3 Reasons to Fix Social Security Now!

[CalGun]

GW Bush advocated that and was mocked for it. A few years later the private markets had a serious collapse and those mocking his idea of allowing privatization berated him further. I'd definitely like to see them create a 50/50 program whereby the individual could control at least 1/2 of their deposits themselves and be responsible for them.

I would like a program that allows you to pay into the SS or you put it into a private investment that you can use under the same rules as SS. Allow choice. The return on the government program stinks. I would be far better off in the private sector. I would also be willing to pay a percentage of my gains on that account back to the FED SS program...50 / 50 split. So if I put $100,000 during my life time, and those investments were valued at $500,000 at retirement, I would be willing to take a 200000 hit in taxes. (500,000 - 100,000) x 50% = 200,000 to the government.

 

[specklebang]

That's just semantics. I really don't concern myself with constitutional issues. Apparently all the taxes and tax avoidances we have now have passed muster (including MHC by recent court decision) so allow me that term for discussion purpose and I'll take the complaints later.

Everything can be politicized but it doesn't have to be. So, these thoughts are not directed or deflected from any political party or perspective. Either an idea has merit or it doesn't. Someone will always be unhappy. That's unimportant to the discussion itself though.

Mandatory?!?!? If I put that in front of Healthcare, cons (as instructed) scream “unconstitutional”. If I put that in front of “sonogram” or “vaginal exam” cons cheer and fire their AK 47s in the air.

 

[Vern]

That's just semantics. I really don't concern myself with constitutional issues. Apparently all the taxes and tax avoidances we have now have passed muster (including MHC by recent court decision) so allow me that term for discussion purpose and I'll take the complaints later.

Everything can be politicized but it doesn't have to be. So, these thoughts are not directed or deflected from any political party or perspective. Either an idea has merit or it doesn't. Someone will always be unhappy. That's unimportant to the discussion itself though.

To be honest with you speckle, I really offered no opinion on your plan. But two people who run around spouting conservative narratives agreed with your mandatory savings theory and I just had to laugh. I have no problem with mandatory car insurance or mandatory health insurance because it forces people to pay for their risk. What risk is there for society to justify forcing people to save for their retirement? Will we mandate how much they can spend each month to prevent them from spending it all or getting fleeced by con men? that's why defined benefit pension plans like SS are best. Smart people won't need to depend on it. And it'll keep dumb people from starving.

And again, all the "social security is broke" is just empty factless rhetoric to keep from having to pay SS what's its owed.

 

[specklebang]

Well, if you didn't find too much wrong with my plan and other people find something to like, thenI've accomplished my purpose, which is to make people think about the reality that everything is no black and white, right or left, conservative or liberal. Just exchanges back and forth digs at "the other side" accomplishes nothing.

I think I did make it clear that it was a defined benefit plan, as it is now. If you put more in, you take more out. You also, past a certain point, get a moderate input into the plan in hopes of increasing the benefit.

Social Security isn't broke but it isn't without its flaws either. In no way was it predictive of the lengthening of lifespans or the substantial increase in disability claims. If we don't think about improving the strategy now, it will become problematic in the future.

To be honest with you speckle, I really offered no opinion on your plan. But two people who run around spouting conservative narratives agreed with your mandatory savings theory and I just had to laugh. I have no problem with mandatory car insurance or mandatory health insurance because it forces people to pay for their risk. What risk is there for society to justify forcing people to save for their retirement? Will we mandate how much they can spend each month to prevent them from spending it all or getting fleeced by con men? that's why defined benefit pension plans like SS are best. Smart people won't need to depend on it. And it'll keep dumb people from starving.

And again, all the "social security is broke" is just empty factless rhetoric to keep from having to pay SS what's its owed.

 

[Vern]

Well, if you didn't find too much wrong with my plan and other people find something to like, thenI've accomplished my purpose, which is to make people think about the reality that everything is no black and white, right or left, conservative or liberal. Just exchanges back and forth digs at "the other side" accomplishes nothing..

I just cant think of a reason to justify it.

Social Security isn't broke but it isn't without its flaws either. In no way was it predictive of the lengthening of lifespans or the substantial increase in disability claims. If we don't think about improving the strategy now, it will become problematic in the future.

But the OP's editorial said it was broke ie bankrupt. Just another conservative (perpetrating as libertarian) editorial pandering to an ignorant and gullible base. I have no problem 'improving the strategy now' concept but the rhetoric is basically an excuse not to pay what is owed to SS. thank goodness illegal immigrants have paid approximately a trillion dollars into SS for benefits they will never get. google "earnings suspense file". In 2006 it was almost 600 billion.

"As of October 2006,the Earnings Suspense File had accumulated about $586 billion in wages and 264 million wage items for Tax Years 1937 through 2004.In Tax Year 2004 alone, the Earnings Suspense File grew by $66 billion in wages and 9.5 million wage items.
"
Office of the Inspector General, SSA | Social Security Administration

 

[JoeTheEconomist]

The article is flawed, and ironically enough understates the problem. It is factually wrong to say "It already takes in less than it pays out, and is cashing in bonds from the Treasury, which is also taking in less than it pays out". The UI research deals with a very narrow segment of America - and doesn't begin to support the "virtually all" said in the article. The UI research greatly overstates the economic returns of the system for younger workers.

If you look at the UI research, you will find that Social Security for people just entering the system is not terribly different from spending a quarter to buy a dime. If we increase taxes, that return will get worse. As it is today, the vast majority of Americans put their largest expense in retirement planning in a system that loses money - and you wonder why we have poverty in the elderly?

Social Security has been means tested since 1984.

You can't let people opt-out, or everyone would. At which point you would be unable to pay benefits to existing retirees.

Privatization does not help at all. Every dollar that is diverted to a private account is a dollar that can't pay benefits to existing retirees. A private account will only help younger workers to extent that we bail on the promises of the past.

 

[JoeTheEconomist]

Social Security was not suppose to be an investment but a retirement supplement so the poor didn't go into an age they could not work and be broke and dependent on children.

Can you tell me why so many of the poor were excluded from the original version of Social Security? It is not for rich or poor. It was suppose to be insurance to help people manage the risk of old-age.

There are some modifications needed, some will include more taxes, and others won't but to keep it working it does need change.

We need 10 trillion of modificiations- just to keep the system solvent. That is 10 trillion dollars that could be used to control the deficit. So when you talk about more taxes for Social Security it appears like you want to put your 401K contribution on your child's credit card.

 

[JoeTheEconomist]

I would lower the retirement age with reduced benefits to 55 or 60 raise the retirement age for full benefits to 73 or 75 with some kind of formula so that if you are low wage worker you clear the market place and get closer to your full retirement benefits but if you are a higher income worker you have to work until the full retirement age to draw your max benefits. I would be okay with making it means tested just so long as there is some safety gap that would prevent someone from pouring a mint into a trust the benefits them and calling that not income.

Are you aware that Social Security is already means tested with a test that reaches up to 1/3rd of retirees? Also by getting people to leave the work force, your solution will remove the highest contributors to the system. Social Security heavily subsidizes shorter-work careers, so you are encouraging people to take the subsidy?

I would be okay with allowing younger workers to divert up to 20% into a government run investment program (no T Rowe Price fingers and fees) but if the person dies, the account defaults back into the system if there is no surviving spouse or underage children to draw them down.

Are you OK with Social Security reaching insolvency that much faster. Every dollar that doesn't go to Social Security is backfilled from the trust fund which is scheduled to exhausted by 2033- in a good economy.

 

[JoeTheEconomist]

I would like a program that allows you to pay into the SS or you put it into a private investment that you can use under the same rules as SS. Allow choice. The return on the government program stinks. I would be far better off in the private sector. I would also be willing to pay a percentage of my gains on that account back to the FED SS program...50 / 50 split. So if I put $100,000 during my life time, and those investments were valued at $500,000 at retirement, I would be willing to take a 200000 hit in taxes. (500,000 - 100,000) x 50% = 200,000 to the government.

Depending upon your age, the current system gives you a 75% haircut against your contributions. So it is likely that everyone would accept those terms. As you leave though, you drive Social Security into insolvency that much faster.

 

[JoeTheEconomist]

I've posted my thoughts on this elsewhere but I'll summarize them here in hopes of a real conversation instead of the usual Liber Bad Conservative Good (or vice-versa) that most of these conversations become.

I would like to see a Mandatory Savings Account by individual. 10% of your income and a 5% match by the employer. Each time $1K is accumulated, you get a T-Bill of apporopriate length to the retirement age, which I suggest should be 70. After enough is accumulated, a percentage can be allocated to a S&P500 fund or similar. When you are ready to retire, you may request a distribution commensurate with your actuarial chart. You pay taxes as you withdraw the money and you pay an annual administration fee. If you die, you may leave your MSA to your heirs MSA accounts.

Like I said, this is the short version. I'll see how it goes from here. Will we discuss SS or will we just be doing the usual name-calling? Inquiring minds etc......

You are proposing 30% payroll taxes?

Just to be clear, you need 12.4% for OAS, 1.8% for DI, 2.9% for HI (all of which are heading for insolvency at those rates). On top of that you would put 10% savings and a 5% match (which really comes from the employee in the form of lower wages).

 

[JoeTheEconomist]

First and foremost, keep it as a defined benefit and none of this contribution bologna! Raise the cap!

The problem is that raising the cap no longer makes Social Security solvent, much less fixed. That approach would however make it much less possible to raise taxes on the rich to pay for controlling the debt.

 

[Fisher]

Are you aware that Social Security is already means tested with a test that reaches up to 1/3rd of retirees? Also by getting people to leave the work force, your solution will remove the highest contributors to the system. Social Security heavily subsidizes shorter-work careers, so you are encouraging people to take the subsidy?

Not enough.

Are you OK with Social Security reaching insolvency that much faster. Every dollar that doesn't go to Social Security is backfilled from the trust fund which is scheduled to exhausted by 2033- in a good economy.

I know what I am proposing. I also know there is no "trust fund". We spend the money we get and allocate it against future revenue in the way of government "debt". In the end, it makes no difference. It just overstates our debt and hides the fact that social security is welfare with the illusion the tax is your "contribution" when it is no more than just tax.

 

[JoeTheEconomist]

Oh, another “Social Security is broke” editorial. Mmmm, even the ‘editorial’ mentions its using its ‘surpluses’ . If it has assets, then its not broke. Why do libertarian ‘editorials’ feel the need to pander and lie to a gullible base like conservative ‘editorials’? Oh, I know, we spent those assets and people who don’t depend on SSN don’t want to pay it back. If someone borrowed money from you and then determined you could cut back on your living standard so he didn’t have to pay you back, you’ d be pretty pissed. Why is this different?

And its not an entitlement program. You are entitled to nothing if you’ve paid nothing in. That should be the first sign the ‘editorial’ is really not trying to inform in an honest or intelligent manner.



Oh my, SSN pays a terrible rate of return. I guess that’s true if you pretend its only a retirement account. Its also an insurance account. If I become disabled, I can collect disability. My children and wife are beneficiaries if I die. Oh, that’s assuming I’ve paid in enough to qualify. (geez even my children and wife are not entitled to anything from it if I haven’t paid into it)

According to the Trustees Social Security has made roughly 25 trillion in promises against the 2.7 trillion in 'surplus'. Social Security is like a $1,000 bank account on which you have written $10,000 in checks. Congrats you have a $1,000 surplus.

Actually the UI research measures the return on a basis of insurance.

 

[JoeTheEconomist]

Not enough.

I know what I am proposing. I also know there is no "trust fund". We spend the money we get and allocate it against future revenue in the way of government "debt". In the end, it makes no difference. It just overstates our debt and hides the fact that social security is welfare with the illusion the tax is your "contribution" when it is no more than just tax.

Just to make sure. It is welfare for which millions of Americans are not eligible, and benefits are based on past contributions. So the most benefit goes to the high-earners. Is that your idea of welfare?

 

[Fisher]

Just to make sure. It is welfare for which millions of Americans are not eligible, and benefits are based on past contributions. So the most benefit goes to the high-earners. Is that your idea of welfare?

Most people draw more than they paid in plus interest paid on those contributions within the first few years of drawing, at which point they continue to draw their same check that is taken from the contributions of people working, so yes it is welfare. The eligibility is irrelevant. More people are ineligible for food stamps than are, but that does not make SNAP any less welfare.

 

[JoeTheEconomist]

Most people draw more than they paid in plus interest paid on those contributions within the first few years of drawing, at which point they continue to draw their same check that is taken from the contributions of people working, so yes it is welfare. The eligibility is irrelevant. More people are ineligible for food stamps than are, but that does not make SNAP any less welfare.

Your statement that people draw more than they contributed is not factually correct according to the Social Security Administration and the Urban Institute. As the article said, average couples retiring in 2010 and later will collect less than they contributed on an investment adjusted basis. Insurance is measured on expected benefits versus past contribution. Going forward fewer and fewer people will collect as much as they contributed.

Also all Americans are ELIGIBLE for SNAP. Millions do not qualify for it. That isn't the case with Social Security.

 

[specklebang]

The current combined FICA tax is a little over 15%. My thoughts are quite similar. In my proposal, which will not become law and is discussed for intellectual reasons, I shifted a little more of the usually 50/50 burden from the employer to the employee. I don't know what OAS is (I'm sure you didn't mean Organization Of American States) but maybe thats the same as SS?










I

You are proposing 30% payroll taxes?

Just to be clear, you need 12.4% for OAS, 1.8% for DI, 2.9% for HI (all of which are heading for insolvency at those rates). On top of that you would put 10% savings and a 5% match (which really comes from the employee in the form of lower wages).

 

[Fisher]

Your statement that people draw more than they contributed is not factually correct according to the Social Security Administration and the Urban Institute. As the article said, average couples retiring in 2010 and later will collect less than they contributed on an investment adjusted basis. Insurance is measured on expected benefits versus past contribution. Going forward fewer and fewer people will collect as much as they contributed.

Also all Americans are ELIGIBLE for SNAP. Millions do not qualify for it. That isn't the case with Social Security.

They are called social security "BENEFITS" for the same reason they are called welfare "BENEFITS"--because they are not returns or dividends or anything other than welfare. No matter how much you want to buy into the mythology, you are wrong. They are every bit as much a welfare program as anything else. If they were a true entitlement and not a welfare program there would have never been notch babies in the SS system--people who were never entitled to full benefits no matter how much they paid in and for how long they worked--and people would only get what they paid in and interest instead of a payment based on an indexed version of your contributions/earnings.

 

[JoeTheEconomist]

The current combined FICA tax is a little over 15%. My thoughts are quite similar. In my proposal, which will not become law and is discussed for intellectual reasons, I shifted a little more of the usually 50/50 burden from the employer to the employee. I don't know what OAS is (I'm sure you didn't mean Organization Of American States) but maybe thats the same as SS?

OAS is Old-Age Survivors Social Security, DI is Disability Social Security, HI is Medicare. The is a concensus in the economic community that employees bear the cost of FICA taxes. If they are right, there is no shift to be had.

The Congressional Budget Office (CBO) : "In the judgment of CBO and most economists, the employers' share of payroll taxes is passed on to employees in the form of lower wages." Likewise, the U.S. Government Accountability Office states: "While employees and employers pay equal amounts in social insurance taxes, economists generally agree that employees bear the entire burden of social insurance taxes in the form of reduced wages." Furthermore, self-employed workers must directly pay both the employee and employer taxes.

 

[reinoe]

That is the only thing they will accept, that is why the Republican party has had to resort to obstructionism.

Nobody in politics is actually interested in a solution.

 

[reinoe]

At which point you would be unable to pay benefits to existing retirees.

The vast majority of people collecting social security have multiple incomes and live lavishly already. The social security money is used to determine if they're flying coach or first class on their European vacations.

A private account will only help younger workers to extent that we bail on the promises of the past.

Actually they're not promises of the past. They're unearned handouts that nobody should really be entitled to, but it's a pyramaid scheme and a great vote buying tool.

 

[CalGun]

That is a bit inflammatory without the detail. $10 trillion over 30 years is but $150 billion the first year and maybe $500 billion the 30th.

I don't believe in eliminating the cap AND start means testing for social security - I think that is incredibly unjust to the people who make more money than I do. I do believe that a person (like me) who lives off investment income should be have to pay into social security since we're going to draw from it thanks to our earning days. I have under 50 but don't work much any more - maybe to the tune of $5k a year. I have all I need from some investments and live off that - my social security is set but I no longer contribute more than a few hundred a year to it. Fair? hardly

If we're going to remove the cap and make people pay more why not make those living off investment put the same as the self employed into social security first?

Can you tell me why so many of the poor were excluded from the original version of Social Security? It is not for rich or poor. It was suppose to be insurance to help people manage the risk of old-age.



We need 10 trillion of modificiations- just to keep the system solvent. That is 10 trillion dollars that could be used to control the deficit. So when you talk about more taxes for Social Security it appears like you want to put your 401K contribution on your child's credit card.

 

[specklebang]

So, if I am following the reasoning if there were no SS (sorry, never heard that OAS term before) that wages would rise?

I've been an employer for many decades. I can't say that those taxes entered into my valuation of pay but I'm not the CEO of some huge corporation either. Still, it seems my prposal doesn't change anything except give people more customized SS payments so that to some degree, they at least have a sense of live participation.

SpecklebangTheNonEconomist

OAS is Old-Age Survivors Social Security, DI is Disability Social Security, HI is Medicare. The is a concensus in the economic community that employees bear the cost of FICA taxes. If they are right, there is no shift to be had.

The Congressional Budget Office (CBO) : "In the judgment of CBO and most economists, the employers' share of payroll taxes is passed on to employees in the form of lower wages." Likewise, the U.S. Government Accountability Office states: "While employees and employers pay equal amounts in social insurance taxes, economists generally agree that employees bear the entire burden of social insurance taxes in the form of reduced wages." Furthermore, self-employed workers must directly pay both the employee and employer taxes.

 

[JoeTheEconomist]

That is a bit inflammatory without the detail. $10 trillion over 30 years is but $150 billion the first year and maybe $500 billion the 30th.

I am not sure what you mean by inflammatory. It is data from the Social Security Trustees 2013 Report. The solvency shortfall is roughly 10 trillion in 2012 dollars. The overall shortfall is about 23 trillion - that is more than the system has collected in all forms since inception.

10 trillion is a present value number. That is the amount you would have to add today in order for Social Security to meet its obligations for the next 75 years. It represents the gap between the expected inflow and expected outflow less the Trust Fund assets.

I don't believe in eliminating the cap AND start means testing for social security - I think that is incredibly unjust to the people who make more money than I do. I do believe that a person (like me) who lives off investment income should be have to pay into social security since we're going to draw from it thanks to our earning days. I have under 50 but don't work much any more - maybe to the tune of $5k a year. I have all I need from some investments and live off that - my social security is set but I no longer contribute more than a few hundred a year to it. Fair? hardly

If we're going to remove the cap and make people pay more why not make those living off investment put the same as the self employed into social security first?

The question is whether you would like to fund Social Security by contribution or by taxes. FDR made it clear that he didn't want to fund it through taxes. You can read his whole No Damn Politician quote. If people contribute based on investments, then they will get larger checks in the future. More money without completely rewriting system does nothing. You first have to say that you are the damn politician, and FDR was wrong.

Life isn't fair. And your case in Social Security is less fair than others because long-career workers subsidize shorter career workers. If that bothers you send a larger check, but you can't tell other people about fairness when you don't feel guilty enough to send the amount that is in your mind fair.

 

[JoeTheEconomist]

So, if I am following the reasoning if there were no SS (sorry, never heard that OAS term before) that wages would rise?

I've been an employer for many decades. I can't say that those taxes entered into my valuation of pay but I'm not the CEO of some huge corporation either. Still, it seems my prposal doesn't change anything except give people more customized SS payments so that to some degree, they at least have a sense of live participation.

SpecklebangTheNonEconomist

I have to ask Do you ignore the cost of healthcare as well? Do you not factor your contributions to retirement accounts when you are making wage decisions? I can assure that you the cost of employment is in the minds of your competitors. So, the market wage will reflect the cost of employment. In short, if there were no payroll taxes, yes wages would rise.