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Explaining the Social Security Problem
Posted by: Jon Henke on Saturday, December 02, 2006

Social Security Reform is in the news again, with The Economist suggesting that "Washington is full of rumours that 2007 will bring a Grand Bargain on social security reform." Liberal bloggers are taking shots at the idea. Duncan Black argues that:
Social Security is a lovely program which works just fine and really needs no changes other than extraordinarily nonurgent tweaks to the tax formula at some point. And, no, there's no need for modest benefit cuts. ... There is no problem with the Social Security system.
Social Security isn't going to "run out of money"
Black's argument is as dishonest as the opposing claims that Social Security will 'run out of money'. In fact, I think virtually everybody is getting this debate wrong in one way or another.

Social Security isn't going to "run out of money". Even past the 2040 solvency date, they will still have the cash flow to pay out something like 70% of promises. But, assuming normal growth, that would still be higher in real dollar terms than current benefits. So, at most, we'd have to cut benefits back to something above current benefit levels.

Besides, Social Security's long-term $3.7 trillion or so fiscal shortfall is almost inconsequential next to the $37+ trillion shortfall we have in Medicare/Medicaid. Fix Medicare, and Social Security will be small beans; don't fix Medicare, and Social Security won't matter much, anyway.

the Left is just full of it when they deny there's a problem
On the other hand, the Left is just full of it when they deny there's a problem. Right now, we have a yearly payroll tax surplus of approximately $150+ billion that gets tossed into the general fund to create a "unified budget", allowing politicians to pretend the deficit is lower than it really is. But even with that, we're still running big deficits during an economic expansion. Imagine our deficits when that yearly spiff goes away or even becomes a $100 billion dollar yearly debit.
Higher taxes on a few rich people won't solve that massive swing from payroll surplus to payroll deficit
Higher taxes on a few rich people won't solve that massive swing from payroll surplus to payroll deficit. Unless the Left has a plan to eliminate vast swathes of current discretionary spending to make room for the coming mandatory spending burdens, then....yeah, there is a problem. As Alan Greenspan pointed out, "[t]ax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base." Closing that mandatory spending gap with tax cuts will be incredibly unpopular and economically dangerous.

So, no, Social Security won't be "gone" or "bankrupt" one day. But somebody is going to have to figure out how to pay for future benefits without either eliminating the discretionary budget or passing politically impossible enormous tax hikes. That makes Social Security both an economic and political problem.
 
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The third rail!

Social Security is a problem, no doubt about it, partly because of the way the system has been tweaked, and a huge part owing to politics.

The cash flow problem is serious, but as you pointed out, a drop in the bucket compared to other problems, the real problem is ROI. When SS began, with a tiny stipend of payroll taxes, the ROI was great. There was nothing to back up that ROI except the next group of workers, but to the retirees it was a pretty good deal.

The ROI current workers will get is awful, and it’s no longer a tiny stipend at almost 16% of every workers pay up to the cap.

It’s politically difficult to have a public debate about the real math and offer real solutions. Not the big math, 2040 and 3 trillion dollars, those number are virtually abstract to a person thinking about their own retirement. The real math is what could a person, even of modest income do, if they had 1/2 or 2/3rds of that 15.5% to invest even in the safest investments for their own personal retirement.

I know Bush had an idea about reforming Social Security, but it’s an "only Nixon could go to China" thing, only a Democrat can reform Social Security. I want to see personal accounts and I didn’t trust Bush not to make reform a boondoggle for Wall Street and make the problem worse.

That said, here is what I think could be done, but before that, there are some elements that MUST be included in any reform:

1. Much of the guaranteed payouts for retirees for the next 20 years or so must be paid for.
2. There must be a safety net element to prevent poverty among the elderly.
3. Private accounts must be personal, but risk averse, and include protective investments to mitigate stock markets dips, bond market dips, and inflation.
4. The accounts should be privatized, but the investment management itself should be an extension of the federal governments retirement fund management to sure proper oversight.
5. An annuity option must be offered at payout, it must be a payout for life based on standard actuarials.

So here’s the plan.

Immediately create private accounts with the employer portion (7.65%) going into the private accounts. Fund ongoing payments with the continuing employer paid portion plus the vaporous SS surplus that has already been paid into the system. This will come out of the general fund, just as future SS payments will when the surplus disappears, but at least in this scenario, it is self terminating rather than perpetually worsening.

Phase in a needs based payout completing in 20 years as follows:

Immediately end payouts to people with incomes over $100,000 or assets over $1,000,000 and reducing payouts by 10% for every $10,000 in income above $30k.

Phase down SS payouts incementally over 20 years to zero.

Reduce employee paid payroll taxes incrementally to 2% over to 20 years to fund needs based SS. Maintain employer portion at 7.65% to fund private account.

After 20 years, we have a 2% payroll tax and every worker will be placing 7.65% of their earning in a private account, that can be added to with 401k or IRA type savings.

There are elements of unfairness to this reform, there is no way around this, so the goal is to mitigate the negatives to the extent possible.

Cap

 
Written By: CaptinSarcastic
URL: http://
Damn, I wish what was sane was politically possible.

Cap -
That said, here is what I think could be done, but before that, there are some elements that MUST be included in any reform:
I get itchy when anyone says "must," and especially when they use emphasis. It implies something that usually isn’t true, every time.
So please, make your argument for what happens if "any reform" doesn’t include the five elements you listed.
1. Much of the guaranteed payouts for retirees for the next 20 years or so must be paid for.
Why twenty? People can’t make adjustments to their retirement plans in ten years?
2. There must be a safety net element to prevent poverty among the elderly.
There’s that "must" again.
But more to the point, what is the purpose of Social Security, in your mind?
3. Private accounts must be personal, but risk averse, and include protective investments to mitigate stock markets dips, bond market dips, and inflation.
What you’re saying is, people shouldn’t be allowed to take certain risks with their own money, with "risk" set at some arbitrary level. Who decides what level of risk is acceptable for my money?
And considering that inflation is nearly impossible to measure accurately (it doesn’t take substitution effects and technological change into account terribly well at all), why should I trust the BEA’s (or any government institution’s) numbers with my hedging?
4. The accounts should be privatized, but the investment management itself should be an extension of the federal governments retirement fund management to [en]sure proper oversight.
I’m about as allergic to the word "should" as I am to "must," but again, to get to the point...
That creates a pretty big principal-actor problem, does it not? Who manages my money, and why not just leave it in my hands?
5. An annuity option must be offered at payout, it must be a payout for life based on standard actuarials.
"Must" again.
Why is this option important, and who determines what is "standard"?
Phase in a needs based payout completing in 20 years as follows:
As a number of conservative and libertarian individuals should have pointed out to you by now, there’s no such thing as an objective quantifiable "need." Need implies an end. Needed for what? So when you say something is need-based, I say, prove to me that anything can be need-based.
So-and-so needs a shower, so-and-so needs a pay raise, so-and-so needs to get laid, so-and-so needs a government-managed pension. You’re telling me people in their forties and up "need" my money? I "need" my money too! I’m tens of thousands of dollars in debt and I’m still getting hit with a payroll tax! When I become confident that a bureaucrat halfway across town from me (I’m in Washington, DC) knows better than I do who needs the fruits of my labor, I’ll start listening to all this confident "must" and "should" and "need" talk of yours.
There are elements of unfairness to this reform, there is no way around this
I don’t leave it up to other people to decide what’s fair. I want the government to stop taking my money, and I’d rather they not take twenty years to do so.
 
Written By: OrneryWP
URL: http://
Social Security is a Ponzi scheme, by definition. But as those who got into Mr. Ponzi’s scheme late in the game found out, when the pyramid narrows the whole thing collapses. Unfortunately both aprties are drooling all over themselves to extend this farce for years to come. There is no "lock box", the future cash flows into the system are simply tax payments that must be taken from future tax payers based on future exconomic growth, none of them guaranteed.

The elderly are the wealthiest demographic in the United States, very few of them are in danger of living in poverty, that rationale has always been bogus. The punchline to the joke is that Bill Gates will get payments from the government in order to keep him from eating out of garbage cans when he is too old to work. His payments will be much larger than the ones that legitimately poor elderly will recieve.

The solution is to provide welfare for people legitimately too old, too poor or too sick to support themselves. The fact that we are going to raise taxes through the roof in order to give Warren Buffet his monthly check is an absurdity beyond comprehension. Paying to support the elderly poor would cost very little and SHOULD satisfy those who legitmately care about them.
 
Written By: DS
URL: http://
Jon,

Thank you for laying out the basic Social Security math honestly. It’s so rare to see anyone in the right-leaning side of the political world ever do that. We’re always told that Social Security will go "bankrupt" and we "won’t see a dime" (Bush himself has said both of these lies approximately 58,000 times).

I would also add that the 2040 projections are based on VERY conservative estimates of economic growth over the next 30+ years. If the economy grows at anything like the rate is has over the last 40 years, there may not be a shortfall at all.

Moreover, and you address this somewhat, the projected Social Security shortfall is a drop in the bucket compared to our other budgetary problems.

The bottomline is this: not only is Social Security perhaps the most popular government program we have, it’s probably the most successful one too. It pretty much single-handidly solved the problem of eldery poverty in this country (which was a MAJOR problem). Conservatives who dream of doing away with Social Security are in fantasyland. It will never happen.

There’s no doubt that we’re going to have to face some serious budgetary issues in the coming years. We’re running huge deficits and they’ll only get worse. But Social Security ISN’T THE PROBLEM. It still more than pays for itself and even if it someday gets to a point where it goes into the red (which, again, may never happen), that shortfall will be relatively small and can be covered by minor tax increases, minor benefit cuts, or a combination of the two. Indeed, the solvency issue solved by the Reagan-era reforms was far bigger and more imminent than the one Social Security faces now (which is remote and contingent).

And don’t get me started on the policy idiocy that is "privatization". Bush’s plan would have undermined the whole point of Social Security and would have made the solvency problem worse, not better (something the Bush administration grudgingly admitted eventually).

Solving our deficit/debt problem is going to require some combination of increased taxation and cuts in spending. Anyone who says otherwise is not being serious. But there’s very little fat that can be trimmed from Social Security and very little reason to start the cutting there.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
"Social Security perhaps the most popular government program we have, it’s probably the most successful one too."
And yet the payroll tax has needed to be adjusted upward many times over the lifetime of the program. Never downward. That’s the definition of success? If the payroll tax needed to be 50% of income in order to maintain the program, is that still successful? Just wondering where the success/failure threshold is in your mind.

It’s so rare to see anyone on the left acknowledge that SS is dependent on a favorable ratio of workers to retirees and that this ratio has been declining for decades. It’s so rare to see anyone on the left acknowledge the steep rise in payroll tax to keep SS working. I’d for once like to hear someone on the left say "yeah, SS isn’t well designed, we should do X instead to provide a basic safety net to eliminate elderly poverty." But alas, they typically assume a defensive posture and criticize any suggestion for change.
 
Written By: Unknown
URL: http://
"...that shortfall will be relatively small and can be covered by minor tax increases, minor benefit cuts, or a combination of the two."
I’ll bet defenders of SS have been saying that since it was born. Over a dozen tax rate changes. Over two dozen income base changes since it was started. Add up enough minors and it becomes major.
 
Written By: Unknown
URL: http://
AnonLib-
It pretty much single-[handedly] solved the problem of eldery poverty in this country (which was a MAJOR problem).
According to whose definition of "problem"? And there was more to it than Social Security, mind you.

Is it conceivable that people who did not have their money taken from them from their earliest employment years might have spent that money in ways that could have guaranteed a better retirement (e.g., in securities or stocks or human capital or their children), and retired at a time based on their own willingness to reitre and ability to work, instead of at an arbitrary government-set (and shifting) date? Is it possible that, coming out of the Depression (when elderly poverty wasn’t so much "the problem" as poverty period), people who didn’t have Social Security guaranteeing some funds after that age, people would have saved more and invested more?
Conservatives who dream of doing away with Social Security are in fantasyland. It will never happen.
That may be so, because a powerful political constituency collects rents from the program and has become dependent on it and has organized to defend it. Same goes for Medicare, although there’s some question as to how quickly the rest of the taxpayers will catch on and finally force change.
Moreover, and you address this somewhat, the projected Social Security shortfall is a drop in the bucket compared to our other budgetary problems.
How many trillion makes more than a "drop"?
But Social Security ISN’T THE PROBLEM. It still more than pays for itself
No, it doesn’t. What you mean to say is, it still taxes more than it pays out, and even then, you’re wrong. Congress has been spending the rest of the money and called the pile of IOUs a "trust fund." As in, we trust them to tax us again when, not too long from now, we have to collect on those IOUs (pay off those bonds, many of which, thankfully, belong to American businesses and individuals) and they have to make up the shortfall to the discretionary budget. If you don’t own enough of these securities based on your taxes/benefits from the government, you get the short end of that stick.
even if it someday gets to a point where it goes into the red (which, again, may never happen), that shortfall will be relatively small and can be covered by minor tax increases, minor benefit cuts, or a combination of the two.
The "unified budget" gets even more red in not too many years. The "trust fund" itself may never be completely depleted, assuming economic growth keeps up (I’m confident that, for the most part, it will), but that doesn’t mean there’s no problem. Every year without a substantial benefit cut means more taxes later, period.
Solving our deficit/debt problem is going to require some combination of increased taxation and cuts in spending. Anyone who says otherwise is not being serious.
I agree, but only because of the political infeasibility of defeating the rent-seeking constituency that has formed around protecting Social Security, not because society would fall apart if it were abolished. It’s the same problem as with any government program, only one of the largest-writ because of the nature and size of the program.

They will keep on being parasites as long and to the extent that their hosts are unwilling and/or unable to stop them.
But there’s very little fat that can be trimmed from Social Security and very little reason to start the cutting there.
By what standard do you call one part of this beast "fat" and the rest not?
 
Written By: OrneryWP
URL: http://
"Social Security isn’t going to "run out of money". Even past the 2040 solvency date, they will still have the cash flow to pay out something like 70% of promises."

I am sure that will be a great comfort to the other 30%

"But, assuming normal growth, that would still be higher in real dollar terms than current benefits. So, at most, we’d have to cut benefits back to something above current benefit levels."

Normal growth of what? I know benefits are adjusted for inflation, but I didn’t know they increase in real terms also. How do you know exactly how much benefits would have to be cut back? Please show your work, as my math. profs used to say.


"Besides, Social Security’s long-term $3.7 trillion or so fiscal shortfall is almost inconsequential next to the $37+ trillion shortfall we have in Medicare/Medicaid."

And a bullet to the crotch is inconsequential next to a bullet in the brain.

As the economy grows, real wages will also probably grow, and therefore the amount of benefits due will grow. Will the revenue increase faster than the expense? It hasn’t so far.

I read somewhere that there is at least one governmental unit that is not included in the Social Security plan. They have their own retirement plan, and from what I read it outperforms Soc. Sec. It can be done, and be done safely. You don’t think the Kennedys et al. have all their money tied up in gov’t. securities, do you?
 
Written By: timactual
URL: http://
Cap, that’s an interesting idea. However...
Immediately create private accounts with the employer portion (7.65%) going into the private accounts.
...as much as I am ideologically in favor of privatization, I have to point out that (a) personal accounts aren’t really privatization, and (b) there are some very serious problems with what amounts to a government controlled mutual fund that eventually controls trillions of dollars, and spreads it over a relatively limited group of blue chip stocks. (crowding out, overcapitalization, and what kind of control do you think that will give the government when they control so much stock selection?)
The solution is to provide welfare for people legitimately too old, too poor or too sick to support themselves.

It is a bit farcical that Democrats call Social Security a "safety net". Safety nets don’t catch everybody — only those who fall. The problem is that, for the program to remain politically popular for Democrats, it must pay out to everybody. They’ll resist attempts to turn it into an actual safety net.
I am sure that will be a great comfort to the other 30%
Not 70% of people. 70% of promised funds. That is, if your contributions would justify a $2200 payout in 2040, you might only get something like a $1540 payout. That is still larger than what people would get today.
Normal growth of what?
Wages.
And a bullet to the crotch is inconsequential next to a bullet in the brain.
So why are we spending more political time on the crotch-wound than the brain injury?
 
Written By: Jon Henke
URL: http://QandO.net
"I would also add that the 2040 projections are based on VERY conservative estimates of economic growth over the next 30+ years. If the economy grows at anything like the rate is has over the last 40 years, there may not be a shortfall at all."
This is a pervasive myth, but it’s a myth.

First, the Trustees are actually projecting faster real wage growth into the indefinite future than we’ve had on average over the last 40 years. See here.

Second, the problem doesn’t go away if you assume faster growth. There is only a 10% chance that the permanent shortfalls will be postponed even from 2017 to 2020 even if all the economic and demographic factors break in one direction.
It still more than pays for itself and even if it someday gets to a point where it goes into the red (which, again, may never happen), that shortfall will be relatively small and can be covered by minor tax increases, minor benefit cuts, or a combination of the two. Indeed, the solvency issue solved by the Reagan-era reforms was far bigger and more imminent than the one Social Security faces now (which is remote and contingent).
That is incorrect. The crisis in the early 1980s was indeed more imminent but it was smaller. As you can see here the current projected 75-year shortfall is larger than the one projected in 1982. What you can’t see there is that the methods were changed in 1988 to make the shortfall appear smaller. If we still used the same methodology that the Greenspan Commission used, we’d be looking at a program shortfall nearly twice as large as the one they saw.

It’s reasonable to disagree over what to do about Social Security, but the denial of the reality of the program is not serving anyone well.

Consider this: This year, the Trustees projected that we’d hit permanent cash deficits by 2017. In 1991, they made the same projection. The numbers have bounced around a bit since then, but they’ve gone back, on average, to right where they were. If the Trustees were being pessimistic and the problem might go away, then the doomsday date should recede as real data replaces the projections. But that’s not what has happened. All that has happened is that we’ve frittered away 26 years of the lead time we had in 1991.
 
Written By: Feverishb
URL: http://
I would also add that the 2040 projections are based on VERY conservative estimates of economic growth over the next 30+ years. If the economy grows at anything like the rate is has over the last 40 years, there may not be a shortfall at all.
Very true. And if the technology-induced productivity increase of the past decade is sustained, that may obtain. However, there are some good reasons to believe productivity might slow down. We’ll see.
The bottomline is this: not only is Social Security perhaps the most popular government program we have, it’s probably the most successful one too. It pretty much single-handidly solved the problem of eldery poverty in this country (which was a MAJOR problem). Conservatives who dream of doing away with Social Security are in fantasyland. It will never happen.
I don’t think it was a single-handed accomplishment, but it certainly contributed. On the other hand, it has also contributed to a widespread reduction in savings, which is a problem, as well.
that shortfall will be relatively small and can be covered by minor tax increases, minor benefit cuts, or a combination of the two.
Or by an increase in retirement age. Democrats like to talk about indexing, e.g., the minimum wage to inflation. Why not index retirement age to life expectancy? It would do a great deal to resolve the compositional contributor/beneficiary problems.
 
Written By: Jon Henke
URL: http://QandO.net
but it’s an "only Nixon could go to China" thing, only a Democrat can reform Social Security.

I said this before too. Hillary will push the same reforms as Bush. and the left will GUSH with praise.
 
Written By: Harun
URL: http://
Very true. And if the technology-induced productivity increase of the past decade is sustained, that may obtain. However, there are some good reasons to believe productivity might slow down. We’ll see.
Fair enough, Jon. I guess my meta-point is this: Of all the budgetary problems our government faces, the projected Social Security shortfall (which may or may not obtain at some point far down the road) is the least of our worries. Moreover, given that Social Security is immensely popular and has been hugely successful, it’s makes very sense to focus on it as THE problem that we need to solve RIGHT NOW.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
I’d for once like to hear someone on the left say "yeah, SS isn’t well designed, we should do X instead to provide a basic safety net to eliminate elderly poverty." But alas, they typically assume a defensive posture and criticize any suggestion for change.
You heard someone (ostensibly)on the left say these things at the top of the responses.
I don’t leave it up to other people to decide what’s fair. I want the government to stop taking my money, and I’d rather they not take twenty years to do so.
Ornery, I understand your point, and personally, I would be much better off if SS did not exist. I could choose to take the position that the only acceptable reform would be to eliminate the taxes I have to pay for SS. If I did choose that position, I would also be taking the position that I don’t want to participate in the debate, you guys work and out and know that if there are still SS taxes I won’t approve.

On the other hand, you did seem to find some elements of my suggestion workable, 10 years instead of 20, etc. My question is, do you like my plan better than the current plan, and other than eliminating the program altogether, what be your preference?

Cap
 
Written By: Captin Sarcastic
URL: http://
" Not 70% of people. 70% of promised funds."

Yes, I know. I am sure that is a great comfort to the people who have a 30% cut in their SS benefits, which drops them from a life of genteel poverty into a life of real poverty.
Better?

"That is still larger than what people would get today."

Are you sure that real growth will be more than 30% in that time frame? That sounds a bit high to me. Plus, I think some of the increase in revenues due to growth will be needed to cover increases in benefits caused by inflation.

Assuming normal growth, it is still a Ponzi scheme.

"So why are we spending more political time on the crotch-wound than the brain injury?"

Because a crotch injury still causes real pain, whereas a brain injury in Wash. DC is unremarkable.
Really, who cares? A problem is a problem. We should be grateful someone actually wants to solve one. The more time the folks in Wash. spend trying to solve this, the less time they will have to figure out ways to spend more on other things.
 
Written By: timactual
URL: http://
I could choose to take the position that the only acceptable reform would be to eliminate the taxes I have to pay for SS. If I did choose that position, I would also be taking the position that I don’t want to participate in the debate, you guys work and out and know that if there are still SS taxes I won’t approve.
Well, I’m not one to sit in the corner and pout if I don’t get things exactly my way. I’m a maximizing pragmatist, so I’ll take what I can get, particularly since politics is the art of the possible.
On the other hand, you did seem to find some elements of my suggestion workable, 10 years instead of 20, etc. My question is, do you like my plan better than the current plan, and other than eliminating the program altogether, what be your preference?
Well, I posed the "Why not 10 years" question because I wanted to know why people needed 20 years to make adjustments to their retirement plans, but in terms of what I’d prefer to the current system:

Assuming that Social Security must stay with us:
1. Do not index benefits to inflation. The CPI is notoriously unreliable, and will always be unreliable due to the nature of the statistic. If it’s politically impossible to stop indexing of some sort, index it to some number that rises slower than the CPI, like CPI minus 1% annual growth. New technology, new medicine, and substitution effects all make an inflation-indexed benefit better than a "real" COLA, as if the cost of living were really what’s under debate, and it’s time to stop the farce.
2. Start pushing back the arbitrary collection age, as quickly as possible, starting with the people who are currently furthest from retirement. Jon’s proposed indexing to life expectancy might be a good start, although that, too, is a bit arbitrary in my mind; how long you live doesn’t reliably indicate how long you can stay a productive worker. But then, a slight change in the retirement age is as good as a transfer of many billions of dollars.
3. As much as the payroll tax *can* be cut, I would prefer that it *is* cut—gradually if necessary, but the more the better and the sooner the better. We can start eating into that "trust fund" now and show Americans what the trust fund is really made of. Lucky for us, much of the bond payoff will go to American businesses and individuals. Unlucky for us, the government’s going to have to do a lot more borrowing or taxing because they’re so strongly opposed to cutting spending—and more taxing and borrowing means the economy takes a hit.
NOTE: When it happens, as it will soon, I’m actually going to enjoy seeing politicians explain why the "trust fund" means substiantially more taxes, more debt (future taxes), and/or possibly constrained "discretionary" spending this year (as opposed to some far-off future date). It’s a nice side benefit of eating into the trust fund.
4. Means-testing on all Social Security beneficiaries, starting ASAP. Not because I think it’s more "fair" or because I think poor people "deserve" it more than the middle-income and rich (I’ll leave that to people who feel comfortable making such moral pronouncements), but because that gets more people off the government teat and shrinks the rent-collecting constituency. I fully expect it to be another example of arbitrary government labelling, but I don’t care. Anything to kill the beast.
Heck, I could take this social engineering bit a long way: the more expensive the housing in a beneficiary’s neighborhood, the smaller the check they get. The more expensive the part of the country they live in, the smaller the check. That’d encourage the elderly to move to parts of the country that don’t cost quite so much to live in, like the MidWest. I’m not going to subsidize a South Beach retirement lifestyle when our dear retiree could be living in Oklahoma or rural Tennessee. If they don’t want to live in Oklahoma (as I’d suspect), they can stop collecting such a big SocSec check and thereby have less to lose if SocSec is threatened.

And y’know what? Do the same damn things to Medicare, for all the same reasons.
 
Written By: OrneryWP
URL: http://
AnonLib - Unknown asked you a very pertinent question to which you’ve failed to respond. . .
And yet the payroll tax has needed to be adjusted upward many times over the lifetime of the program. Never downward. That’s the definition of success? If the payroll tax needed to be 50% of income in order to maintain the program, is that still successful? Just wondering where the success/failure threshold is in your mind.
Social Security contribution rates started at 1% each for employer and employee. Disability insurance and health insurance were subsequently added, but Social Security retirement contribution rates now stand at 5.3% for each employer and employee. So what is your definition of success? At what level of contribution rates does the program become unsuccessful?

Cap - still crunching those numbers on progressive taxation or is your lack a response an admission of defeat?
 
Written By: m.jed
URL: http://
I am sure that is a great comfort to the people who have a 30% cut in their SS benefits, which drops them from a life of genteel poverty into a life of real poverty.

I am outraged. People have a right to their comforts!
 
Written By: Wulf
URL: http://www.atlasblogged.com
I think its foolish to believe that when Social Security becomes a drain on the general fund, there won’t be cuts in it. There will be.

First it will be graduated according to retirement income. Next it will be graduated according to retirement income and savings (including IRAs).

 
Written By: jpm100
URL: http://
I think its foolish to believe that when Social Security becomes a drain on the general fund, there won’t be cuts in it. There will be.

First it will be graduated according to retirement income. Next it will be graduated according to retirement income and savings (including IRAs).
That’s rather specific. How do you know this?

And doesn’t that graduation disincentivize savings even more?
 
Written By: OrneryWP
URL: http://
From a 1936 Social Security Pamphlet, aka, Lies My Government Told Me:
Beginning November 24, 1936, the United States Government will set up a Social Security account for you, if you are eligible.
"The checks will come to you as a right. You will get them regardless of the amount of property or income you may have."
"The law also creates an "Old-Age Reserve Account" in the United States Treasury, and Congress is authorized to put into this reserve account each year enough money to provide for the monthly payments you and other workers are to receive when you are 65."
"The taxes called for in this law will be paid both by your employer and by you. For the next 3 years you will pay maybe 15 cents a week, maybe 25 cents a week, maybe 30 cents or more, according to what you earn. That is to say, during the next 3 years, beginning January 1, 1937, you will pay 1 cent for every dollar you earn, and at the same time your employer will pay 1 cent for every dollar you earn, up to $3,000 a year. Twenty-six million other workers and their employers will be paying at the same time.
After the first 3 year—that is to say, beginning in 1940—you will pay, and your employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year. This will be the tax for 3 years, and then, beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. After that, you and your employer will each pay half a cent more for 3 years, and finally, beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay."
"Meanwhile, the Old-Age Reserve fund in the United States Treasury is drawing interest, and the Government guarantees it will never earn less than 3 percent. This means that 3 cents will be added to every dollar in the fund each year."
"What you get from the Government plan will always be more than you have paid in taxes and usually more than you can get for yourself by putting away the same amount of money each week in some other way."



 
Written By: Unknown
URL: http://
Based on my income, the amount of money I put away for retirement, the growing entitlement culture and the willingness of a rabid minority of activists and politicians to enable it, I expect nothing from social security when I retire. I chalk up every dollar taken as lost forever. The only chance my family has to collect any of it is if I die prematurely, before I can be excluded based on income and wealth when I am older.


 
Written By: Unknown
URL: http://
I fully expect that I will never receive Social Security benefits either. My retirement plans anticipate that very thing. I am taxed up to the current limit every year, and have been for several years, and view them as taxes, not contributions. It’s the only realistic way to view any of this. Welfare, plain and simple.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
Personally, I don’t plan on ever retiring—seems to me like waiting to die—but maybe I’m just ridiculously optimistic about technology and my career prospects.

I’ll save up money, sure, but retire? Eh.
 
Written By: OrneryWP
URL: http://
Hey Ornery,

My "retirement" consists of leaving a "real job" and working as a consultant, enough to supplement my income. I figure that the Singularity is close enough that I don’t need to last all that long.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
I don’t plan on having any social security either. 401k and Roth IRA right now.

Oh and Adam, Simon Jester says "hi".
 
Written By: ChrisB
URL: http://
I love it when people say stuff like this:
Based on my income, the amount of money I put away for retirement, the growing entitlement culture and the willingness of a rabid minority of activists and politicians to enable it, I expect nothing from social security when I retire. I chalk up every dollar taken as lost forever.
And
I fully expect that I will never receive Social Security benefits either.
This is so silly. There is ZERO reason to believe you won’t receive your promised Social Security benefits when you become eligible. You’ve soaked up a lot of propoganda if you really believe it won’t be there for you when you retire. As Jon pointed out, even under the gloomy SS projections upon which all this discussion is based, you still end up getting 70% of your promised benefits (an that’s not until 2040!). And because benefits rise faster than inflation, that’s more in today’s dollars that people currently receive.

Plus, as everyone acknowlegdes, Social Security is an entitlement and is immensely popular. It’s not going anywhere. Barring totally unforeseen events (like a giant meteor destroying the country) you’re going to get Social Security benefits at at least the level people get today. If you want to plan your retirement around the expectation that you won’t receive such benefits, fine; that can’t hurt. It’s always good to be prepared. But if you really don’t think you’ll be getting those benefits, then you are living in fantasyland.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
Yes, I know. I am sure that is a great comfort to the people who have a 30% cut in their SS benefits, which drops them from a life of genteel poverty into a life of real poverty.
So, do you suggest we raise benefits immediately? Because, even with that 30% cut, future benefits would still be above current benefit levels. (in real terms)

Naturally, people won’t like any substantial cut, which is why we’re talking about doing something about that right now.
 
Written By: Jon Henke
URL: http://QandO.net
For the record, just because I don’t respond to every comment, doesn’t mean I’m avoiding anything. Here’s the question I’m supposedly ducking:
And yet the payroll tax has needed to be adjusted upward many times over the lifetime of the program. Never downward. That’s the definition of success? If the payroll tax needed to be 50% of income in order to maintain the program, is that still successful? Just wondering where the success/failure threshold is in your mind.
This strikes me as an absurdly stupid way of analyzing success. Sure, the payroll tax has had to be adjusted mulitple times, and we likely haven’t seen the last of these adjustments. But you don’t measure the success or failure of the program by looking only at the cost. Cost-benefit analysis requires weighing costs against benefits.

So you have to ask, what are the benefits of the program. Well, for starters, it has succeeded in accomplishing it’s primary goal, i.e., eliminating the problem of widespread poverty among the elderly. I don’t think opponents of Social Security realize just how big a problem this would be if Social Security suddenly disappeared.

Second, it provides everyone with some minimal security should they become disabled or should they not have enough money to live in old age. That’s important not only from a standpoint of basic fairness, but from a utilitarian standpoint. When people have some minimum fallback, they can afford to take more economic risk, to start their own businesses, etc. In that way, it encourages entrepenuership, which in turn helps the economy.

Overall, the benefits of Social Security far outweigh the costs, even if those costs will be slightly higher in the future. Compared to other government programs, you get far more bang for you buck from Social Security.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
"There is ZERO reason to believe you won’t receive your promised Social Security benefits when you become eligible."
I’m in fantasyland? Do you honestly think that in the future that there is not a chance people who have retirement incomes > X and/or wealth > Y will not be means tested out of SS benefits?

 
Written By: Unknown
URL: http://
"I don’t think opponents of Social Security realize just how big a problem this would be if Social Security suddenly disappeared."
I don’t think proponents of SS have a clue what the problem, if any, would be in the abscence of SS. You must think that in the abscence of government action, nothing else would have been done. That is absurdly stupid.
"Second, it provides everyone with some minimal security should they become disabled or should they not have enough money to live in old age. That’s important not only from a standpoint of basic fairness, but from a utilitarian standpoint. When people have some minimum fallback, they can afford to take more economic risk, to start their own businesses, etc. In that way, it encourages entrepenuership, which in turn helps the economy."
Right. And it’s just inconceivable that a non-governmental solution could be imagined and implemented to do the same things. I wish someone would invent disability insurance and investment accounts, but since they haven’t, good thing the government is here to take responsibility for my life.

So let me get this straight? You’re saying because 12% of my income is taken for social security, I should be more inclined to start a business because I have a fallback at age 65? Have you heard of the concept ’tradeoff’? What risk might I be willing to assume if I had that extra 12% in my pocket as capital to start a business with less debt, or as a buffer for the lean years of the startup? You are myopic.

 
Written By: Unknown
URL: http://
I think the unknown commenter just above is absolutely correct and I will be means tested out of my "benefits". I don’t believe that everyone will not get SS. Instead, we’ll finally recognize it for the welfare that it is. Of course, we will also expose another New Deal lie, but that’s a tale for another day.

Hey, how are you ChrisB? Simon does indeed say hello. He’s been kicking around at The Liberty Papers recently.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
"Compared to other government programs, you get far more bang for you buck from Social Security. "
Compared to having those dollars myself, I don’t. Not even close.
 
Written By: Unknown
URL: http://
it provides everyone with some minimal security should they become disabled or should they not have enough money to live in old age. That’s important not only from a standpoint of basic fairness, but from a utilitarian standpoint.
As I understand, in order to receive disability or retirement benefits from SS, one has to work and contribute. So why must we have SS instead of having individuals purchase their own disability insurance and save for their own retirement? And "basic fairness" is a normative statement that has no objective meaning.
Overall, the benefits of Social Security far outweigh the costs, even if those costs will be slightly higher in the future.
This too looks more like a subjective statement than based in anything resembling fact.

Under current law, the real IRR on the post-baby boom generation is less than 2%, whereas the real yield on 20-year treasuries is 2.1% That (eyeballed) 0.3% difference over a 40 year career leads to a real 7% lower retirement accumulation - and that’s using a risk-free assumption for investment returns, which, since I assume it represents the majority of retirement contributions for those at the lowest end of the income spectrum, is a tremendous opportunity cost of foregone returns from having a more diversified portfolio. Now you’re saying that the costs will be higher or benefits will be lower, which means that the IRR will be reduced further - meaning the costs will further outpace the benefits.
 
Written By: m.jed
URL: http://
M.jed, try not to confuse AL with facts and numbers. Let’s stick to feelings and opinions, shall we?
 
Written By: Unknown
URL: http://
I don’t think opponents of Social Security realize just how big a problem this would be if Social Security suddenly disappeared.
I’d like to find out. It wouldn’t be a problem for me; I’d have more money to pour into my own human capital, money I wouldn’t have to borrow like I am right now to get through college. It’s not my fault the government promised benefits they couldn’t deliver to a class of people who are not uniformly disabled or otherwise unable to work or, for that matter, too poor to survive at a slightly lower level of comfort. I’m sick of subsidizing their comfort. My grandparents have plenty of children and grandchildren who can look after them, and who would be pleased to spend the money as they saw fit.
Second, it provides everyone with some minimal security should they become disabled or should they not have enough money to live in old age. That’s important not only from a standpoint of basic fairness, but from a utilitarian standpoint.
First, I don’t subscribe either to the idea of "fairness" or to utilitarianism. I am not obligated to make other people happy except by people with guns, who make me decidedly *less* happy.

Second, a completely different program that only provided money to those who were demonstrably unable to work, and only provided them with enough money for a minimal amount of shelter and subsistence, would be far cheaper than Social Security is today.
SocSec currently pays out to anyone of a particular age, regardless of whether they are physically capable of working for years to come. It disregards a number of factors regarding other ways they could obtain shelter and subsistence, e.g., relatives.
When people have some minimum fallback, they can afford to take more economic risk, to start their own businesses, etc. In that way, it encourages entrepenuership, which in turn helps the economy.
Taxing people 6.2% of their income on their side and taxing their businesses another 6.2% discourages employment and entrepreneurship. It makes investment and savings harder for everyone who collects a paycheck—and they’re already discouraged from saving by the belief that they have benefits coming to them no matter how irresponsible they are in thinking about the future. It encourages businesses to make decisions for their employees by offering relatively inflexible benefit packages instead of income that employees can decide how to spend themselves. Furthermore, setting an arbitrary retirement date for the entire populace discourages people from working longer and often forces people into retirement.
Overall, the benefits of Social Security far outweigh the costs, even if those costs will be slightly higher in the future. Compared to other government programs, you get far more bang for you buck from Social Security.
What bang am *I* getting for my buck? I’m having my income forcefully taken from me and transferred to others, and what isn’t immediately transferred to others is converted into debt which I am further obliged to pay off with interest! Meanwhile, I’m borrowing every dollar taxed from me so that I can pay for school, shelter and food.
And meanwhile, a huge segment of the population is subject to economic distortions I described above, which all comes around and harms me at some point.
 
Written By: OrneryWP
URL: http://
Another way that Social Security lowers the abominably low savings rate in this country is by transferring wealth to people who are well known to have a higher propensity to consume, the very people who have the least to gain by investing in human capital or in otherwise saving for the future.
 
Written By: OrneryWP
URL: http://
Social Security will not die because some huge percentage of Americans don’t save anything for retirement, in fact, a large tranche of these baby boomers are about to "retire" soon.

Ornery WP had some funny "social engineering" ideas. Here’s another:

SS is based on future worker’s incomes to keep it going. Thus people who have children are "contributing" and those who do not are not. People who do not have children should receive little to no social security. And yeah, how could anyone who is single their whole life not already have saved enough to live on is beyond me. The family that raises 3 children to grow up and become workers gets a gold star.

 
Written By: Harun
URL: http://
What bang am *I* getting for my buck?
OrneryWP (and those expressing similar sentiments), I respect your opinion, but I think you’re being awfully myopic. Yes, if you or I were allowed to keep our social security contributions, we could likely turn it into something more than what our eventual social security benefits will be. But social security isn’t meant to be a 401k. The bottomline is that while people should save for retirement and buy disability insurance, the inescabable fact is that large numbers of people won’t. That’s human nature. Some won’t save because they are reckless or stupid. Others live paycheck to paycheck because they have no other choice. Either way, absent Social Security, large numbers of people would be in very dire straights. Now society can either let those people starve to death, or more likely, it will end up picking up the cost. At least with social security, the people being helped are forced to contribute.

A lot people seem to think that what happens to others who are less responsible than themselves is somehow not their problem. If only that were true. Poverty and desperation comes back to bite everyone. It causes crime, social unrest, numerous other societal ills. The "bang for the buck" you get from Social Security is not just the benefit check you receive when you retire or become disabled, it is the benefit you recieve from living in a functioning society not crippled by widespread poverty and desperation.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
Harun:
The family that raises 3 children to grow up and become workers gets a gold star.
Considering the affection that FDR had, in the 1930’s, for Fascists, this seems entirely appropriate.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
In case you doubt FDR’s liking for Mussolini and Fascism and the source of many of his reforms, here’s a secondary source for you, with references to primary sources. I’ll be curious to see AnonLib’s reaction. My guess is he will shrug it off, ignore it, or divert attention.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
Poverty and desperation comes back to bite everyone. It causes crime, social unrest, numerous other societal ills.
So let me get this straight, you say I’m paying 12.4% of my income so that poor people won’t form mobs and attack me?
"A lot people seem to think that what happens to others who are less responsible than themselves is somehow not their problem."
Yes, that’s right. It’s not. How could you possibly think otherwise?! It is not the responsibility of the responsible to coddle the irresponsible in order to indemnify themselves against future and unjustified unrest. Should the irresponsible come back later and complain that life isn’t fair because they were lazy, tough cookies. All leftists do is enable that irresponsibility. Can you imagine a parent still tying the shoe of his otherwise capable 30 year old? Why doesn’t that happen? Because the parent teaches him how to do it, and then has the expectation that he will do it or suffer the consequences. The child has an incentive to learn and is better off because of the self-sufficiency. But, by wrapping your warm liberal blanket around people, you effectively harm and disable them, despite your best intentions. The evidence is quite overwhelming.


 
Written By: Unknown
URL: http://
Yes, that’s right. It’s not. How could you possibly think otherwise?! It is not the responsibility of the responsible to coddle the irresponsible in order to indemnify themselves against future and unjustified unrest.
First of all, this is an incredibly simplistic view of the world. You can be responsible and still have bad luck. It’s just not the case that proper planning and forethought can put everyone in a position to deal with a sudden disability or other misfortune. And some people can work hard every day of their lives and still not be able to save up enough to avoid poverty in old age.

But more to the point, just because you don’t think it’s "fair" that the plight of the irresponsible and unfortunate should be your problem, wishing doesn’t make it so. Life isn’t fair, as you point out. When a lot of people are starving and desperate, that’s everyone’s problem. And not just for moralistic reasons. Societies just don’t function well when poverty and desperation are widespread. In other words, even if you don’t give a damn about anyone but yourself, it’s still in your interest to have a program like Social Security that prevents this kind of poverty and desperation from reaching epidemic proportions.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
I love the guy with the simplistic views calling me simplistic. How kettlish.

Your assertions are full of assumptions, and poorly held ones at that. For example:
*I don’t give a damn about anyone but myself.
*Social Security is the best way to combat poverty and desperation.
*Responsible people can’t deal with sudden misfortune (what the h*ll is insurance for then?).
*Without something like SS, poverty and desperation would reach epidemic proportions (and I thought liberals were supposed to optimistically believe in the perfectibility of man).

Furthermore, you’ve failed to concretely address any rational counter-arguments and questions, choosing instead to respond with platitudes and homilies. The whole idea of tradeoffs apparently escapes you. You are apparently oblivious to the value of self-sufficiency and the damage caused by coddling.
"The essence of the Liberal outlook lies not in what opinions are held, but in how they are held: instead of being held dogmatically, they are held tentatively, and with a consciousness that new evidence may at any moment lead to their abandonment."
You have this on your website. Perhaps you should take it seriously.


 
Written By: Unknown
URL: http://
Poverty and desperation comes back to bite everyone. It causes crime, social unrest, numerous other societal ills.
I doubt very much that poverty among the elderly — which you said Social Security was designed to cure — will cause any of the horrible things you mention. It’s not like there are roving bands of retirees descending on local businesses demanding protection money.
 
Written By: steverino
URL: http://steverino.journalspace.com/
Correct me if I’m wrong, but isn’t the whole 2040 date based upone the assumption that the government will be able to honor the $trillions worth of IOUs they’ve written to themselves between now and then? If that’s so, then we’ve got about eight or nine years before this thing starts going t*ts-up.

Because that’s when the taxes will have to start. The Democrats have deluded themselves into believing that they can boil the frog, that they can simply do as they’ve always done: get together in Congress every eight to twelve years and increase the payroll tax. but boy, do they have another think coming. They’re not simply unaware that they’ve hit the political point of vanishing returns, they don’t even understand that such a point exists. But at the end of the day we may be waist-deep in retiring baby boomers, but it’s not like they will form anything close to a political majority. But the second it becomes clear to the actual majority— Generation X plus Generation Y and Generation Sometimes Y— that they will face European levels of taxation to support this Rube Goldberg anti-poverty scheme, it’s gone, and I mean just. Like. That. And to anyone who would question this, I have one question of my own: why do you think we don’t already have European levels of taxation? It’s because historically Americans just haven’t been willing to pay it. And I argue that the Reagan babies are going to be even less susceptible to the ol’ time moral demands of the leftist worldview.

yours/
peter.
 
Written By: peter jackson
URL: www.liberalcapitalist.com
You have this on your website. Perhaps you should take it seriously.
What makes you think that I’m not taking my "motto" seriously? Am I just supposed to be bowled over by the unassailable persuasiveness of your posts? Please. I’m always open to new arguments, but I haven’t heard anything from you that I haven’t heard a million times before. In formulating the opinions I currently hold, I’ve considered your arguments and ultimately found them unpersuasive.

You criticize me for responding "with platitudes and homilies", but who’s being "kettlish" now? My posts have been every bit as fullsome as yours, and let’s be fair, we’re writing comments on a blog post, not graduate dissertations. Time and the nature of the medium are factors here. I can’t possibly respond to everything that everyone says. All I can do is try to hit the highlights. For what it’s worth, I don’t think you’ve been addressing my points either.

You write:
Your assertions are full of assumptions, and poorly held ones at that. For example:
*I don’t give a damn about anyone but myself.
*Social Security is the best way to combat poverty and desperation.
*Responsible people can’t deal with sudden misfortune (what the h*ll is insurance for then?).
*Without something like SS, poverty and desperation would reach epidemic proportions (and I thought liberals were supposed to optimistically believe in the perfectibility of man).
I wasn’t accusing you of not caring about anyone but yourself. I said "even if you don’t care..." That’s both hypothetical and was intended as a generic "you", so relax. And I never suggested that Social Security was "the best" way to combat poverty and desperation, just that it has proven to be an extraordinarily effective way of dealing with a common form of poverty. Before we had Social Security, there were a lot of really poor and really desperate elderly and disabled people in this country. Social Security vastly improved that problem. Could there be better ways to solve this problem? Sure. But the burden is on those who would overhaul the system and do away with Social Security to demonstrate that they have a better alternative.

You incredulously write "Responsible people can’t deal with sudden misfortune (what the h*ll is insurance for then?)." Not to pick on you, but this is silly point. Disability insurance, health insurance, and many other kinds of insurance are expensive and not obtainable through many jobs. Not everyone can afford them, particularly people with pre-existing conditions. Private insurance functions poorly when risk is distributed unevenly. In short, even very responsible, hard-working people often cannot protect themselves from bad luck.

You write "Without something like SS, poverty and desperation would reach epidemic proportions? (and I thought liberals were supposed to optimistically believe in the perfectibility of man)." Look, there may be alternatives to Social Security that can prevent this from happening, but we know from historical experience what things were like before we had Social Security. If you think that was a preferable state of affairs, then there’s really not much point is us debating this further.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
Look, there may be alternatives to Social Security that can prevent this from happening, but we know from historical experience what things were like before we had Social Security.
We do? What was it, then? Let’s have some good, solid statistics and evidence. How many people over age 55 were impoverished? Define "impoverished". What percentage of the total population over that age did they constitute? What’s the source for the information? How does that compare to today? In inflation adjusted dollars?

You’ve been asserting throughout this comment series that the elderly were much worse off prior to Social Security than they are now. So, prove it.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
AL - your view of the world and your wishes for it demand something of me - a portion my earned property, my time, and my freedom. You don’t give me a choice, you require it or I go to jail. Conversely, my view of the world does not demand any such thing of you. That you’re comfortable with the coercive burden placed on others by your view is both sad and appalling. I have no explanation for your worldview; is it careless thoughtlessness expressed as concern, or is it just a frightful lack of respect for individuals? Either way, your pessimism and arrogance are depressing.
 
Written By: Unknown
URL: http://
Y’know, guys, the debate about whether SS is strictly necessary is all very interesting, but so is a debate about whether or not people should believe in a god. There’s a place for that academic debate, but at the end of the day...that’s how it is, live with it. It’s not going away. Both sides can have their say, but never the twain shall meet. You might as well argue for the elimination of the Federal Reserve, or of the standing army.

The only practically useful debate is on what form it will take. For my money, the interesting proposals to a lot of these problems are in the realm of "soft paternalism" (aka: libertarian paternalism). It’s not perfect, but it does offer more freedom without removing the idea of a safety net.

Now, if we could just get liberals to stop calling the SS catch-all a "safety net"....or, to start treating it like a safety net.
 
Written By: Jon Henke
URL: http://QandO.net
Y’know, guys, the debate about whether SS is strictly necessary is all very interesting, but so is a debate about whether or not people should believe in a god.
Oh, I’m not debating whether it is necessary, or not. However, AnonLib has made some strong claims about what a wonderful thing it is. I think it would be useful to see if he can prove his claims, or not. First, because such claims are always suspect without facts. Second, the real answer would help to frame the pragmatic discussion about what to do with SS.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
It’s not like there are roving bands of retirees descending on local businesses demanding protection money.
Acually, this was the subject of a documentary made by Monty Python back in the 1970’s. I can assure you that nobody wants gangs of violent grannies wandering the streets, no good can some of it. BTW, the grannies were most violent on the days when the recieved their pensioner checks.....
 
Written By: DS
URL: http://
The only practically useful debate is on what form it will take. For my money, the interesting proposals to a lot of these problems are in the realm of "soft paternalism" (aka: libertarian paternalism). It’s not perfect, but it does offer more freedom without removing the idea of a safety net.
I made my suggestion up top, but beyond that, yes, I would be thrilled to see SS become a simple means tested welfare program for the elderly.

I have to believe that everyone who makes an income would gladly trade the ostensible guarantee of a paltry stipend for having the bulk of that 16% back.

I would think that 2% could pay for a means tested welfare safety net.

My purpose for wanting to see private accounts with strict management and life annuity payouts is to prevent people fom impoverishing themselves in order to meet the needs test and cost us more money.

Cap
 
Written By: CaptinSarcastic
URL: http://
I would think that 2% could pay for a means tested welfare safety net.
This is exactly what will not happen Cap. The entirety of the SS taxes are being used right now by our government. You’re never getting that money back. Now, we could be honest. We could change SS to a means tested welfare program. I’m all for it, it’s far better than what we have now. But, we might as well be honest about those taxes. The SS "contribution" and "employer contribution" is simply additional income tax.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
This is exactly what will not happen Cap. The entirety of the SS taxes are being used right now by our government. You’re never getting that money back. Now, we could be honest. We could change SS to a means tested welfare program. I’m all for it, it’s far better than what we have now. But, we might as well be honest about those taxes. The SS "contribution" and "employer contribution" is simply additional income tax.
You sound like me, "it’s inevitable, deal with it."

Perhaps it is, but that’s why I think the personal accounts are so important, they would redirect the tax money and it would actually become the investment that this tax has been inappropriately labelled.

Cap
 
Written By: CaptinSarcastic
URL: http://
Private Accounts won’t happen until all of us under age 60 realize we outvote the old folks and they’ve been screwing us over for 60 years. Since I don’t expect that to happen, I’m fairly confident that means testing and indexing is going to be "the solution".
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
You sound like me, "it’s inevitable, deal with it."
Rethinking a bit. That’s not really what I think. What I actually think is that, since the 1980’s, SS taxes have been used for the General Fund. That’s what they are, and all the rest of the BS about trust funds and bonds and so forth are just political coverup, the "big lie" to make it palatable. Sooner, or later, the government will have to deal with it in some fashion, this big lie they have told us.

I expect they will simply adjust taxes, add some means testing and indexing and call it good. I hope that they will convert SS to a true welfare program and be honest about the rest of the taxes. I wish that they would do away with SS entirely, except for the so-called "safety net" that seems to be necessary to placate the bleeding hearts.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
By the way, I wish that we would do away with the employer contribution tax. That’s a lie too. My employer is not contributing that money, I am. Obviously, I am worth that much to the company and they pay their "contribution" by not paying me as high a salary as they could. Just get rid of it, already. A small lie that helps perpetuate the big lie.

Of course, that applies to corporate taxes, period. Corporations do not pay them. They raise end prices or reduce wages, or some other combination of adjustments in order to pay those "taxes". Employees and consumers pay them, just indirectly, through higher prices and lower wages.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
By the way, I wish that we would do away with the employer contribution tax. That’s a lie too. My employer is not contributing that money, I am.
I agree, sort of.

If the employer contribution disappeared, it would not add 7.65% to your paycheck, even though the company is willing to pay it to have you as an employee. It may even out eventually, but my preference would be to use the employer contribution to fund the private accounts. This would maintain this "pay" that your company is willing to pay you, and for self employed people, it would not be the absolute sham it is now.

There needs to be a debate about Social Security, but it needs to start with a fully fleshed out plan, not a debate between concepts where each side can make up what the other’s plan is and then knock it down.

Cap
 
Written By: CaptinSarcastic
URL: http://
If the employer contribution disappeared, it would not add 7.65% to your paycheck, even though the company is willing to pay it to have you as an employee.
Nope, but at least it would be honest.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
If the employer contribution disappeared, it would not add 7.65% to your paycheck, even though the company is willing to pay it to have you as an employee.
Why not? Other employers who offered the full 7.65% of each labor dollar to their employees would gain an edge in hiring and employee retention. It’s part of the compensation package now, who’s to say they’d spend it on something else? If anything, businesses not having to pay the extra would lead to increased employment hours and income-as-compensation.
 
Written By: OrneryWP
URL: http://
Of course, many companies *would* spend the money on other things, like keeping prices lower/competitive or otherwise reinvesting, but anything they do to maximize profits (definition of profits: time-offset wages) would increase employee compensation in the intermediate- and long-term anyway.

Also, some companies would simply spend the money on non-income compensation, like medical benefits. But health care’s another discussion.
 
Written By: OrneryWP
URL: http://
Sorry for three posts in a row, but in case you missed it, lower prices are a benefit unto themselves, for consumers and for the country. Makes American firms more competitive, and... you guessed it: more and better jobs result!
 
Written By: OrneryWP
URL: http://
"If the employer contribution disappeared, it would not add 7.65% to your paycheck..."
Highly debatable. It certainly would to mine as I am self-employed. I’d expect most of it to get to the employee somehow, after factoring out the tax deduction the employer gets.
 
Written By: Unknown
URL: http://
Look, there may be alternatives to Social Security that can prevent this from happening, but we know from historical experience what things were like before we had Social Security. If you think that was a preferable state of affairs, then there’s really not much point is us debating this further.

Written By: Anonymous Liberal


Hillery Clinton’s claimed that we need SS so we don’t have to support our grandparents. Obviously, if you are not rich you have to support them by having them live with you; no doubt a horrible thing for most self-absorbed leftists.
 
Written By: Don
URL: http://
If the employer contribution disappeared, it would not add 7.65% to your paycheck, even though the company is willing to pay it to have you as an employee.
Where that would go is impossible to say, and it might very well go towards a higher paycheck. But the company will put it wherever it thinks it will do the most good. Could be someone else’s paycheck (possibly more jobs), or more capital investment.

The best guess I think is that employement will go up and the wages of the currently employeed would also go up. But compared to having dedicated Democrat voters, what’s a good economy?
 
Written By: Don
URL: http://
The best guess I think is that employement will go up and the wages of the currently employeed would also go up. But compared to having dedicated Democrat voters, what’s a good economy?
Yeah, that’s a great way to advance the discussion.

Whine, whine, whine.

Here was my suggestion about how to deal with the 7.65% that would provide all of the advantages of eliminating the employer contribution.
My preference would be to use the employer contribution to fund the private accounts. This would maintain this "pay" that your company is willing to pay you, and for self employed people, it would not be the absolute sham it is now.
Cap (Frequest Democratic Voter that wants to change SS)

 
Written By: CaptinSarcastic
URL: http://
Incidentally, let me just point out that if we threw that employer-contributed 7.65% onto "wages", the "stagnant wages" story would disappear. We’ve been transitioning compensation into non-wage benefits and employer-contributions to social programs, and then pretending that "wages are declining".

They’re not declining anyway, but that’s just another reason they’re not.
 
Written By: Jon Henke
URL: http://QandO.net
However the economics worked out, returning the employer contribution to circulation cannot help but be good. Whether it is invested in "private" SS accounts (not sure how something mandated by the gov can be "private", but that’s a different topic, I guess), used to increase employee’s pay, invested in new capital or hiring more employees, or cut from the bottom line of prices, it’s good for the economy.

IF that tax money is really needed, then the Congress should raise personal income taxes.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
"From a 1936 Social Security Pamphlet, aka, Lies My Government Told Me:"

First rate, Unknown.

*******************
"There is ZERO reason to believe you won’t receive your promised Social Security benefits when you become eligible."

This is a prediction from the side of the aisle that gave us such gems as;

A vote for Goldwater is a vote for a war in VietNam.
American boys will not be sent to fight in wars that Asian boys should fight
Nothing in this bill will require forced busing of school children
We will only be in Bosnia(?) for a year.
etc. ad inf.
Lest I be accused of partisanship, I am prepared to concede that there are just as many erroneous predictions made by the other side.

"Plus, as everyone acknowlegdes, Social Security is an entitlement..."

Error. The Supreme Court, for one, disagrees.

*************************
"future benefits would still be above current benefit levels. (in real terms)"

You may be right, but I won’t believe it until I see some figures.

***************************
" My guess is he will shrug it off, ignore it, or divert attention"

Is there any particular reason he should not ignore it?

********************************
"So let me get this straight, you say I’m paying 12.4% of my income so that poor people won’t form mobs and attack me?"

What, too much? Think about it. You have to sleep eventually, and it’s cheaper than a security guard.

*********************************

"A lot people seem to think that what happens to others who are less responsible than themselves is somehow not their problem"

What?? My brothers keeper? Care for the poor? Humbug! Surely you are not trying to inject religion into the formulation of government policy? What about the WALL OF SEPARATION(ECHO, echo, ec..).

****************

"...and all the rest of the BS about trust funds "

A government trust fund.
Government—Trust.
Oxymoron with a capital O. Also ask the Indians. Excuse me, Native Americans.

 
Written By: timactual
URL: http://
"So let me get this straight, you say I’m paying 12.4% of my income so that poor people won’t form mobs and attack me?"

What, too much? Think about it. You have to sleep eventually, and it’s cheaper than a security guard.
Actually, I could hire a security guard for less than 12.4% of my income. Shrugs, I could hire a security company to protect my house and family for about 15% of my income. Sounds like a deal to me. I provide "social security" for 3 or 4 guards and a supervisor and I no longer have to pay SS taxes? Sign me up.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
Guns are a cheap way of stopping old people too.

... did I just say that?
 
Written By: OrneryWP
URL: http://
Jon, on an unrelated subject, what’s with the little excerpts in your articles, in little cut-out boxes and size 26 font?

They’re usually the relatively obnoxious bits, too ;-)

Not that I shouldn’t have better things to do than cramp your style, but I think you should put them up to a popular vote and scratch them if you lose.
 
Written By: glasnost
URL: http://
Ornery:
Guns are a cheap way of stopping old people too.
Now I have to clean the coffee off of my monitor. Thanks OrneryWP!
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
"I could hire a security company to protect my house and family for about 15% of my income."

Man, you must make tons of money, or like lousy security. If the first, you are my new best friend and prospective adoptive parent. If the later, I suggest getting a dog and moving to the country.


" Guns are a cheap way of stopping old people too."

Careful, there. We are quicker than you think, and we know things.
 
Written By: timactual
URL: http://
Man, you must make tons of money, or like lousy security. If the first, you are my new best friend and prospective adoptive parent. If the later, I suggest getting a dog and moving to the country.
15% of my gross income, since we are talking about pre-tax issues. ;-)

With that clarification, I make enough money that I could hire a security firm to provide reasonable security for my house and family (not Secret Service level, but not mall cop level either) for that price. I also happen to work in the security industry, which gives me some advantages.

Honestly, there’s no reason why I would. But, if I could stop paying SS taxes in exchange for that, I would do it without hesitating. I would much rather that portion of my income go to for goods and services than paying for bureaucrats.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
Whine, whine, whine.
Stop whining, I answered your question.
Here was my suggestion about how to deal with the 7.65% that would provide all of the advantages of eliminating the employer contribution.
I’d rather let the market decide where it should go. Higher wages, higher profits, capital investment, more jobs . . .
 
Written By: Don
URL: http://
No wonder the ERISA was created in 1974 to FORCE middle class workers to invest in their 401k plans and let them grow tax-deferred until retirement... There is no such thing as a social security system folks!
 
Written By: Abdulrasool
URL: http://www.research401k.com

 
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