higher than the one we have now in terms of percent of GDP, yet now we find people ready to declare bankruptcy. People who consider themselves to be conservatives, no less, and who have managed their own finances conservatively, yet don't want the US government to do the same.

We have to cut back spending and increase taxes in order to get out of the hole we're in. No one wants to hear that, of course, and no one in Washington wants to hear it. They'd much rather blather about how cutting taxes brings in more revenues, and how deficits don't matter.

We have to look at the entire budget, not just "discretionary" spending. it's going to be painful, no question, but not as painful as hyper inflation caused by printing money or as an economic collapse caused by bankruptcy.

The US is too big to fail. Such a default would bring the world economic system down.

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Hmmm...unfunded liability is 107 trillion dollars and rising, the GDP is $14 trillion and falling. (The Mayor isn't ignorant of inflation) So, currently, as a fraction of GDP, the nation owes 700%, plus interest.

Saying the US is "too big to fail" mocks history. Rome was too big to fail, too, but it fell anyway. The British empire failed, twice. The Evil Empire is gone.

The United States is not an empire, but it can die just the same from economic mismanagement.


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EDIT:

Also, the United States, at the end of WWII, was in the historically unique position of being the only industrialized nation with intact factories, able to immediately retool to the demands of peacetime consumerism and able to export goods to satisfy demand from all points on the globe.

There's no demand for the crap made in America's factories today. The coming crash isn't going to be ameliorated by foreign demands for Made in the USA. Made in the USA is a joke, a sign of junk. The coming crash is going to see a drastic decline in any demand for overpriced low quality American crap.

We're not going to be buying foreign oil with printed dollars, so our energy prices are going to soar. Higher energy costs means more unemployment, more unemployment means less tax revenue. Less tax revenue leads to greater deficits, and greater deficits encourages the politicians to print more money, leading to higher energy prices.

Continued or more socialism isn't going to change this.

drz-400 said:

There is a lot more to say about this than you imply. MY future is uncertain. I face a certain degree of risk over the coarse of my life.

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Yes yes yes.

Your life is no different from anyone else's, and who cares? What's important is that THIS particular nation is based on the notion that people are free to run their own lives, and the price of their freedom is the risk and consequences of failure.

If you wish to enter into a voluntary insurance program with others to cover risks of getting old, fine. The Constitution does not allow the Congress to pass laws forcing strangers to subsidize your retirement.

Charity is voluntary, not coercive.


[qoute]People benefit from knowing that they have a certain guarantee at the end of it all.[/quote]

As can be seen, the guarantee is a broken promise and the end of it all is national bankruptcy.

Social Security ENCOURAGES people to take risks, and do something productive in their lives.

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Oh, please.

The savings rate in the United States is NEGATIVE. Socialist Security has encouraged people to be fools.

Of course this argument may not be able to justify the massive amount of spending we have now for SS,

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NOTHING justifies the gross violations of the Constitution the departures from freedom into the realm of socialism that are contained in the philosophy and practice of the Social Security ponzi scheme. Congress lacked the authority to pass that law, and the wisdom of the people who limited to powers of Congress was confirmed when it became clear the Ponzi Scheme has failed.

yet you have to realize that it is whole lot more than just "people ruling there own lives." There is such a thing as risk, it exists.

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Yes, risk exists. However, there was no risk involved when FDR embarked on the greatest Ponzi Scheme the world had ever seen. It was guaranteed to fail, because all pyramid scams fail.

The nation needs to get back to where there's a risk of failure for the individual, not a guarantee of failure for the whole nation.

Mayor Snorkum said:

Hello?

If it's "private savings accounts" it ain't social security

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sure it is. social security is just a name. you could just as easily point out that in either path the individual chose, we are "securing" "society" against having to deal with them if they retire impoverished.

The individual and only the individual bears responsibility for his future, and no one should be forced to hold their hand, especially not when they can no longer take care of themselves because their hands are busy holding others.

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man did you even read the OP?

Dittohead not! said:

The US didn't go bankrupt after WWII left us a debt far higher than the one we have now in terms of percent of GDP, yet now we find people ready to declare bankruptcy

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yes. that's because it's not the debt that's going to wipe us out, it's the debt plus the mandated, rapid, and massive increases in government spending that are scheduled to occur in the next few years. that's what we face now that we didn't face post-WWII

People who consider themselves to be conservatives, no less, and who have managed their own finances conservatively, yet don't want the US government to do the same.

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actually we do, which is why we want to cut spending to bring it to our income (this is the biggest long-term flaw i see in the Ryan plan - he assumes 20% when the historical average is more like 19% of revenue), but it's still 100% better than anything else floating around out there). since the single biggest ticket item driving that spending (and us) into bankruptcy is our entitlement system, the payouts going to that system will have to be reduced.

We have to cut back spending and increase taxes in order to get out of the hole we're in. No one wants to hear that, of course, and no one in Washington wants to hear it. They'd much rather blather about how cutting taxes brings in more revenues, and how deficits don't matter.

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raising taxes generally doesn't bring in more revenue (and can sometimes curtail it) unless you are able to provide the taxpayers an incentive to pay that is higher than their loss. that's why combining popping the cap with privatized tax-free accounts can assume increased revenue, but simply hiking the top tax rate to (say) 40% can't.

We have to look at the entire budget, not just "discretionary" spending

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yup. which is why we are having this discussion. how do we reform Social Security so that we can keep some form of protection for our elderly against poverty, but at the same time reduce our payouts over the next few decades?

The US is too big to fail. Such a default would bring the world economic system down.

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which doesn't make it 'too big to fail'. that is a name that applies only to entities that can be bailed out. there is no entity big enough to bail us out.

drz-400 said:

Popping the cap is probobly a necessity, though it is probobly not entirely fair since many of these people will never see a dime of that back

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as we sit now, that's a forgone conclusion. The American People wrote themselves a bad check. but again, this plan gives backmore than it takes from everyone under $604,000. that's the best i could do, those above will just have to deal.

I believe your plan would be feasable with reduced benefits paid out to SS beneficiaries (not your private accounts but the general ones if you know what I mean), raising the retirement age, etc

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we will probably have to do those things as well, though only temporarily. the future solvency of the program would allow retirement age for the government plan to steady while life expectancy rose.

Also, a smaller amount being diverted from SS to the private accounts would be needed.

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you're assuming everyone would immediately switch over. i find that highly unlikely.

You could in theory get the money from other parts of the general fund by reducing spending elsewhere, how feasible this is in reality I am not entirely convinced of.

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you seen the Republican 2012 proposed budget?

Also, cpwill, I believe this aspect of investing in the stock market is rarely discussed. While I agree the prospects of such a system are better as far as return, overall health of the economy, etc, You have to figure in the amount of corruption, and cronyism that will arise out of the government investing practically trillions into the stock market. You think companies lobbying for government money is bad now, just wait until the government puts other peoples money up for grabs in the stock market. Basically, you need a pretty objective way for the government to do this type of investing to keep it from becoming a free for all.

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damn, that's a good point. you would need to either allow for individual investing, or set up a series of funds, as pension plans and tsp do.

Mayor Snorkum said:

Hmmm...unfunded liability is 107 trillion dollars and rising, the GDP is $14 trillion and falling. (The Mayor isn't ignorant of inflation) So, currently, as a fraction of GDP, the nation owes 700%, plus interest.

Saying the US is "too big to fail" mocks history. Rome was too big to fail, too, but it fell anyway. The British empire failed, twice. The Evil Empire is gone.

The United States is not an empire, but it can die just the same from economic mismanagement.


=======================
EDIT:

Also, the United States, at the end of WWII, was in the historically unique position of being the only industrialized nation with intact factories, able to immediately retool to the demands of peacetime consumerism and able to export goods to satisfy demand from all points on the globe.

There's no demand for the crap made in America's factories today. The coming crash isn't going to be ameliorated by foreign demands for Made in the USA. Made in the USA is a joke, a sign of junk. The coming crash is going to see a drastic decline in any demand for overpriced low quality American crap.

We're not going to be buying foreign oil with printed dollars, so our energy prices are going to soar. Higher energy costs means more unemployment, more unemployment means less tax revenue. Less tax revenue leads to greater deficits, and greater deficits encourages the politicians to print more money, leading to higher energy prices.

Continued or more socialism isn't going to change this.

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The GDP is rising.

The Gross Domestic Product (GDP) in the United States expanded 3.1 percent in the fourth quarter of 2010 over the previous quarter. From 1947 until 2010 The United States' average quarterly GDP Growth was 3.30 percent reaching an historical high of 17.20 percent in March of 1950 and a record low of -10.40 percent in March of 1958. The economy of the United States is the largest in the world. The United States is a market-oriented economy where private individuals and business firms make most of the decisions. The federal and state governments buy needed goods and services predominantly in the private marketplace. This page includes: United States GDP Growth Rate chart, historical data and

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The national debt is in the order of 14 trillion, which is bad enough, but exaggerating it doesn't help to clarify anything.

Socialism is government control of industry. No one here is suggesting that.

So, no, I wouldn't count the USA out just yet.

found someone who has run the figures. it turns out that even if you pop the cap and don't tie higher benefits to that extra income, it's still nowhere near enough.

cpwill said:

found someone who has run the figures. it turns out that even if you pop the cap and don't tie higher benefits to that extra income, it's still nowhere near enough.

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So, if the government does declare bankruptcy, as has been suggested here, and doesn't pay back the money it has borrowed from SS, then the program is kaput, and people who have paid into it are just SOL. Nice. I really thought the government would be better than Enron. Wrong.

Dittohead not! said:

So, if the government does declare bankruptcy, as has been suggested here, and doesn't pay back the money it has borrowed from SS, then the program is kaput, and people who have paid into it are just SOL. Nice. I really thought the government would be better than Enron. Wrong.

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the debt held by the SS Trust fund is internal debt; alterations to the program wouldn't involve bankruptcy. remember that SS isn't legally insurance, or a pension program; it's a tax. changing it is no different (legally) than changing out any other part of our tax code. the system as it exists is bankrupt. we can keep the current schedule for those who are 55 and older, but not for those below that age we need to alter the system. the point of this thread is, since we have to do so anyway; why don't we alter it in a way to make it better for low-income workers?

cpwill said:

the debt held by the SS Trust fund is internal debt; alterations to the program wouldn't involve bankruptcy. remember that SS isn't legally insurance, or a pension program; it's a tax. changing it is no different (legally) than changing out any other part of our tax code. the system as it exists is bankrupt. we can keep the current schedule for those who are 55 and older, but not for those below that age we need to alter the system. the point of this thread is, since we have to do so anyway; why don't we alter it in a way to make it better for low-income workers?

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Why not indeed.

If it is, as you say, a tax and not a pension plan, then it is certainly a regressive tax. The lower wage earners pay more than the higher wage earners do. Further, you have a good point in calling it a tax, as a pension plan would have been placed in a trust fund and used only for pensions. That is what should have been done, of course, but that ship has sailed now.

So, let's tax everyone for SS, as a start. Let's raise the age for retirement. Let's indeed allow younger workers to leave SS altogether and set up their own plan with that 16% that is being taxed, which is what you've suggested.

Since it is a tax, then there is no need to balance that 16% of lower wage earners' income and the obligation to pay SS pensions to seniors. Therefore, the existing pensions could be paid out of that same general fund that has absorbed the excess from the SS tax all of these years. That way, the seniors could still get their SS, while the youth could be saving for a genuinely affluent retirement.

Except, there is that balancing the budget idea.., oh never mind. The feds will never get serious about that anyway.

cpwill said:

found someone who has run the figures. it turns out that even if you pop the cap and don't tie higher benefits to that extra income, it's still nowhere near enough.

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I read the entire article.

I saw NOTHING in there which used numbers to demostrate your allegation - that if you pop the cap but freeze benefits, its still nowhere near enough. there is nothing in there except empty rhetoric arguing about the nature of the program and advising against its change.

If I missed it, I would be glad to read it again if you can point this out to me in the article.

this is the articles objection to popping the cap but freezing benefits at present levels

. Once it is established that some Social Security taxes must be paid without any accompanying benefit credits, the program would lose its critical distinction from welfare.

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That is NOT a dollars and cents economic argument which shows the idea would not work . That is a philosophical argument. I do not care if you call it Social Security, welfare or a three legged cricket playing a harmonica. Just pop the cap, freezen benefits at presnet highs and get on with it already.

Dittohead not! said:

Why not indeed.

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:shrug: well apparently there is a solid constituency against it.

If it is, as you say, a tax and not a pension plan, then it is certainly a regressive tax. The lower wage earners pay more than the higher wage earners do

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by the same measure, they get back later more than higher wage earners do. but yes, the payroll tax as it exists depresses employment and is the highest tax faced by the poorest of our workers.

Further, you have a good point in calling it a tax, as a pension plan would have been placed in a trust fund and used only for pensions

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well, that's not what makes it a tax. the law makes it a tax. anything else would have been unconstitutional. even at the height of the New Deal, FDR knew it was unConstitutional to force Americans to purchase insurance.

So, let's tax everyone for SS, as a start. Let's raise the age for retirement. Let's indeed allow younger workers to leave SS altogether and set up their own plan with that 16% that is being taxed, which is what you've suggested.

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i've suggested they take 10% of their income to do so; we still are going to need that 5% to retain solvency in the here and now.

Since it is a tax, then there is no need to balance that 16% of lower wage earners' income and the obligation to pay SS pensions to seniors. Therefore, the existing pensions could be paid out of that same general fund that has absorbed the excess from the SS tax all of these years

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except that that General Fund is already running a $1.5 Trillion Deficit, and will be completely unable to absorb those extra costs.

That way, the seniors could still get their SS, while the youth could be saving for a genuinely affluent retirement.

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that's what i'm trying to do here, yes.

haymarket said:

I read the entire article.

I saw NOTHING in there which used numbers to demostrate your allegation - that if you pop the cap but freeze benefits, its still nowhere near enough. there is nothing in there except empty rhetoric arguing about the nature of the program and advising against its change.

If I missed it, I would be glad to read it again if you can point this out to me in the article.

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Point #2: Even raising the cap by a lot would do very little to close financing shortfalls. To understand this, let’s first look at those shortfalls under current law.



As shown above, after the 1983 reforms – Social Security ran substantial cash surpluses for several years. Last year in 2010, it began to run a cash deficit... The 1983 negotiators – again, not realizing that this pattern would emerge – failed to establish such a mechanism, allowing program surpluses to be spent.

Since 1983, one bipartisan technical panel after another has come forward to urge that this mistake not be repeated. Such panels agreed that actuarial balance over long spans of time was a necessary but not sufficient standard for credible financing. And so for over a decade now, Social Security’s scorekeepers have routinely evaluated every reform proposal to determine not only whether it achieves a generic summarized actuarial balance over the long range, but also whether it ultimately eliminates shortfalls of annual tax income relative to annual expenditures. This is why the proposal of President Obama’s fiscal commission looks like this:



As the graph above shows, Simpson-Bowles would not only eliminate Social Security’s aggregate shortfall averaged crudely over all time, but it would return the program to a position in which its annual income is sufficient to finance its annual outgo.

Raising the cap on taxable wages, by contrast, would do little to establish practical financing. For example, consider the oft-floated proposal to raise the cap (to the equivalent of roughly $180,000) so that it covers 90% of all wages nationally. This would produce a flow of income and costs as in the graph below – reproduced exactly from the Social Security Chief Actuary’s web page:



As is evident by looking at the above picture, this proposal would leave almost the entirety of current-law annual shortfalls in place – roughly 86% of them in the out-years.

Even if the cap on taxable wages were entirely eliminated – that is, a new 12.4% payroll tax were applied on all wages from $106,800 to infinity – most of the annual shortfalls (62% of them over the long term) would still remain



Finally, even if we took the most radical steps of all – both totally eliminating the cap and entirely severing the contribution-benefit link for all wages newly subject to tax – Social Security would still face substantial and rising shortfalls, as seen below.



What’s interesting about the current Social Security debate has been how proponents of raising the cap have largely ignored these fiscal realities...

That is NOT a dollars and cents economic argument

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neither were the responses from your side to the plan under discussion in the OP. because - dollars and cents wise - it is superior to Social Security as it currently exists, and that reality is painfully obvious.