SOCIAL SECURITY: Is A Bailout In The Cards? How About A Misdeal?
Lykmi Pusi
"Why Social Security Needs Some Major Repairs"
By Allan Sloan
Sunday, August 2, 2009
IN WASHINGTON THESE DAYS, the only topics of discussion seem to be how
many trillions of dollars to throw at health care and the recession,
and whom on Wall Street to pillory next. But watch out. Lurking just
below the surface is a bailout candidate that may soon emerge like the
great white shark in "Jaws" -- Social Security.
Perhaps as early as this year, Social Security, which at $680 billion
is the nation's biggest social program, will be transformed from an
operation that's helped finance the rest of the government for 25
years into a cash drain that will need money from the Treasury. In
other words, a bailout.
I've been writing about Social Security's problems for more than a
decade, arguing that having the government borrow several trillion
dollars to bail out the program so it can pay its promised benefits
would impose an intolerable burden on our public finances. But I've
changed my mind about what "intolerable" means. With the government
spending untold trillions to bail out incompetent banks and the auto
industry, it should damn well bail out Social Security recipients,
too. But in a smart way.
Why am I talking about Social Security now, when health care is
sucking up nearly all the oxygen in our nation's capital? Because
Social Security is a big deal, providing a majority of the income for
more than half of Americans 65 and up and also supporting millions of
people with disabilities and survivors of deceased workers. And
because the collapse of stock prices and home values makes Social
Security retirement benefits far more important than they were during
the highs of a few years ago. And because the problems aren't that
hard to solve if we look at Social Security realistically instead of
treating it as a sacred, untouchable program (liberals) or a demonic
plot to make people dependent on government (conservatives).
Finally, this is a good time to discuss Social Security because the
Obama folks say it's next on the agenda, after health care. No one at
the White House, the Treasury Department or the Social Security
Administration would discuss specifics, however.
It ought to tell you something that Peter Orszag, director of the
White House Office of Management and Budget, is a noted Social
Security scholar. Alas, he wouldn't tell me what he plans to propose.
"Health care first" was all he'd say.
I'd like to show you that Social Security has a real and growing cash
problem even as its trust fund is getting bigger than ever, explain
how the program really works, and -- immodest though it may seem --
propose a few solutions.
The Cash Problem
How can Social Security possibly need a bailout when, by Washington
rules, it's "solvent" for another 26 years? To understand the problem,
look at me. I'll turn 66 next year, which makes me and my wife
eligible for full Social Security benefits. They'll be about $42,000 a
year for the both of us starting Jan. 1, 2011, and are scheduled to
rise as the consumer price index does.
Social Security, which analyzed my situation, values those promised
(but not legally binding) benefits at a bit more than $600,000. That
is a lot of money, but Social Security is way ahead of us because the
value of our benefits is far less than the Social Security taxes we
and our employers will have paid by the end of next year, plus the
interest Social Security will have earned on that money in the decades
since we started working. Those taxes and interest will total more
than $800,000 by Dec. 31, 2010. For example, the $5.18 my employer and
I paid in 1961 -- the year I got my card -- will have grown to $140 by
next year.
I don't have a problem with this disparity. One of the principles of
Social Security is that higher-paid folks like me support the lower-
paid. That's as it should be, given that the Social Security tax (12.4
percent of covered wages, split equally between employer and employee)
is regressive, far more costly as a percentage of income to a $40,000-
a-year worker than it is to me. According to the Tax Policy Institute,
five of six U.S. workers pay more in Social Security tax (including
the employer's portion) than in federal income tax -- something that
makes it especially important (and only fair) to preserve the program
for lower earners, who get old-age benefits of up to 90 percent of
their covered wages, while I get only 28 percent.
How can my wife and I pose a problem to Social Security when our
benefits are valued at $600,293, while our tax payments plus interest
will total $804,686? Answer: Because the obligation is real, but the
$800,000-plus asset is illusory, consisting solely of government IOUs
to itself.
Now, let's step back a bit -- to 1935, actually -- to see how we got
into this mess. President Franklin D. Roosevelt set up Social Security
as an intergenerational social-insurance plan, under which today's
workers support their parents (and those with disabilities and
workers' survivors) in the hope that their children will in turn
support them. It's not a pension fund. It's not an insurance company.
Social Security exists in its own world. In this world, taxes are
called "contributions," though they're certainly not voluntary. "Trust
funds," which in the outside world connote real wealth bestowed on
beneficiaries, are nothing but IOUs from one arm of the government
(the Treasury) to another (the Social Security Administration). And
"solvency," which in the real world means that assets are greater than
liabilities, means only that the Social Security trust fund has a
positive balance.
Alas, the trust fund is a mere accounting entry, albeit one with a
moral and political claim on taxpayers. It currently holds about $2.5
trillion in Treasury securities and is projected to grow to more than
$4 trillion, even as Social Security begins to take in far less cash
in taxes than it spends in benefits. For instance, it projects a cash
deficit of $234 billion for 2023. But the trust fund will grow -- on
paper -- because it will get $245 billion in Treasury IOUs as
interest. The Treasury pays its interest tab with paper, not cash.
"The trust fund has no financial significance," says David Walker,
former head of the Government Accountability Office and now president
of the Peter G. Peterson Foundation, which advocates fiscal
responsibility. "If you did [bookkeeping like] that in the private
sector, you'd go to jail."
Let me show you why the Social Security trust fund isn't social or
secure, has no funds, and can't be trusted, by returning to my
favorite subject: myself.
The cash that Social Security has collected from me and my wife and
our employers isn't sitting at Social Security. It's gone. Some went
to pay benefits, some to fund the rest of the government. Since 1983,
when it suffered a cash crisis, Social Security has been collecting
more in taxes each year than it has paid out in benefits. It has used
the excess to buy the Treasury securities that go into the trust fund,
reducing the Treasury's need to raise money from investors. What
happens if Social Security takes in less cash than it needs to pay
benefits? Watch.
Let's say that late next year, Social Security realizes that it's
short the $3,486 it needs to pay me and my wife for our Jan. 1, 2011,
benefit. It gets that money by having the Treasury redeem $3,486 in
trust-fund Treasury securities. The Treasury would get the necessary
cash by selling $3,486 in new Treasury securities to investors. That
means that $3,486 has been moved from the national debt that the
government owes itself, which almost no one cares about, to the
national debt it owes investors, which almost everyone -- and
certainly the bond market -- takes very seriously.
This example shows you that the trust fund is of no economic value to
the government as a whole (which is what really matters), because the
government has to borrow from private investors the money it needs to
redeem the securities. It would be the same if the trust fund sold its
Treasury securities directly to investors -- the government would be
adding to the publicly held national debt to fund Social Security
checks.
Social Security's "solvency" calculations -- and the insistence by the
status quo's supporters that there's "no problem" until 2036 because
the trust fund will have assets until then -- assumes that the
Treasury can and will borrow the necessary money to redeem the trust
fund's Treasury securities. There is also the assumption that our
children, who by then will be running the country, will allow all this
money to be diverted from other needs. I sure wouldn't assume that.
This whole problem of Social Security posting huge surpluses for
years, using proceeds from a regressive tax to fund the rest of the
government and then needing a Treasury bailout to pay its bills, is an
unanticipated consequence of the 1983 legislation that supposedly
fixed the system.
In order to show 75 years of "solvency" as required by law, Congress,
using the bipartisan 1983 Greenspan Commission report as political
cover, sharply raised Social Security taxes, cut future benefits and
boosted the retirement age (then 65, currently 66, rising to 67).
The changes transformed Social Security from an explicitly pay-as-you-
go program into one that produced huge cash surpluses for years
followed by huge cash deficits. No one in authority seems to have
realized that the only way to really save the temporary surpluses was
to let the trust fund invest in non-Treasury debt securities, such as
high-grade mortgages (yes, such things exist) or corporate bonds. That
way, interest and principal repayments from homeowners and
corporations would have been covering Social Security's future cash
shortfalls, rather than the Treasury's having to borrow money to cover
them.
This problem has been metastasizing for 25 years. Now I'll show you
why the day of reckoning may finally be here.
Just last year, Social Security was projecting a cash surplus of $87
billion this year and $88 billion next year. These were to be the peak
cash-generating years, followed by a cash-flow decline, followed by
cash outlays exceeding inflows starting in 2017.
But in this year's Social Security trustees report, the cash flow
projections for 2009 and 2010 have shrunk by almost 80 percent, to $19
billion and $18 billion, respectively. How did $138 billion of
projected cash go missing in one year? Stephen Goss, Social Security's
chief actuary, says the major reason is that the recession has cost
millions of jobs, reducing Social Security's tax income below
projections.
But $18 billion is still a surplus. So why do I say Social Security
could go cash-negative this year? Because unemployment is far worse
than Social Security projected. It assumed that unemployment would
rise gradually this year and peak at 9 percent in 2010. Now, of
course, the rate is 9.5 percent and rising -- and we're still in 2009.
Social Security's having negative cash flow this year would be a
relatively minor economic event -- what's a few more billion dollars
when the government's already borrowing more than $1 trillion? -- but
I think it would be a really important psychological and political
event.
Orszag pooh-poohed my thinking when I met with him. He says I'm wrong
to harp on Social Security's near-term cash flow -- a term, by the
way, that he won't use. "I think the real question of Social Security
is how we bring long-term revenues in line with long-term expenses,"
he said, "not whether the primary surplus within Social Security turns
negative within the next few years." I guess we'll see.
When you look back at numbers from previous years, you suddenly
realize that Social Security's finances have been deteriorating for a
long time. Social Security's cash flow (and thus its trust fund
balances) has fallen well below earlier projections. Seven years ago,
the projected 2009 cash flow was $115 billion. That fell to $87
billion by last year and is now $19 billion. Ten years ago, the trust
fund was projected to be $3 trillion at the end of this year, rather
than the currently projected $2.56 trillion.
In 1983, the system was projected to be "solvent" until the 2050s.
This year it's only until 2036. Social Security's Goss says the major
reason is that over the past two decades, the wages on which Social
Security collects taxes have grown more slowly than projected. He said
Social Security projected them to grow at 1.5 percent above inflation,
but they've been growing at only 1.1 percent above it.
The scariest thing, at least to me, is that even as its financials
erode, Social Security is as important as ever -- maybe more so. Let
me elaborate on what I said earlier, about how older people depend
heavily on Social Security. It accounts for more than half the income
of 52 percent of married couples over 65, and 72 percent of that of 65-
and-up singles, according to the Social Security Administration.
What's more, this dependence -- which Goss says isn't projected to
change -- comes despite 30 years of broadly popular self-directed
retirement accounts such as 401(k)s, IRAs, 403(b)s and such.
Why haven't those savings accounts reduced dependence on Social
Security? Part of the reason is that it takes a lot of money to
generate serious retirement income: about $170,000 for a $1,000-a-
month lifetime annuity. Inflation protection, if you can find it, is
ultra-expensive. Vanguard, which offers a lifetime inflation-adjusted
annuity in conjunction with an AIG insurance company called American
General, quoted me a staggering price for an annuity mimicking my
wife's and my Social Security benefit. Would you believe $774,895?
Another problem is that the stock market has been stinko. Stocks are
below their level of April 2000, when the great bull market (August
1982 to March 2000) ended. It's hard to make money in stocks when
they've been down for nine years. The Employee Benefit Research
Institute estimates that the average retirement account balance of
people 65 to 74 was $266,000 in 2007 but had fallen to $217,000 as of
mid-June.
Then there's the problem of lost home equity. According to a study
conducted for Fortune by the Center for Economic and Policy Research,
people in the lower-income to upper-middle-income ranges have lost a
far greater proportion of their net worth as a result of the housing
bust than the most wealthy people have.
The bottom line is that many older people who felt reasonably well
fixed for retirement a few years ago now need Social Security more
than ever. That makes it even more important to come up with a way to
sustain it and to show our children a realistic plan to give them
benefits, rather than to rely on the trust fund and the supposed
political clout of the geezer class to keep benefits flowing when cash
flow goes negative.
So how do we fix these problems? Let me divide it into three
categories: what to do, what to change and what not to do.
What to Do
Many of the old standbys: raising the "covered wage" limit, but not to
outrageous levels; tweaking the benefit formulas so that high-end
people like me get a little less bang for the buck; modifying cost-of-
living increases for us high-end types; and, most important, raising
the retirement age to 70, with a special earlier-retirement provision
for manual laborers, who can't be expected to work that long.
What to Change
-- The law requiring 75-year solvency. It's hard to predict what will
happen 75 days from now, let alone 75 years from now. But the
obsession with 75-year solvency and the status of the trust fund has
obscured what's really going on.
This requirement forces Social Security's actuaries -- who are among
the best and smartest public servants I know -- to make all sorts of
impossible projections. As we've seen, even one faulty projection --
such as overestimating wage growth -- can cause substantial problems.
-- The trust fund. Before the Greenspan Commission-related changes in
1983, the trust fund was a checking account. The workings of Social
Security since 1983 have turned it into something it was never
intended to be: an investment account. Let's gradually draw down the
trust fund by having the Treasury redeem $100 billion or so annually
(less than the current interest the fund earns) by giving the fund
cash rather than Treasury IOUs, gradually increasing the redemptions.
That will let the fund buy assets that will be useful when serious
cash-flow deficits hit, assets such as high-grade mortgage securities
and high-grade bonds.
That way we'll be bailing out Social Security a bit at a time, which
is realistic, rather than in huge chunks, which isn't. Combine that
with the lower costs and higher revenues, and today's kids could see
that there really is a way they'll get benefits someday.
What Not to Do
-- Depend on taxing "the rich." One solution you hear in Washington is
restoring "covered wage" levels to the good old Greenspan Commission
days, when 90 percent of wages were subject to Social Security tax,
compared with 83 percent now. Sounds simple and fair, doesn't it? But
that would increase the Social Security wage base to about $170,000
from the current $106,800, according to Andrew Biggs of the American
Enterprise Institute -- at 12.4 percent, a huge new tax to middle-
class workers. (And yes, that's middle-class income, not rich-person
income, in large parts of the country.)
During his campaign, President Obama proposed (and then dropped) a
plan to leave the Social Security wage cap where it is but to apply
the 12.4 percent Social Security tax to all wages above $250,000. That
-- like the 90-percent-level-of-income idea -- would be a huge new tax
that would weaken support for Social Security among higher-income
people. I'm not saying "rich people," because truly rich people
generally have huge amounts of investment income, which isn't subject
to Social Security tax.
-- Means-test benefits. It's being done. We'd be making a terrible
mistake to means-test Social Security by saying that people above a
certain income level can't get it. That would violate the social
compact that everyone pays Social Security taxes and everyone gets
something.
Besides, Social Security is already means-tested, indirectly. That's
because if you have enough non-Social Security income -- about $23,000
a year in my case -- you pay federal income tax on 85 percent of your
benefit.
Given the three pensions I stand to collect from previous employers, I
think I hit that level. So, for the final time, let's run my numbers.
If my wife and I are in the 28 percent federal tax bracket when we
start collecting benefits, we'll be giving almost a quarter of our
benefit right back to Social Security.
It would also mean that the $600,000 benefit I talked about earlier
would cost Social Security only about $450,000 -- just 55 percent or
so of the $800,000-plus value of our taxes.
I don't mind that big haircut, but I'd be furious if the government
decided to just confiscate all the money my wife and I put in over the
decades by saying we were "rich" and had no right to any benefits. And
I wouldn't be alone.
Given the way health-care reform has bogged down, Social Security may
not make it onto the agenda until next year. But it's going to show up
sooner or later, probably sooner, because the numbers are so bad that
something's going to have to be done. As I hope I've shown, we're
going to have to bail out Social Security or risk hurting a lot of low-
income older people or putting the whole program at risk by gouging
and alienating upper-income Social Security sympathizers like me.
So let's fix this already. By the numbers. And by the right numbers,
not fantasy ones.
[With reporting by Doris Burke of Fortune. Allan Sloan is Fortune
magazine's senior editor at large. His e-mail address is
asl...@fortunemail.com.]
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/31/AR2009073104214.html
Robert of St Louis
Social Security is a pure socialism and we need to have every
Republican return his/her check to build up the fund.
Kyle Schwitters
By Renuka Rayasam
Kiplinger's Personal Finance
Sunday, August 2, 2009
DESPITE RECENT GAINS in stock prices, ravaged retirement savings are a
big worry, both for employees and for employers that want to help
their workers save for retirement. It will take years to rebuild.
Uncle Sam won't be of much help, with Social Security likely to face
cuts in benefits. With the budget deficit as deep as it is, any major
new tax incentives for employers or employees to increase savings
aren't in the cards, either.
Lawmakers will do some tinkering next year. Look for Congress to
require that employers automatically enroll workers in payroll-
deduction individual retirement accounts -- an "opt-out" offering that
makes employees savers unless they specifically ask not to be.
Small firms starting retirement plans can expect to benefit from
sweeter tax breaks to come, probably $25 more per worker to defray
setup costs, in addition to the credit that small businesses now get
for 50 percent of start-up expenses. Congress will probably increase
portability by ending the ban on rollovers to plans of other
employers. Another possible change would be to give employers leeway
to increase matching pay-ins, as long as they do so across the board.
The weak economy means that companies cannot afford to do more to help
workers dig out of the retirement savings hole.
One major way companies help boost worker savings is by matching
contributions to 401(k) plans. But since last year, many have
suspended those matches. In fact, about 40 percent of firms with 401
(k) plans have stopped matching, have reduced their match or are
considering a suspension this year.
With the economy still so weak, don't expect firms to restore 401(k)
matches before 2011. By then, competition for the best workers will
force many to increase the benefits they offer.
Some companies may also nudge workers to ratchet up their own
contributions each year by adding features to 401(k) plans that put
savings on autopilot, increasing the share of pay contributed each
year unless the worker opts out.
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/31/AR2009073104183.html
Poetic Justice
> Social Security is a pure socialism and we need to have every
> Republican return his/her check to build up the fund.
>
When will the government return the Republicans money confiscated from
their paychecks along with the employers payment for their paycheck?
With interest and penalties..... just like the IRS requires. No more no
less.
Day Brown
expanding. They dont work when it stops. Then, its time for the iron
fist to decide quickly who gets what.
Its been either the mercenaries of the aristocracy, or the mobs behind a
demagogue. But this time, since nobody can control the net, they cant
control the spin and demonize perceived opposition.
Either way is likely to break down central authority. YMMV. Like even
before the fall of Rome, smart money moved to Constantinople. I dont,
however, this time, see an alternative global capital that wont also
face the same crisis.
Twards the end of "Collapse", Diamond outlines those areas that recover
and reorganize quickly. These criteria come to mind...
low, but homogeneous population. lotsa timber for firewood and building
materials. Fertile farmland. ie, more resources/capita. Like Canada. But
that border could be crashed with mobs. Newfoundland, Nova Scotia, and
Victoria island mite work.
The most ethnically diverse states- New York, FL, CA, AZ, TX will have
civil war for control over ethnic pockets.
Six String Stu
"Day Brown" <dayh...@gmail.com> wrote in message
news:4a7794e5$0$18755$ec3e...@news.usenetmonster.com...
to be gone. Yet I remain at the ready and able.
Michael Coburn
> "A Flimsy Trust"
>
> "Why Social Security Needs Some Major Repairs"
>
> By Allan Sloan
> Sunday, August 2, 2009
>
>
> IN WASHINGTON THESE DAYS, the only topics of discussion seem to be how
> many trillions of dollars to throw at health care and the recession, and
> whom on Wall Street to pillory next. But watch out. Lurking just below
> the surface is a bailout candidate that may soon emerge like the great
> white shark in "Jaws" -- Social Security.
>
> Perhaps as early as this year, Social Security, which at $680 billion is
> the nation's biggest social program, will be transformed from an
> operation that's helped finance the rest of the government for 25 years
> into a cash drain that will need money from the Treasury. In other
> words, a bailout.
NO, lying pig. It would not be a bailout if it happens (and it might).
The Social Security Trust Fund is the money owed to the FICA taxpayers by
the thieving lying Republicans that BORROWED the money from the trust
fund so as to grant income tax relief to their rich pals and cover up the
true size of the deficits caused by that thieving tax cutting.
> I've been writing about Social Security's problems for more than a
> decade, arguing that having the government borrow several trillion
> dollars to bail out the program so it can pay its promised benefits
> would impose an intolerable burden on our public finances. But I've
> changed my mind about what "intolerable" means. With the government
> spending untold trillions to bail out incompetent banks and the auto
> industry, it should damn well bail out Social Security recipients, too.
> But in a smart way.
The only thing that government needs to do to make Social Security viable
is the increase taxation of ridiculously high incomes while granting tax
relief to the real producers of the nation. The Democratic Congress of
1993 proved that. They INCREASED taxes on very hgigh ordinary incomes
while leaving capital gains rates at 28%. THE MIDDLE CLASS TAX RATES
WERE NOT INCREASED. But when you piss all over jobs and wages while
granting tax relief to people who invest in China you will get EXACTLY
what you've got.
> Why am I talking about Social Security now, when health care is sucking
> up nearly all the oxygen in our nation's capital? Because Social
> Security is a big deal, providing a majority of the income for more than
> half of Americans 65 and up and also supporting millions of people with
> disabilities and survivors of deceased workers. And because the collapse
> of stock prices and home values makes Social Security retirement
> benefits far more important than they were during the highs of a few
> years ago. And because the problems aren't that hard to solve if we look
> at Social Security realistically instead of treating it as a sacred,
> untouchable program (liberals) or a demonic plot to make people
> dependent on government (conservatives).
Fair enough with the name calling.....
> Finally, this is a good time to discuss Social Security because the
> Obama folks say it's next on the agenda, after health care. No one at
> the White House, the Treasury Department or the Social Security
> Administration would discuss specifics, however.
>
> It ought to tell you something that Peter Orszag, director of the White
> House Office of Management and Budget, is a noted Social Security
> scholar. Alas, he wouldn't tell me what he plans to propose. "Health
> care first" was all he'd say.
The rest of this has been deleted because the BEAN COUNTER VERSION of
Social Security is a sham and always has been. If wages had risen and
would continue to rise in step with productivity then we would currently
have a HUGE SS trust fund and there would be no need of it EXCEPT to see
us through a Republican induced destruction of the economy. While the
NEW producers/workers would be lass than the old number, their fair share
of productivity realized as wages would more than cover the additional
costs imposed by the demographic problem.
--
"Those are my opinions and you can't have em" -- Bart Simpson
Michael Coburn
Will the Republicans return _ALL_ the tax cuts with _ALL_ the interest
and penalties?
Poetic Justice
> On Mon, 03 Aug 2009 18:59:15 -0400, Poetic Justice wrote:
>
>> Robert of St Louis wrote:
>>> Social Security is a pure socialism and we need to have every
>>> Republican return his/her check to build up the fund.
>>>
>>>
>> When will the government return the Republicans money confiscated from
>> their paychecks along with the employers payment for their paycheck?
>> With interest and penalties..... just like the IRS requires. No more no
>> less.
>
> Will the Republicans return _ALL_ the tax cuts with _ALL_ the interest
> and penalties?
>
the law to pay only what we owe, so there are no taxes with interest and
penalties owed by Republicans, you are talking about Geitner and Charlie
Rangel..... They are Democrat tax cheats.
mg
> Perhaps as early as this year, Social Security, which at $680 billion
> is the nation's biggest social program, will be transformed from an
> operation that's helped finance the rest of the government for 25
> years into a cash drain that will need money from the Treasury. In
> other words, a bailout.
So, if the government starts paying back the money it owes Social
Security, that's a bailout? What kind of twisted logic is that?
Michael Coburn
> On Mon, 3 Aug 2009 13:48:11 -0700 (PDT), in
> alt.social-security-disability Lykmi Pusi <jism...@yahoo.com> wrote:
>
>>I've been writing about Social Security's problems for more than a
>>decade, arguing that having the government borrow several trillion
>>dollars to bail out the program so it can pay its promised benefits
>>would impose an intolerable burden on our public finances. But I've
>>changed my mind about what "intolerable" means. With the government
>>spending untold trillions to bail out incompetent banks and the auto
>>industry, it should damn well bail out Social Security recipients, too.
>>But in a smart way.
>
>
> SS does not need a bail out. SS operates at a surplus. SS money was
> used to bail out the banks and insurance companies.
That is incorrect. FICA tax proceeds will probably outrun SS payouts
this year because of several factors. The near term obvious factor is
the recession/depression unemployment. FICA taxes are taxes on incomes
less than $100k. On a longer time frame employment has not kept pace
with population (during the Bush administration) and on a still longer
term, wages have been pissed all over by Republican economic polices.
This will be the first year in the history of SS (I think.. not sure)
that the SS system will draw on the accounting created "trust fund".
The actual solution to the "bean counter" SS problem is to increase
employment and increase wages. For if labor had gotten a fair share of
improvements in productivity over the last 40 years FICA taxes would be
about half what they are and there would be no problem even with the
reality of growth in the aging population. And even WITH the growth in
the aging population, removing the cap on FICA taxation and any actual
cap on benefits will resolve the problem given a decent economy. I have
been unable to find this "cap" on benefits that supposedly exists, but
the claim has been repeated a thousand times so we all assume it is the
case. The reality is that benefits are much less for higher wage
contributors; sort of like the inverse of a progressive income tax. So
instead of a progressive FICA tax we accomplish the same thing with a
regressive benefit schedule. So an outright "cap" is unnecessary.
SoundChaser
news:6f088417-36c5-40cd...@d32g2000yqh.googlegroups.com...
Twisted, not logic.
Beam Me Up Scotty
> On Tue, 18 Aug 2009 05:43:20 -0700, Latoya wrote:
>
>> On Mon, 3 Aug 2009 13:48:11 -0700 (PDT), in
>> alt.social-security-disability Lykmi Pusi <jism...@yahoo.com> wrote:
>>
>>> I've been writing about Social Security's problems for more than a
>>> decade, arguing that having the government borrow several trillion
>>> dollars to bail out the program so it can pay its promised benefits
>>> would impose an intolerable burden on our public finances. But I've
>>> changed my mind about what "intolerable" means. With the government
>>> spending untold trillions to bail out incompetent banks and the auto
>>> industry, it should damn well bail out Social Security recipients, too.
>>> But in a smart way.
>>
>> SS does not need a bail out. SS operates at a surplus. SS money was
>> used to bail out the banks and insurance companies.
>
> That is incorrect. FICA tax proceeds will probably outrun SS payouts
> this year because of several factors. The near term obvious factor is
> the recession/depression unemployment. FICA taxes are taxes on incomes
> less than $100k. On a longer time frame employment has not kept pace
> with population (during the Bush administration) and on a still longer
> term, wages have been pissed all over by Republican economic polices.
>
Fewer people working(unemployment) means less FICA paid into SS, and on
the other side, I know someone(Baby Boomer) that was just laid-off and
he decided to simply retire and sign up to collect his SS starting now.
So you have less coming in... and more going out. SS will go broke much
faster than they have predicted.
Mike Gibson
news:6f088417-36c5-40cd...@d32g2000yqh.googlegroups.com...
Those loans taken on FICA money are already paid back regularly. They are
issued as bonds with set term limits. Of course in reality whenever one bond
is paid off it makes the fund large enough for more loans to be issued from
it. Also each time a bond gets paid off the payment includes the interest
that was set when the money was borrowed.
Mike
John Galt
Pretty twisted. :-)
As anyone who analyzes at the situation knows, SS looks uncomfortably
similar to something that Bernie Madoff would have constructed. That
said, if the government can't make good on their obligations to SS,
they've outlived their usefulness as a central government, I'd say.
JG
Michael Coburn
> mg wrote:
>> . . .
>>> Perhaps as early as this year, Social Security, which at $680 billion
>>> is the nation's biggest social program, will be transformed from an
>>> operation that's helped finance the rest of the government for 25
>>> years into a cash drain that will need money from the Treasury. In
>>> other words, a bailout.
>> . . .
>>
>> So, if the government starts paying back the money it owes Social
>> Security, that's a bailout? What kind of twisted logic is that?
>
> Pretty twisted. :-)
>
> As anyone who analyzes at the situation knows, SS looks uncomfortably
> similar to something that Bernie Madoff would have constructed.
False analogy is the bread and butter of right wing self delusion.
> That
> said, if the government can't make good on their obligations to SS,
> they've outlived their usefulness as a central government, I'd say.
And this is the REAL position of the "right" and always has been. "Let
us destroy all faith in government and we, the rightarded, will be free
to rape the earth". And when we elect Republicans to office that is what
we do. But as it turns out, BOTH POLITICAL PARTIES are doing this in the
Senate. The US Senate is the most corrupt legislative body on this earth.