The Secret Language Of The Social Security Debate

[sangha]

Welfare is a political priority which is subject to voter approval.

This just proves my point that being a welfare program and being motivated by political reasons are not mutually exclusive

If the voters change their priorities - say they want to pay down the deficit - they are entitled to vote for Congressman that re-direct payroll taxes to deficit control. The reason that we have a Social Security reform debate today, is because our contributions were used for other people rather than ourselves. Now we have no political, moral, or legal right to benefits as demonstrated by the benefit cut in 1983.

Of course Congress can change SS! No one has argued otherwise.

As far as morality goes, that's debatable and plenty of people have come to a different conclusion than you have. The reason we have a debate about reform today is because the system will not be sustainable in its' present form. If it were sustainable, there'd be no debate. It has nothing to do with people objecting about the unfairness of the system. Though there are many who think it is unfair, the program is widely supported despite its' "unfairness"

 

[sangha]

If I buy a house with my money. It is my house. It is funded. If I borrow money from a bank, the house belongs to the bank because it is borrowed or paygo. They are exactly opposite.

No, if you buy a house with a mortgage, you own the house. The bank does not own the house. It merely has a claim on the house should the borrower default.

 

[sangha]

This is what political priority means to someone in their mid-50sA. In 1983, we all agreed that our children would bear almost the entire cost of our parents and grandparents financial indiscretions. Now the 11 year-old from 1983 is 41. He has a vote, and frankly he is pissed. He see no reason that he should have to pay for a 'contract' which was an agreement that voters made with themselves. He is pissed because instead of paying our taxes we have built-up a reserve for our retirements. Basically we put our money in our retirement account and everything else on his credit card. We says that I am in my 50s as well.

If he and his co-horts, vote in a guys who makes Rick Perry look like a socialist, they are completely within the grounds of the law to end it. That is what FDR didn't want.

Again, I agree that it is possible to change the SS program. However, IMO that is not going to happen because those 41 yo want their SS when they retire just as much as the current retirees want theirs and they favor increasing taxes over cutting benefits by a wide margin

 

[Mach]

Changing the cap on SS tax is not an obvious fix, it's not a fix at all.

It's supposed to be retirement insurance, you pay in, and get fairly proportional benefits, except it's weighted to help those who put in less the most. Which is fine, that's what it's for, a safety net, but also one that you're not just throwing money into, it's one you get some of it back if you make it to retirement age.

Changing the cap, if you kept the program similar in overall design, would mean you'd also need to change the benefits so that someone making $1M a year would pay a percentage of that entire amount, but would also be getting out a very large amount, way beyond any reasonable idea of a "safety net". Those individuals don't really need it anyway, forcing them to pay so much towards something that they would never benefit from is absurd.

The more outrageous notion that we'd simply require someone earning $1M, for example, to pay into it 10X more than someone making $100K, but receive only the same benefits as someone who made $100K, is just absurd liberal nonsense.

 

[Sisyphus]

Changing the cap on SS tax is not an obvious fix, it's not a fix at all.

It's supposed to be retirement insurance, you pay in, and get fairly proportional benefits, except it's weighted to help those who put in less the most. Which is fine, that's what it's for, a safety net, but also one that you're not just throwing money into, it's one you get some of it back if you make it to retirement age.

Changing the cap, if you kept the program similar in overall design, would mean you'd also need to change the benefits so that someone making $1M a year would pay a percentage of that entire amount, but would also be getting out a very large amount, way beyond any reasonable idea of a "safety net". Those individuals don't really need it anyway, forcing them to pay so much towards something that they would never benefit from is absurd.

The more outrageous notion that we'd simply require someone earning $1M, for example, to pay into it 10X more than someone making $100K, but receive only the same benefits as someone who made $100K, is just absurd liberal nonsense.

It is a fix, if it raises revenue to a level required to fund the checks mailed each month. And of course, it's a de facto means-testing mechanism, insofar as those making $200 K or more a year are unlikely to rely too heavily on their SS checks, even if the payout to them was tripled. Hence I've long advocated for upping the amount of income subject to SS, as we have on MC -- even at times when I maxed out circa July/August.

 

[JoeTheEconomist]

As for the bolded above, are you kidding me?

As far as the income subject to SS withholding "contributions" per worker:


[/url]

The cost of Social Security has risen. Comparing workers who paid dollars with workers who paid nickels isn't very relevant. In 1950, the cap was about $3,000. Inflation adjusted to 2012 it is about $30,000. Today the cap is $113,700. This is a huge jump on its own, but we are paying at more than 5 times the rate. It was 2%, and now it is 10.6%.

The worker to retiree ratio is in my mind silly because it treats workers and retirees as constant over time.

 

[Mach]

It is a fix, if it raises revenue to a level required to fund the checks mailed each month. And of course, it's a de facto means-testing mechanism, insofar as those making $200 K or more a year are unlikely to rely too heavily on their SS checks, even if the payout to them was tripled. Hence I've long advocated for upping the amount of income subject to SS, as we have on MC -- even at times when I maxed out circa July/August.

It fundamentally changes the program from a social insurance, to yet another wholesale wealth redistribution mechanism. The system would no longer resemble the safety net insurance program the public was sold on when this was created. It would make no practical sense for anyone at higher incomes to put that much in, and be told to expect to get nothing out, when it's not been that way for decades, was never designed to be that way, was never pitched to be that way, and for most everyone else it wouldn't be changed.

This is not some big debate point, it would be fundamentally different for anyone that was uncapped then means-tested out of the benefit.

If a "fix" to social security is so broadly defined that anything that allows the program to be funded is a "fix", that would lead to obvious absurdity. Which is why I can't believe you're still pushing it. Why not just reduce benefits sufficient to balance it?
It wouldn't really be a safety net, but then again, your proposal is no longer a safety net either.
Why not just tax the people who want the benefit like traditional insurance, and let the wealthy who don't need or want it, opt out entirely? As long as you reduce the benefits sufficient that it all balances out, this too would be a "fix", by that absurd definition.

If you bring in your broken down lexus into the shop, and they send you out with a working ford festiva, you may call that a "Fix", but I think it's obvious not the case.

 

[Sisyphus]

It fundamentally changes the program from a social insurance, to yet another wholesale wealth redistribution mechanism. The system would no longer resemble the safety net insurance program the public was sold on when this was created. It would make no practical sense for anyone at higher incomes to put that much in, and be told to expect to get nothing out, when it's not been that way for decades, was never designed to be that way, was never pitched to be that way, and for most everyone else it wouldn't be changed.

This is not some big debate point, it would be fundamentally different for anyone that was uncapped then means-tested out of the benefit.

Precisely; and that's the part I love most since it's more beneficial to growing the economy. The elderly in need of assistance do not purchase products from Somalis; they spend it into this economy, which benefits those invested in or in ownership of private enterprises. Ergo, the biggest winners are those who pay-in to growing the economy, and who lose the most when the economy is struggling.

 

[JoeTheEconomist]

Just how did you come up with 1983 for when SS became "insolvent"?

From the "Social Security Administration". Social Security reached insolvency in 1983, and had to borrow money from the Social Security Disability fund in order to pay scheduled benefits. Social Security was retrieved from insolvency with the 1983 Social Security Reform in which we raised taxes and cut benefits. The tax increases enabled Social Security to build the Trust Fund surplus that you mentioned starting in 1985.

Life expectancy has increased significantly since 1950, from about 65 to about 76. You must remember that increase amounts to an additional 11 years of SS benefits for the "bread winner" and likley more than that for the surviving spouse.

Just Facts is a useful resource, but some of the information is pointless. This is a good example, and it rivals the worker to retiree ratio for pointlessness.

The figures you have here are life expectancy of a baby. That is meaningless in terms of a retirement system. To give you an example of how pointless this is consider the fact that the most significant reason for rising life expectancy is declining infant mortality. I hope that everyone will agree that declining infant mortality has nothing to do with Social Security's problems.

Here is more relevant data :

Projected Life Tables From SSA : Table 10: Life Tables

 

[JoeTheEconomist]

Hence I've long advocated for upping the amount of income subject to SS, as we have on MC -- even at times when I maxed out circa July/August.

There is nothing stopping you personally from mailing a check. If you adovate it, why are you not doing it yourself today? When you sort-out the answer, it comes down to the fact that don't think it is a good idea.

 

[sangha]

There is nothing stopping you personally from mailing a check. If you adovate it, why are you not doing it yourself today? When you sort-out the answer, it comes down to the fact that don't think it is a good idea.

That's an incredibly stupid response and beneath someone as well-informed as you obviously are.

 

[Sisyphus]

There is nothing stopping you personally from mailing a check. If you adovate it, why are you not doing it yourself today? When you sort-out the answer, it comes down to the fact that don't think it is a good idea.

Correct. Problem being, it has no effect, given the structure of SS. Moneys not attributed to the system, as it's been designed, are put into a suspense account, benefitting no one.

 

[JoeTheEconomist]

It fundamentally changes the program from a social insurance, to yet another wholesale wealth redistribution mechanism. The system would no longer resemble the safety net insurance program the public was sold on when this was created. It would make no practical sense for anyone at higher incomes to put that much in, and be told to expect to get nothing out, when it's not been that way for decades, was never designed to be that way, was never pitched to be that way, and for most everyone else it wouldn't be changed.

This is not some big debate point, it would be fundamentally different for anyone that was uncapped then means-tested out of the benefit.

If a "fix" to social security is so broadly defined that anything that allows the program to be funded is a "fix", that would lead to obvious absurdity. Which is why I can't believe you're still pushing it. Why not just reduce benefits sufficient to balance it?
It wouldn't really be a safety net, but then again, your proposal is no longer a safety net either.
Why not just tax the people who want the benefit like traditional insurance, and let the wealthy who don't need or want it, opt out entirely? As long as you reduce the benefits sufficient that it all balances out, this too would be a "fix", by that absurd definition.

If you bring in your broken down lexus into the shop, and they send you out with a working ford festiva, you may call that a "Fix", but I think it's obvious not the case.

In the original post, I pointed out that 'fix' in this debate does not mean what 'fix' means in the English language. Fix means solvent which isn't fixed.

If high-wage employees bail, then the system will implode that much faster. High-wage workers contribute more than they collect.

Your belief that Social Security is a safety-net is shared by many, but there is no historical relationship. The cashflows completely confute the idea. It may make you feel good as you watch your paycheck trimmed, but it is not a factually accurate description. Not one penny of benefit is based on need. Millions of Americans aren't eligible - whether they are in need or not.

 

[JoeTheEconomist]

Correct. Problem being, it has no effect, given the structure of SS. Moneys not attributed to the system, as it's been designed, are put into a suspense account, benefitting no one.

Actually undocumented workers put roughly 15 billion a year into the suspense account. It benefits those in 2030 who will get a check. You won't get any credit for the contribution, but that shouldn't bother you because as you hit the max you aren't really getting much extra in benefits anyway. This is simply whether you think people paying more and getting nothing is a good idea - one that you advocate...

 

[Sisyphus]

Actually undocumented workers put roughly 15 billion a year into the suspense account. It benefits those in 2030 who will get a check. You won't get any credit for the contribution, but that shouldn't bother you because as you hit the max you aren't really getting much extra in benefits anyway. This is simply whether you think people paying more and getting nothing is a good idea - one that you advocate...

Nope. Not how SS works, sans a change in how it's structured. Sorry to disappoint.

 

[ttwtt78640]

From the "Social Security Administration". Social Security reached insolvency in 1983, and had to borrow money from the Social Security Disability fund in order to pay scheduled benefits. Social Security was retrieved from insolvency with the 1983 Social Security Reform in which we raised taxes and cut benefits. The tax increases enabled Social Security to build the Trust Fund surplus that you mentioned starting in 1985.



Just Facts is a useful resource, but some of the information is pointless. This is a good example, and it rivals the worker to retiree ratio for pointlessness.

The figures you have here are life expectancy of a baby. That is meaningless in terms of a retirement system. To give you an example of how pointless this is consider the fact that the most significant reason for rising life expectancy is declining infant mortality. I hope that everyone will agree that declining infant mortality has nothing to do with Social Security's problems.

Here is more relevant data :

Projected Life Tables From SSA : Table 10: Life Tables

Those "life tables" are meaningful only for those that make it to that age (e.g. 65). Saying that "only" 6.2 more years of SS will be collected by a an average SS recipient in 2012, than one at age 65 in 1950, ignores the fact that very few lived until age 65 in 1950 and many more do so today. Except for the survivor benefits, a worker's death prior to age 65 is a blessing for SS.

 

[JoeTheEconomist]

Those "life tables" are meaningful only for those that make it to that age (e.g. 65). Saying that "only" 6.2 more years of SS will be collected by a an average SS recipient in 2012, than one at age 65 in 1950, ignores the fact that very few lived until age 65 in 1950 and many more do so today. Except for the survivor benefits, a worker's death prior to age 65 is a blessing for SS.

Actually 48% of those people who were 21 in 1935 lived to retirement. That figure increased to 72% in 1990. I don't have the figures on what it is today. Yes more people do collect, but people contribute for a longer period of time. People who live to 66 or 67 are much better for Social Security than someone who dies at 45. Social Security averages the highest 35 years of wage-adjusted contributions - in year 36 SS contributions may be just free money to the system.

This is the life expectancy table with percentage of people who live to collect ...

Social Security History

 

[JoeTheEconomist]

Nope. Not how SS works, sans a change in how it's structured. Sorry to disappoint.

Do you have a source on the handling of the suspense account. You are the first person to question it, in literally dozens of articles that I have seen on the subject. In the current immigration debate, numerous articles have said that illegal workers contribute to the system, but cannot collect. I haven't seen anyone question that statement until you.

 

[jaeger19]

=AlabamaPaul;1062135155]I'm willing to end deficits tomorrow. Are you? It can be done rather easily by ending all entitlements other than those supported by FICA taxes

Well.. I am absolutely willing to end deficits tomorrow... but ending all entitlements other than those supported by FICA will not end the deficit. On the contrary.. doing such and the tremendous economic fallout will increase the deficit

 

[jaeger19]

Then neither is the Social Security Administration... http://www.ssa.gov/pubs/EN-05-10070.pdf

In the second paragraph... You are one of the "many people wonder how their benefit is figured. Your actual earnings are adjust or "indexed" to account for changes to average wages since the year the earnings were received."

Ummm no again.. you are wrong.. because that is based on a current calculation.. which places a maximum on what benefits you get.. that calculation is not automatically changed as you imply.. It can only be changed by an act of Congress.. Case in point.. cost of living increases have to be approved by Congress.

 

[jaeger19]

I have been through this with any number of people who think that they didn't collect more than they contributed. The vast majority simply aren't aware of all of the benefits. They use the wrong rates, currently Social Security OAS is 10.6% of wages and SS Disability is 1.8% of wages. Most people use 12.4% to figure out their contributions and ignore the value of the disability benefits. 12.4% only goes back about 20 years. Some people think that they paid 12.4% in 1965 when in fact it was something like 5% of the first $4,800. If you were married, you got free life insurance. If you had kids, you got better free life insurance. No one ever factors in the cost of free - which SSA projects will basically double the value of your benefits. Did you get divorced? Magically your contributions have new benefit values.

In general, people retiring before 2010 made money. People who retired after will make less. People who worked a lot after 1983 will lose a lot of money.

Thanks for making my point.. I have worked a lot after 1983.. and I will continue to work for the next 30 years... so tell me again why I am wrong?

And by the way.. there is a point to disability being there.. but again.. if you don't use it.. that money is lost to you.. so again.. you put in, more than you took out.

 

[jaeger19]

Again, I agree that it is possible to change the SS program. However, IMO that is not going to happen because those 41 yo want their SS when they retire just as much as the current retirees want theirs and they favor increasing taxes over cutting benefits by a wide margin

Bingo.. and why shouldn't we.. I certainly see the value of a safety net... and I will probably pay way more in than I get out. So do most of my colleagues... and the last thing is that the check for all the other spending gets dumped on my generation

A