Got an email from my Congresswoman, Jane Harman (who, by the way, voted for the horrible bankruptcy bill). One of the links is to the results of her constituent survey about Social Security.
Question #2 asks “Right now income over $90,000 is exempt from Social Security taxes. Do you think people should or should not have to pay Social Security taxes on income over $90,000?”
71% say “yes.”
Sign me up…oh, I already did.
Would people making over $90k receive more in benefits in return for paying more in taxes?
Wouldn’t it be better to cut their future benefits than to raise their current taxes? We don’t have shortfalls in Social Security now, so any extra revenue raised will just get spent on something else anyway.
If those over $90K don’t see higher benefits for their higher taxes, then the result in increasing the amount of social security that is a transfer payment.
That can be considered bad because it will weaken the public’s commitment to social security as it becomes more welfare and less earned retirement benefit.
Yeah! Let’s make more people pay taxes. That’s the conservative way! No, wait! NO IT’S NOT!
Why in the world would you want to GIVE THE FEDERAL GOVERNMENT MORE MONEY???????
People making over 90K are already paying on that much, What is the “earned income” of that group in excess of 90K and is the increase in revenue significant compared with the demogaphic catastrophy looming in the future of having 2 workers supporting each pension?
Or is this just another “feel good” “soak the rich” ploy?
It’s long past time to stop this massive extortion scheme.
The argument that Social Security is a retirement plan is wrong. It is an insurance policy with an annuity payout for the elderly. It came about before there were pensions, IRA’s, Keogh’s etc. It was a direct repsonse to the massive bank failures from 1929 on.
Prior to the Great Depression everyone saved their money in their local banks. If your local bank went under you as a depositor were dependent on the good will of the owners. There was _NO FDIC_(1933) to repay depositors. Thus when the banking system literally collapsed during the Great Depression there was very little money to generate economic growth let alone repay the depositors. The elderly whose savings were gone were hurt the most because the massive job losses among the total population made it highly improbable to return to work unless they worked on a family farm.
The purpose of Social Security was to act as an insurance policy to provide an income to the elderly. You payed a premium and you received a fixed return based on how long you payed into the system. The return and premium only fluxuates because of changes to the policy. When you pass your premiums stay in the fund just like if you never use your auto insurance.
Other workers going forward still had few pension plans and had to save for themselves. With pension funds disappearing(they never covered more than 30% of the private sector workforce at their zenith) we have gone to Keough’s et al to replace them if your _EMPLOYER_ provides a plan and IRA’s for those whom do not have Keough’s.
Everyone should have to pay into it. What happens if your business fails because of economic changes or mismanagement? What happens if your Keough is destroyed because it isn’t diversified or you suffer an _ENRON_? What happens if your retirement disappears for whatever reason? You fall back on your insurance policy. Social Security is an insurance program for everyone.
The real issue to discuss in my opinion is why if everyone wants to take part in the benefits of capitalism do not want to pay anything(taxes) to keep it going. The idea that there would be limited government to keep capitalism going does not mean that the government has no responsibilities to provide the inputs to keep it going.
You’re right about one thing Robert, it was an insurance plan. SS was designed literally as insurance against living longer than your life expectancy. When it started, there were over 20 workers for every recipient. Needless to say the average life expectancy has risen far faster than the retirement age. If we really wanted to get back to the roots of SS, the retirement age would be up around 80.
Of course SS has morphed dramatically in the last 70 years. As of now, in practice it is an incrediably regressive tax scheme whereby citizens are forced to fund government spending in exchange for the chance to live long enough to collect a tiny rate of return down the road. If you die too soon, you crap out and your dependants probably dont see dime 1 of that loan. Regardless of how SS was invented or sold, this is how it works. We shouldnt judge programs on their intentions, only on their results.
Robert M:
1. Please point out to me the article of the Constitution that authorizes the federal government to sponsor an “insurance program” and coerce all wage earners to participate in it.
2. If it is an insurance program, how come benefits are not paid out of the capital reserve but instead paid out of “new” premiums? How come there is no correlation between premiums paid and benefits recieved? Or between level of risk and premiums? How can benefits and premiums be changed at the sole discretion of the provider after the policy is purchased? How come the policy is not my property to dispose of as I see fit?
3. Your final comments about taxation are revealing. It seems that you recognize that this in not an insurance policy at all but a ‘tax to keep capitlism going”. To begin with the richest 5% of taxpayers already pay over 50% of all taxes see: http://forum.belmont.edu/cornwall/archives/2004/08/tax_cut_myths_d.html
Second the government did not create captialism and taxes don’t support it. Capitalism is a natural outgrowth of human activity that is built from the bottom up not imposed from the top down. Our government performs those functions we have delegated to it through The Constitution and taxes support those functions. Among the functions authorized by the constitution are the formation of armed forces, law enforcement agencies and courts. There is no department of capitalism.
To AL:
1. The effect of taxing income over $90k would be to increase marginal tax rates to something over 50% (when taking state, local, federal taxes into account)which serfdom (well off serfs but serfs none the less). Marginal rates will be even higher for the self employed (doctors, lawyers, farmers, small business men, independant contractors) People who earn over that amount of money by working longer or harder will stop doing so. My wife, for instance will not work overtime now, because it does not pay. My friends father, a veternarian, is very careful not to earn enough to trigger cuts in his social security benefits. Others will seek to divert their compensation into non-taxable areas (perks, benefits, barter)or to otherwise hide or avoid the tax. This will have the effect of a net reduction in all tax revenues or at least a real slowing of their growth. This is particularly true since, see above, over 50% of tax revenue comes from the 5% richest taxpayers, exactly those who will be affected by this new tax. They also happen to be the people that empoy the rest of us. Not good.
I was born in 1968 and was raised to believe Social Security *IS* a welfare program that won’t be available to me when I am ready to retire. So, I don’t think this is a new concept for people my age and younger. In fact, my legal guardian (and oldest brother) would always tell me that Social Security is a Ponzischeme. I must admit to being a little disappointed to find out that was true.
*Ponzischeme* – _an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks_
Robert M:
The classic system you discuss stopped taxing income at “$3,000 per year.”:http://www.usconstitution.com/SocialSecurityActof1935.htm I think that would be equal to $40,540.54 in today’s dollars (converting 1937 to 2004). To remove that cap either expands the purpose of SS to include insuring the continuity of the lifestyle of the more well-to-do or converts the system into welfare redistribution.
Patrick Walsh:
“The Congress shall have power to lay and collect taxes, duties, imposts and excises [and] provide for the . . . general Welfare of the United States.” Art. I, Sec. 8.
The argument that Social Security is a retirement plan is wrong. It is an insurance policy with an annuity payout for the elderly.
Exactly what is it insuring against? Living much longer than you expected so that your retirement runs out? That’s really the only possibility.
An insurance policy protects against unforseen events and catastrophes. Retirement can easily be planned for. An insurance policy that pays out the same amount regardless of what happens to you is not much an insurance policy.
If it’s an insurance policy, then the retirement age should be raised more, since people now can expect to live longer than before, so they can plan for it better. As “insurance,” it should kick in when people live to an age that they would not expect to.
It also makes more sense to merely not keep raising the Social Security benefits of the wealthy so much (and that makes more sense that raising their taxes). If it’s insurance, it should be insurance against poverty; not insurance so that the wealthy can keep living in the manner to which they’ve been accustomed no matter what happens to them. The wealthy should save their own money for that.
It’s President Bush’s plan that makes Social Security into actual insurance, as opposed to a half-assed retirement plan.
Everyone should have to pay into it.
Sure. Social Security should be an insurance plan, a social welfare scheme to ensure that seniors who have retired don’t get trapped in poverty. Everyone should pay into it. There’s nothing wrong with that.
What it shouldn’t be is an insane Ponzi scheme retirement plan, or “insurance” that ensures that the wealthy are able to continue living in a wealthy lifestyle. It should be limited to being insurance, so that no senior is trapped in poverty.
I agree with the general thrust of your points, Robert M., and thus I hope that you will join me in supporting President Bush’s plan, which does precisely that.
PD Shaw: Here is the complete text of Art 1 Section 8:
http://www.law.cornell.edu/constitution/constitution.articlei.html#section8
Don’t see anything in there about “insurance policies”. Just because you can tax doesn’t mean you can spend it however you want.
The general welfare clause has been stretched beyond recognition today but when the constitution was written it was well understoond that payments by the government to individuals (for anything other than services rendered)did not constitute ‘general welfare’.
In fact, according to the treasury dept: http://www.treas.gov/education/fact-sheets/taxes/ustax.shtml
“Under the Constitution, Congress could impose direct taxes only if they were levied in proportion to each State’s population. Thus, when a flat rate Federal income tax was enacted in 1894, it was quickly challenged and in 1895 the U.S. Supreme Court ruled it unconstitutional because it was a direct tax not apportioned according to the population of each state.”
A direct tax such as social security tax was unconstutional until the 16th amendment was passed.
Even then, according to the Social Security Administration there was a problem:
“The basic problem is that under the “reserve clause” of the Constitution (the 10th Amendment) powers not specifically granted to the federal government are reserved for the States or the people. When the federal government seeks to expand its influence in new areas it must find some basis in the Constitution to justify its action. Obviously, the Constitution did not specifically mention the operation of a social insurance system as a power granted to the federal government!” for full text go here:
http://www.ssa.gov/history/court.html
Roosevelt got around this problem by threatening to increase the size of the supreme court so that he could “pack” it with his judges who would go along with a scheme which up until then had never been considered something authorized by the Constitution. The court caved in and the rest is history.
I think my question still stands.
The Constitution also allowed slavery. Is anyone here suggesting we reinstitute that. The Consitution as a poltical document is the closest thing we have to an adaptive organism. It changes/adapts to reflect the current situation.
Neither the Ponzi scheme and the capital reserve arguments are valid. There is a capital fund it is called the trust fund. Just like a private company the money can be loaned out and it is to the government. You may not like the rate of return on investment but that is another argument. It is not a retirement program.
As Mark Buehner points out the life expectancy issue is one that clearly should have been addressed earlier to address long term solvency issues and that it was not is a failure of will on the part of all politicians.
Patrick Walsh asks why can’t he dispose of his premiums paid as he sees fit. The answer is it is a modified life insurance policy that acts more like auto insurance where you do not get your premiums back not a pure private insurance plan(we do not have pure capitalism either).
Retirement cannot easily be planned for unless you know the exact time you are checking out on life and you know exactly what lifestyle you are willing to pay for. I would wager there are large numbers of people expecting their parents accumulated wealth to pass unto them(realistically or not) but are seeing their parents live longer because of our modern society’s medical advances and spending it just to survive. That is the insurance aspect of Social Security, why the payouts are not predetermined by the premiums paid in(I do doubt that this was a real consideration when Social Security was planned).
Another consideration is the number of people supporting the system. It is less now than when Social Security was started. The number of paying supporters is not the only thing that has changed. Productivity, wage & wealth gains and education levels have as well. All of these thing lead to more (premiums)income for it as well.
As to revealing about taxes and capitalism. There was never a time when capitalism did not support a government of some kind. Perhaps if you had pure bartering it would be true but not many of those societies made it to today. Even hereditary lords had obligations to their vassals. There wasn’t much sense in growing a crop to suport the lord if he didn’t offer protection against predatory outsiders.
As to the 5% paying 50% that is a false note. Whatever taxes we pay it depends on what income is taxed and at what rate. If you receieve all your income as dividends it is taxed at 20% regardless of the total amount. If you pay against wage income it is a sliding scale. If we all paid a given rate against all of our income, regardless of how it is earned, I would wager most of us would be happier and more productive.
John Thacker
The non proposal of the presidents is a farce. It seeks to end Social Security period. I am not for that at all. I am seeking a plan for long term solvency not one that would drain resources from it. I would like to see IRA’s and Keough’s expanded in real dollar terms for contributions. I would like to see accounts at the fed similar to those one uses to pay a base $10,000 t-bill for thirty days representing smaller amounts. I want to make the rules such that much at least 50% of IRA/Keough money go into this type of account so that it will be there. If you work for a corporation that matches your contribution it be in cash or held as stock for as short a time as possible(no more Enron’s)
*Social Security – (Ohh the pain)*
rob – v.tr. – To deprive unjustly of something belonging to, desired by, or legally due (someone): robbed her of her professional standing.
“Social Security”:http://www.ssa.gov/
“AWG Administrative Wage Garnishment”:http://ssa-custhelp.ssa.gov/cgi-bin/ssa.cfg/php/enduser/std_alp.php?p_li=&p_page=1&p_cv=1.108%3B2.u0&p_pv=&p_prods=&p_cats=108
“Supplemental Security Income”:http://www.ssa.gov/d&s1.htm#ssi
“Plan Your Retirement”:http://www.ssa.gov/r&m1.htm
bq. “Because we’re living longer, healthier lives, we can expect to spend more time in
retirement than our parents and grandparents did. Achieving a secure, comfortable
retirement is much easier when you plan your finances. Most financial planners
recommend you prepare for the future with a combination of Social Security, private
pensions and personal savings.”
“Early Retirement”:http://www.ssa.gov/retire2/agereduction.htm
“Taxes and your Social Security Benefits”:http://www.ssa.gov/planners/taxes.htm
“Frequently asked Questions”:http://www.ssa.gov/planners/faqs.htm
bq. “Q. If I work after I start receiving Social Security retirement benefits, will I still
have to pay Social Security and Medicare taxes on my earnings?”
SURPRISE! SURPRISE!
“Prepare your financial needs”:http://www.ssa.gov/r&m6.htm
bq. “Most financial advisors say you’ll need about 70 percent of your pre-retirement
earnings to comfortably maintain your pre-retirement standard of living. If you have
average earnings, your Social Security retirement benefits will replace only about 40
percent. You’ll need to supplement your benefits with a pension, savings or
investments.”
“Medicare”:http://www.ssa.gov/pubs/10043.html
You are forced into Medicare at age 65 regardless if you take early retirement. At age 65 you will pay the premium for Medicare part A. It will be automatically deducted from your social security check when you begin receiving SS benefits. You can elect to pay an additional premium for Part B at time of Medicare eligibility. If you do not you can elect for Part B at a latter time with higher premiums of course.
Lest anyone doubt the governments ability to manage retirement and medical care for citizens and non-citizens of this great nation I would suggest people start reading exactly what this thievery is all about. If you think the issue is simply Social Security guess again.
To those who think we can fix the problem by tweaking here and there raising retirement age, lowering benefits to those that are better off, increasing the FICA deduction, etc.. Can I have some of what you’re smoking in that pipe? If today’s generation doesn’t realize what they are up against now I shudder to think what their reaction will be when the s___ really hits the fan.
Yes, the Constitution allowed slavery. In order to understand the proper way to “adapt” the Constitution to changing circumstances, I suggest that you read the 13th Amendment.
Sheesh.
And the “insurance” argument is classic “form over substance”: the “trust fund” consists of IOUs the government wrote to itself. An IOU you write to me is an asset to me; and IOU I write to myself is meaningless. If I were to, for instance, seek to reduce my taxes by loaning myself money against my home equity, and deducting the interest, no court would allow it, even if the paperwork was perfectly executed, since the transaction would be a sham.
I’m not buying it any more than the tax court would: the “trust fund” is just as much of a sham. The substance behind the SS debate is essentially one of tax policy and the appropriate role of government. For my part, I am perfectly capable of buying insurance against penury in the form of cash savings, annuities, life insurance, etc. and do not require the government’s “help” at low, low, rates of return. Hell, I “lost” money on Enron, but since I have enough sense not to put my entire savings into a single company whose business I don’t understand, I didn’t suffer meaningfully.
Tax point: while “perks, barter, [and] benefits” may escape the payroll taxes which fund SS, they are NOT for the most part exempt from income taxes (there are statutory exceptions such as health insurance, of course, but if your employer compensates you by buying you a car, that is taxable income to you). Enforcement of course, is not trivial in many cases.
Things that make you go “sigh”….
Calling Social Security an “insurance” is quite deceptive. True insurance spreads the risk of costly unlikely events among many policy holders. Achieving retirement age is not an event that unlikely, so this cannot be honestly called “insurance”.
Patrick Walsh wrote:
Not completely however they want, no, but they can spend it in any fashion that does not violate equal protection or a constitutional right. There are very few restraints on the spending power.
Yes, but note that the 16th amendment was passed, and very quickly after that Lochner-era Supreme Court ruling came down.
Note that there are very few groups and no major ones, even in today’s society where the libertarian element is much more organized than they were just 20 years ago, trying to attack the constitutionality of the social security scheme. Why? Because think ahead to what would almost certainly happen if such a program were challenged. There would be a constitutional amendment almost immediately declaring such programs constitutional … very likely with sufficiently expansive text to justify far more than just the social-insurance program. Such an “Entitlements Clause” would almost certainly pass with the same celerity that the Income Tax Amendment passed when the court struck down the old income tax; even conservative states would be voting for it. Old people are everywhere, after all. This is the kill-all-social-programs crowd’s worst nightmare, so it’s probably actually better for them that there isn’t a whole lot of constitutional litigation over the subject. As a supporter of the current system (save for the fact that I believe it to be insufficiently progressive, making me pleasantly surprised by the president’s proposed formula changes), I would almost rather see the libertarian fringe overstep; the backlash would be far more gratifying for me than the temporary victory would be for the Gilded Age nostalgia crowd.
Just some random thoughts.
I am all for doing something to transform social security to be sure. I can imagine a number of ways of doing it but can see no better way than leaving most of the responsibility with the individual.
Social security is a forced savings plan.
It is not a retirement plan. It is not insurance. It supplements your retirement income. 401k, whatever. Please note the signifance of the word supplement.
You cannot live on social security. At least I would not want to try. Even after they “fix” it no one will be able to live on it unless the government resorts to outright thievery.
If it is a forced savings plan than folks, everyone…that includes Bill Gates, should get their money back when they retire, or maybe even before after a certian age. An age that one can on average realistically hope to achieve.
If we try to fix the system so that those who contribute get their money back, with some interest maybe, we may have a shot. If the idea is to fix it so that it a lifetime source of living income I think we will fail.
In any cause we all should be saving/investing like mad so that we will be able to enjoy retirement. Of course there is a conflict here as “they” want you to buy buy buy to keep the economy going. That is not condusive to saving. That part needs to be sorted out.
One could even imagine phasing out social security over time in favor of other methods of savings and wealth accumulation with the government acting a the provider of rules and guidelines.
Why does the government have to be involved at all beyond that? Only exception I can see is to provide assistance where it is truely needed. Of course that in itself may be a huge can of worms.
But then I have reached a point in my life wherein I have precious little sympathy for that silly grasshopper.
Annuity insurance:
bq. This is an insurance policy which makes a series of either level or fluctuating payments, paid out over a fixed number of years or during the lifetime(s) of one or two individuals, or in any combination of lifetime plus period certain guarantees. The overarching characteristic of the immediate annuity is that it is a vehicle for distributing savings. A common use for an immediate annuity might be to provide a pension income to a person who is about to retire. (“Wikipedia”:http://en.wikipedia.org/wiki/Annuity)
The risk being insured against by a retirement annuity is market loss and living longer than you’re savings.
Concerning the constitution.
Article I Section 8 and the 16 Amendment have nothing to do with each other. Amendment 16 was passed in reference to Article I Section 9.
Article I Section 9 – “No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.”
Amendment 16 – “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”
bq. Believe it or not Congress can tax charity if they so choose.
Article I Section 8 – “The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;……”
It then goes further on to list exactly what can and can’t be done.
One can certainly argue “general welfare of the United States” includes social programs, however; the constitution does not specifically state taxes can be collected for social programs.
The preamble – “We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.”
One can argue the point of “promote the general welfare” as collecting taxes for social programs but again it’s a stretch.
The annuity analogy isn’t insane.
So let’s ask what would happen if an insurance company behaved like SS does.
A large insurance conglomerate, which is bleeding cash at a high rate, has one very profitable division: a subsidiary selling annuities at well above market rates (it is not clear why they are able to charge such high prices or to so blithly ignore actuarial realities, but never mind). Let us presume the conglomerate has a controlling interest in the annuity division and dominates the board of directors.
Looking to cover expenses, the holding company sells bonds to the annuity division. These bonds pay low interest. The annuity company pays out ALL of its cash to buy the bonds, paying this year’s benefits only out of the premiums on new annuity contracts, which fortunately cover the required payments. The money from the bonds themselves is used to pay operating expenses. No other attempt at altering the problems which have caused the holding company to lose money is made.
What result?
1) the financial rating of the annuity company is destroyed. It goes as low as it can possibly go.
2) The minority shareholders in the annunity company file–and win–a derivative suit charging breach of fiduciary duty among the board and officers, who have bought bonds on the direction of the controling shareholder without regard to the obvious risk and low return.
3) Federal and state insurance and securities regulators STOMP on the scheme.
4) Since the formerly legitimate annuity company is now operating a Ponzi scheme, criminal charges are filed against the officers, directors, and possibly the officers and directors of the holding company.
Note that all of these results are very different if the annuity subsidiary invests its capital in legitimate corporate bonds from other companies with decent financials, or in index funds, or even in somewhat risky investments with high potential rates of return–that’s normal insurance-company behavior. But the obvious self-dealing and the meaningless nature of the bonds–no reasonable person expects them to be paid back–make this a criminal conspiracy. No amount of formal paperwork can change the underlying reality.
I’m not suggesting indictments for SS administrators, but if the capital reserve of any insurance company were treated the way SS treats its trust fund (ie, loaned in its entirety to a thoroughly unprofitable entity that has no possibility of using the proceeds to create wealth), somebody would go to prison.
This analogy isn’t perfect: T-bills are considered a safe investment. But that’s because Congress has the power to tax us to death to pay off its debts.
Now, none of this says SS is a bad idea or it ought to be abolished or whatever. My only intent is to point out that the claim of “insurance” is nonsense.
It’s popular amongst the realists to casually dismiss the “trust fund” as non-existent. I happen to agree with them — it’s bad debt. The trust fund’s been lending itself to shady characters.
The problem is that the trust fund is filled up with a special tax. It’s a flat tax on the poor and middle class. The rich barely pay it. The only reason such a tax is remotely acceptable is that it’s supposed to be going a special place, and that it’ll come back out again.
So if the trust fund is non-existent, the basis for the social security tax is bullshit too. A significant chunk of it is just being used as general revenue. Bush’s dire predictions about social security expenditures passing revenues really only mark the point where the government is supposed to be paying back the trust fund what it borrowed.
I did the math a year ago or so — you can chop the social security rate by somewhere around 4% (down from the current 12.4%, including employer portion) IF you knock out the limit. Gives almost everyone in the country a nice tax break, and individuals making over 90k can sniffle a little, if they even notice.
Rob Lyman.
Your assertion that “to point out that the claim of “insurance” is nonsense” is.. well, nonsense.
I had a friend killed in an accident at age 20 with a wife and two small children.
The oldest child is now 14. And they all still recieve benefit checks from Social Security.
Not insurance? Really?
Ross..
The point of all of this is merely to device a scheme whereby the government is not required to repay all or some of the SS trust fund.
Robert M,
You state that:
bq. There is a capital fund it is called the trust fund.
I submit that the existence of the trust fund is irrelevant. Consider the following two cases, with the assumption that the overriding fact is that we have an obligation to those that have paid into the system that we will not abrogate.
1) There *is* a trust fund. In this case, starting in about 12 years, the SS system will start cashing the bonds in it. The money to pay these debts comes from the general treasury funds, resulting in A) higher taxes or B) reduced spending on other items by the government.
2) There *is not* a trust fund. In this case, in about 12 years, the SS system will have a shortfall, and the congress will not allow the shortfall to go unmet, and will transfer money from general treasury funds. See above for results.
The obligations will be met. Whether they are met by a direct transfer or by ‘cashing in the trust fund’ doesn’t make any difference. The money *must* come from the general treasury funds in either case.
Therefore, we could all agree to increase the size of the trust fund to $100 trillion, or reduce it to zero, and it will not change a thing in 2018, or whenever the SS system needs its first dollar, or in 2042, or whenever the SS system cashes in its last bond.
For there to be a *capital fund*, there must be *capital*. Without the capital, the fund is meaningless.
bq. _”I did the math a year ago or so — you can chop the social security rate by somewhere around 4% (down from the current 12.4%, including employer portion) IF you knock out the limit. Gives almost everyone in the country a nice tax break, and individuals making over 90k can sniffle a little, if they even notice.”_
Again the perception here is that this will create solvency within SS. In fact it only increases the coffers that will be depleted the moment they fill.
On another note the perception that an employer pays half of SS benefits is a crock. The employee pays it all. All the employer did was withhold wages at twice the rate to cover the cost of business.
“OASDI”:http://www.ssa.gov/OACT/COLA/cbb.html
Bottom line if you make $90,000 a year you will contribute $5,580.00 to SS and the employer contributes $5,580.00. The employer must make $95,580.00 out of you just to break even in the hiring process. In effect you the employee are out $11,160.00. If you are self employed you certainly see the entire cost because you must pay both portions of SS as employer / employee. For the self employed to break even they must hire themselves out at the same rate any potential employer does. Do not be fooled about the fact that your employer contributes half you contribute it all.
–too much squabbling over terms. Call it whatever you want. In the end it’s one way to provide some measure of support for the poor. Perhaps SS could use a change, so long as it continues to help people in need. I for one feel good about contrubuting toward this end.
And regarding an earlier comment about capitalism being some sort of a natural process that sort of pours from human action — give me a break. You people need to put away for good your little paper and coin idols.
Davebo,
I don’t know if you noticed, but this entire thread, including the posts which asserted that SS was “insurance,” and indeed the entire SS debate taking place in the country this year, is concerned with the *Old Age* part of Old Age, Survivors’, and Disability Insurance, popularly known as “Social Security.” I have heard much discussion in the media and on blogs of baby boomers retiring and changing mortality tables; I have not heard similar concerns about increased car accidents or hoped-for savings from new thearpies for the wheelchair-bound. My post was directed at the portion of the program actually under discussion.
You have therefore changed the subject for no apparent reason, other than perhaps an inability to refute my actual points.
I am willing to concede that the Survivors and Disability portions of the program more closely resemble conventional casualty insurance (and do not constitute a Ponzi scheme), although I would point out that they are managed just as irresponsibly as the Old Age portion and would certainly draw the attention of insurance regulators if similar behavior occurred in the private sector.
SMW–providing some measure of support for the poor is not terribly controversial. Nor is it what the SS debate is about: the issue is largely whether to provide support for people who can and ought to support themselves.
bq. And regarding an earlier comment about capitalism being some sort of a natural process that sort of pours from human action — give me a break.
Freedom creates capitalism, the free man will trade.
You can have faux capitalism without freedom, See Captalist Roader, Deng Xao Peng China, Third Way Britain and Germany.
But you cant have freedom without capitalism.
When the free man started to pound iron into horse shoes, when he buggied his grain to market, captialism is born.
A Free man will do that, unless you remove his freedom to stop it.
Govt didt create his job, govt didnt create the market, these things happened before the notion of a govt existed.
In the USA, they had a better idea, the govt would protect it, it would enact laws to make it fair, create courts to punish cheats and thieves.
And the results have been wealth and a standard of living shared by the greated majority of a population than the planet has ever seen.
Or we had those commies, who did away with the market, and we see the largest pile of mass murdered, general misery and oppression than the planet has ever seen.
Nope, sorry, it seems it is you that worships Idols. probably Busts of Marx Mao and Lenin.
And that pile of 174 Million skulls they created would sure fit the idea of sacrifice to the leftist religion.
So far, it looks like our choices are:
a. there should be no SS program;
b. the SS program should become a welfare program with less regressive taxation and/or more progressive benefits;
c. the SS program can be salvaged with some combination of tax increases and/or benefit cuts, including raising the retirement age;
d. there’s no SS crisis.
I haven’t decided between b and c.
PD Shaw, increase taxes the govt will spend it, result everyone is poorer, jobs are lost, nothing is fixed.
Remember Al Gore cast the tie breaker vote to allow that to happen ? doing that and selling off the navy bunker fuel to occidental petrolium, and other america hurting crap, is how they “ballanced” the budget.
Remove the chearde so that everyone sees it as welfare, and it will have no more support than the last perm welfare. that we did away with.
The private accounts will start out small, as people see the return on them, they will demand more untill all SS withholding goes twoard these higher returns.
The public will not tolerate tax increases, they still think they are taxed too much, raise the ret age and people will see even less ret on the money taken, it will be no more popular than the income taxes, because one you do things so that people sees themselves unlikely to see a penny, will die first, cant live on it anyway.
Its a Ponzi scheme, and wait till you see the German style economic collapse caused by rasing more taxes to pay, detroying jobs, that destroy the tax base, that require more taxes that destroy more jobs that … rinse recycle repeat.
One way or the other. SS is going away. you cant keep it and keep an economy.. the ponzi bubble is busting.
If we want to keep an economy, will need to cut taxes even more to offset energy costs.
If you dont, the economic downturn means an even greater downturn in govt revenue, and increasing taxes only makes the decline worse.
Nothing is free, but by letting govt do it, it does cost the most and deliver the least.
The involuntary private accnts at least points a way out of the ponzi scheme.
Btw… stuff that uses the words “progressive” without the proper level is loathing and disdain, is what America is rejecting.
Tax cuts is what will be supported, politicos that the public cant trust to keep their hands out of their wallets will not be elected.
And the republican politicos learned their lesson with the “read my lips” debacle. you think they will make that mistake again ? no time soon.
The democrats jave yet to learn the lesson, and they will keep losing, untill they do.
I’ll just bet the “Armed Liberal” voted for Al (The Lock Box) Gore. Keith
Note that Democrats are opposed to Bush’s attempt to make SS a progressive system. Think about that. The why is pretty simple, the theory is that Americans wont support a system they are personally invested in. Think about that too. The democratic philosophy on Social Security is that Americans are so selfish and stupid that unless they get something out of it they are more than willing to see the elderly and destitute starve to death in the streets. This is the supposed party of the masses mind you.
So, is the core of Democratic/liberal ideals today really about helping the little guy? Or is the true core disdain for the average America and insisting on trying to run their lives, doubtless for their own good. I would say actions speak louder than words.
“they are personally invested in”
They _arent_ personally invested in
That scheme merely transforms Social Security into a true ponzi scheme. Or, at best, a wealth transfer system. Any pretense that it is some sort of “savings” or “investment” system is completely washed away, as is the idea of a “trust fund”.
Perhaps as a way of clarifying the true nature of Social Security, it’s fine, but as a way of “preserving” it, it’s unworkable from the get go.
Sigh, I had decided to let this thread go but:
SMW let loose with this:
“And regarding an earlier comment about capitalism being some sort of a natural process that sort of pours from human action — give me a break. You people need to put away for good your little paper and coin idols.”
1. Read some history. In the west, feudalism, in which the vast majority of people were serfs or slaves working on behalf of the guys with the biggest swords came to an end when merchants, craftsman and free land holders made enough money (and therefore power) to wrest a certain degree of freedom from the hereditary lords. In the United States this process was accelerated because there were fewer lords and more of the new middle class right from the get go. But this is not the only time or place this happened. Any place or time that people were able to control their own labor, their own property and to trade freely (particulary if there were enforceable contracts) there was increased prosperity and freedom and business practices that would conform to what we call capitalism. Whether this was China prior to 1421-22, the Ancient Phoenicians, or the merchants of the Silk Road and the city states of Italy the pattern is basically the same. No one washes a rented car and serfs and slaves do not improve the land the way the yeoman does. That is the basic human truth I was referring to. It is not theory, it is history.
2. I don’t worship paper and coins. We give a fair amount to charity every year. If you want we can match tax returns. What I value (not worship) is freedom. In fact, I am looking forward to semi-retirement before my 50th birthday, living on a modest scale in my working class neighborhood so I can spend more time doing what I want, with whom I want. What I dont’ like is being FORCED to participate in a criminally stupid system that is has been pillaged from day one by corrupt politicians. If SS is insurance it is an incredibly bad deal. If it is welfare it is incredibly inefficient, regressive and counterproductive. If I was allowed to keep the money that I earned instead of giving it to the Social Security system I would have both invested more and given more to charity and that would have done a lot more good than building a namesake library or road for the “permanent criminal class” we have in Washington.
3. For those of you like Ross Judson, whose attitude is: “Gives almost everyone in the country a nice tax break, and individuals making over 90k can sniffle a little, if they even notice.” Thanks, that certainly makes me feel like we are all in the same boat. Really makes me feel like kicking in a little more and pulling for the team. After all I should recognize that as Letter Carrier and Retired Soldier turned Technology Manager my wife and I have been just raping the people and living a life of undeserved privelage for which we must be justly punished. Ditto for the family farm owner, the restaraunt owner, your doctor, the guy who owns the local garage, the dry cleaners, the baker and on. Of course it doesn’t matter that in most cases our spouses have been contributing to the SS system their entire lives and they will never be able to draw any more than the same spouses rate as someone who never worked. So take some more, by all means, we don’t miss it. Then, be sure to complain there aren’t enought jobs, or doctors, or family farms, or non-franchise restaraunts etc.
“PD Shaw #33”:http://www.windsofchange.net/archives/006771.php#c33
Option A is the best option of all. In order to correct the mess we are in, SS as we know it needs to be transformed into something else possibly Option B.
Option B make SS a welfare program. I understand there are people in this world that can not provide for themselves. There are other programs that provide aid and address the needs for this small percentage of the population. I don’t have a problem supporting the people that can not fend for themselves. As for the argument of being heartless and wanting to throw Grandma and Grandpa to the wolves I’m not buying it. Grandma and Grandpa raised a family that dispersed to the winds. Now I’m not saying this is good or bad but it stands to reason that the family structure has more of a vested interest in the welfare of Grandma and Grandpa than the whole of society let alone big government. People dealt with this situation before SS and they can certainly deal with it now.
Option C offers nothing except more of the same. Take the money misappropriate it and pat yourself on the back because you delayed the inevitable. It seems to me the people who are even considering this option firmly believe they should get something in return for the donations they were forced to make. They were led to believe in a lie of personal savings and a return on investment. Given big brothers wisdom why would they believe otherwise. If they didn’t believe big government then they are holding on to the last breath in hopes of reduced benefits to recoup some of that which they were robbed of. That being reduced benefits are better than nothing which in effect forces the population into Option B on a sliding scale. In the mean time we dig the hole a little deeper. At some point people will come to the realization that the solution is to stop digging because throwing a temper tantrum will not produce that which doesn’t exist.
It is ironic that both parties understand the issues. Both parties have made attempts to correct the inevitable by putting patches here and there. In all cases neither party has ever put forth a plan that addresses the core issue. It has always been for those about to retire we protected your little piece of the pie for a few more years. Those years being enough to persuade people that they will see some benefit all the while neglecting the futures of the scions required to support it. It also seems kind of ironic that both parties including the POTUS have warned the public of impending doom yet the populace is too blind to see or heed these words.
Option D is a bald face lie. I’m not sure why anyone would believe there isn’t a crisis. The fact that we are discussing an Option C should be enough to take Option D off the board.
Robin G., are you suggesting that it is desireable to maintain a “pretense” of things which are essentially lies? Sort of a Platonic philosopher-king approach: you don’t know enough to understand your interests, so we have to lie to you to get you to act properly?
Why NOT clarify the existing structure and then see how many people support it? Then the public can decide between a true investment system (private accounts) and a true welfare system (heavily progressive at the benefit end) and a Ponzi scheme.
Three points about raising the income level to be taxed:
(1) Real rates of return are already dismal, particularly for upper income earners.
(2) Those in the $100-300K range are among the most productive citizens in the economy.
(3) Social Security is in no way guaranteed.
(1) Real rates of return for lower income workers are a pithy 1-2%. For higher income workers (over ~$60K/yr), real rates are already in the -1% range. In other words, you could do better by putting that money in your bank and not touching it. By raising the rate of taxation on higher income workers, while presumably keeping the same payout, you would cause the real rate of return for much of the population to drop.
(2) Many of those in the $100-$300K range are doctors, lawyers, engineers, and small businessmen. If you want a great way to help convince them not to bother working as hard, I’d suggest raising their tax rates over 50%. Particularly since these are the folks who would be targeted by such a punitive raising of taxes (over 12% on income over $90K) and many of them cannot even pretend that their company is paying for it since they are self-employed (and note that this is only pretense, since an employee effectively pays the full tax regardless), massive incentives would be created to stop working so hard. Forget about finding the doctor at the hospital who’s there part-time to make a little more – he’ll be relaxing at home instead.
(3) The Supreme Court has ruled that Social Security is not guaranteed. The government has the right to change it whenever they would like. Excess funds from SS revenues vs. payouts are spent by the government; adding an increase to the revenue side would only increase spending on other government business. Increasing revenues would not extend the lifetime of the program since additional revenues are spent.
Instead, here are two suggestions that are reasonable:
(1) Pozen’s suggestion of mixed price/wage indexing.
(2) Bush’s suggestion of private accounts.
The two can be combined, of course.
(1) Pozen’s suggestion suggests wage indexing for lower income workers and price indexing for higher income workers, with middle income getting a mix of the two. This would help reduce SS liabilities and make it more progressive. While I generally oppose progressive taxation, in this case it does make sense – wealthier folks are more likely to be able to provide for themselves in retirement.
(2) Private accounts will generate positive real rates of return. They will also partially break the Ponzi scheme nature of SS as it currently stands. A better system than Bush’s would allow workers to put considerably more than 4% of their income or $1K/yr into private accounts. Upper income earners are not able to get the full benefit of private accounts with the $1K cap while lower income earners are deprived of the ability to earn larger returns by the 4% limit, limiting their ability to have a more comfortable retirement.
Social security is a welfare fund, it has always been a welfare fund, it will always be a welfare fund. The people davebo refers to were receiving welfare payments, not insurance payments.
Government dispenses welfare.
Private insurance companies administer insurance plans.
If you look at Bush’s proposal, and for a moment (god help us) ignore the cost, its really quite ingenious.
-Lower classes keep their benefits intact with the opportunity to invest a portion in a way that will allow them to retire with some real cash instead of a government pittance.
-Middle class doesnt have to pay any more and _really_ benefits from being able to invest. For them SS goes from being a nice little stipend to their real retirement accounts to being a major chunk of change that _most importantly_ they can leave to their family. This is particularly huge for blacks who’s life expectancy is less than the retirement age. This will give minority families a much better opportunity to build generational wealth. The most unfair thing in the world is a guy working for 40 years, paying FICA, dropping dead and all that money is just gone.
-Upper class, much happier with a benefit cut as opposed to a tax hike. SS is chump change to them, if that, but (unlike the Democrat logic goes) the vast majority have no problem with ponying up the SS to help out the poor elderly.
From an age point of view, its just as fair. In 10 years we will be seeing the most regressive tax structure in history as a generation of the struggling young transfer a growing and large portion of their wealth to the generally wealthy baby boomers retirements. By focusing the majority of the benefits to those who truly need it, as well as allowing personal accounts which will ensure something will be there in the future, the next generation actually becomes invested in the system, exactly the opposite of what Democrats argue will happen. Right now people under 40 have no faith in SS. Personal accounts will change that. Making sure less of their own paycheck is being robbed to fund Ross Perots retirement will change that.
Whether we can afford the reforms is a totally different question. Whether Bush’s system is more fair and just is absolutely undeniable.
Some of you might find this interesting. In 1937, Robert Jackson argued the constitutionality of the Social Security program to the Supreme Court, “stating”:http://hnn.us/articles/10212.html in part:
bq. _The uncontradicted evidence shows that there are developments in the matter of the old-age problem which differentiate that problem as it exists today from the problem as it existed in the past. In 1870, out of a population of 38 million, we had 1,153,000 or less than 3 percent of our people 65 and over. That proportion had more than doubled by 1936, and out of 128 million we had 7,700,000, or 6 percent of the population, that had reached 65. …It seems that science is extending life, but that science is not stimulating the birth rate._
The more things change . . .
Bill Funt: Social security is a welfare fund, it has always been a welfare fund, it will always be a welfare fund.
It’s clear that the Democrats view it that way, which is why they will never allow reform if they can help it. The situation is very similar to the successful Democratic effort to kill Nixon’s Family Assistance Program (see DP Moynihan’s The Politics of the Guaranteed Income) because they are totally opposed to any Republican effort to help low-income Americans. Only Democrats are allowed to pretend that they want to help low-income Americans.
So this might as well be our new national anthem:
Five-pound blocks of cheese, bags of groceries
Social Security has run out for you and me
We just get by however we can …
The Circle Jerks, “When the S*** Hits the Fan”
#25,
Raising taxes slows economic growth.
So the question then is which is better for the poor a growing economy or a growing government?
Milton Friedman estimates if government was limited to its constitutional functions that the economy would be growing 10% a year.
Remember what was happening to the pay in low wage jobs the last time the economy was growing any where near that rate?
Of course some will prefer the security of a system that destroys wealth. Why worry about the poor, when you can beat up on the rich to make up for giving the poor a raw deal. Besides the poor, being economic illiterates will never notice. And they will have the satisfaction of beating up on the rich for compensation.
Rob (41), I neither want to preserve Social Security nor maintain the pretext that SS is a retirement savings (or even insurance) plan. Nevertheless, I’d rather not see taxes go up with or without such a pretext.
It is fine if you do not like Social Security. If you accept the Pre sident Bush’s definition of the problem is its long term deficit at the current rate of benefits the proposals here and those of the president to fix Social Security have two problems. One, they do not solve the deficit problem . Almost all take the money away from the system. Two, the government is still invovled telling you how to save for your retirement. So everyone has to make a decision either you change benefits in some manner under the current system benefits payout, my option or you admit you do not want social security to survive period and offer changes. You can not do both.
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