Social Security Crisis? Not if The Wealthy Pay Their Way

[Bronco_Beerslug]

As promised by a Reagan/Greenspan commission.
..........

-------------------------------------------------------
From the January 27, 2005 edition

Social Security crisis? Not if wealthy pay their way
By Kevin Drum
IRVINE, CALIF. – Is Social Security headed for a crisis sooner than thought? Although President Bush says so, not everyone agrees. The system's trustees estimate the Social Security trust fund is in good shape for another four decades. The nonpartisan Congressional Budget Office figures five decades. Many independent economists think Social Security is healthy for more like six or seven decades.

But there's a vocal contingent that thinks Social Security has much more urgent problems. For years, Social Security has been amassing surpluses that the system's trustees use to accumulate Treasury bonds in its trust fund.

But as the baby boomers begin to retire, they're going to have to start selling those bonds back to the federal government in order to raise money to pay benefits. This could happen as soon as 2018, little more than a decade away.

To some people, this looks like a shell game, one branch of the government merely redeeming IOUs from another branch. Sen. Wayne Allard (R) of Colorado, for example, told constituents recently, "The money is spent. I don't believe, in my own opinion, we'll be able to raise the funds to pay it back."

This statement betrays a fundamental misunderstanding of how Social Security works. Unlike ordinary government functions, Social Security is funded by its own tax, the payroll tax. In 1983, at a time when Social Security was genuinely facing a crisis - it was mere months away from failing at the time - a commission appointed by President Reagan and headed by Alan Greenspan proposed a series of fixes. Among other things, the Greenspan commission recommended increasing payroll taxes.

But there was a twist: Knowing that the baby boomers would begin retiring around 2010, Mr. Greenspan recommended raising payroll taxes by much more than was needed to pay benefits at the time. The surplus would be used to buy Treasury bonds, which could be redeemed when the boomers retired and payroll taxes were no longer sufficient to fully fund retirement benefits.

This is where the second twist comes in. Because the surplus payroll taxes were handed over to the federal government (in return for Treasury bonds), this meant ordinary income taxes could be kept low. After all, the federal government has a fixed need for money, and if it gets excess money from payroll taxes it can afford to keep income taxes lower than they'd otherwise be.

But the payroll tax is a flat tax, paid disproportionately by low and middle income workers. The income tax is a progressive tax and is paid disproportionately by high earners.

So this was the implicit bargain in the reforms recommended by Greenspan and signed into law by Reagan: From 1983 to 2018, low- and middle-income earners would pay excess payroll taxes. This allowed income taxes to be kept low, and primarily benefited high earners.

Then, beginning in 2018, instead of raising payroll taxes to pay for baby-boomer retirement benefits, Social Security would begin selling its bonds back to the government.

To pay for those bonds, income taxes would be raised - high earners would begin paying higher income taxes.

In other words, the fact that income taxes will eventually need to be increased in order to cover Social Security benefits was part of the Greenspan/Reagan plan from the start.

That's the real meaning of the trust fund: It's an implicit promise that high earners will keep their part of the bargain and begin paying their share of Social Security's costs when the baby boomers retire.

So to suggest, as Senator Allard and others sometimes do, that the trust fund is just a bunch of meaningless IOUs that will never be paid back is more than just a breach of faith between generations. It's a breach of faith among taxpayers.

For more than two decades, low- and middle-income Americans have kept their part of the bargain, paying more in payroll taxes than Social Security needs and helping to keep income taxes low. In return, beginning in 2018, high earners are expected to start paying a bit more in income taxes in order to help keep payroll taxes low.

That's the bargain that was struck in 1983. It's one we should keep.

• Kevin Drum is a writer for the Washington Monthly.
http://www.csmonitor.com/2005/0127/p09s01-coop.html

[W*GS]

Will anyone on the OM take on the following bet:

Pay me, in cash, what I have lost via SS taxation up until now (just the flat dollar amount, no compound interest, even!) and I will sign over to you any and all future SS benefits I am due, at such time as I am eligible to receive them.

Any takers?

[Bronco_Beerslug]

Will anyone on the OM take on the following bet:

Pay me, in cash, what I have lost via SS taxation up until now (just the flat dollar amount, no compound interest, even!) and I will sign over to you any and all future SS benefits I am due, at such time as I am eligible to receive them.

Any takers?
You're not much of a gambler, are you?

[W*GS]

I'm just curious as to the level of people's faith in the SS pyramid scheme being around for much longer.

Care to play?

[ClevelandBronco]

I have so little faith that I'll make this deal:
I've been paying in for 25 years. For the last 11 years I've paid the max. For the majority of those 11 years I've been employed by my own company, so during those years I paid my personal half and the employer's half. Here's the deal I'll make today: Keep it all. I don't want a cent now and won't need a cent later. Just let me out of this f'ing house of cards right now.

And my kids would be a hell of a lot better off if you'd leave them alone, too.

[ClevelandBronco]

Social Security is in essence an insurance annuity (the absolute worst investment vehicle this side of "signed" Dali prints bought on Ebay). It has a back end payout that can't exceed a set dollar amount, therefore it must have a maximum premium that does not exceed a set dollar pay in. If it's not balanced against that reality, it's nothing more than governmental theft from those of us who are exceedingly productive to those of us who aren't able or just haven't tried to meet expectation.

And those who just haven't tried vastly outnumber those who aren't able.

[Bronco_Beerslug]

Social Security is in essence an insurance annuity (the absolute worst investment vehicle this side of "signed" Dali prints bought on Ebay). It has a back end payout that can't exceed a set dollar amount, therefore it must have a maximum premium that does not exceed a set dollar pay in. If it's not balanced against that reality, it's nothing more than governmental theft from those of us who are exceedingly productive to those of us who aren't able or just haven't tried to meet expectation.

And those who just haven't tried vastly outnumber those who aren't able.
Don't forget to mention the part about saving taxpayers hundreds of billions by not having to house, feed, clothe etc... millions of seniors who without SS is exactly what would be happening.

[ClevelandBronco]

Don't forget to mention the part about saving taxpayers hundreds of billions by not having to house, feed, clothe etc... millions of seniors who without SS is exactly what would be happening.

That statement is so ludricrous, so absolutley nonsensical that I hardly know where to start to deconstruct it. You're saying that the government saves us hundred of billions of dollars we'd have to spend on care by taxing us hundreds of billions of dollars that then are given to people to spend on those same things.

Hey, ever hear of personal responsibility, family responsibility and private charity? Last, absolutely last on the list is a minimum-comfort government warehousing if you've had the lack of foresight to imagine you might outlive your money or any other available private resources.

[Bronco_Beerslug]

That statement is so ludricrous, so absolutley nonsensical that I hardly know where to start to deconstruct it. You're saying that the government saves us hundred of billions of dollars we'd have to spend on care by taxing us hundreds of billions of dollars that then are given to people to spend on those same things.

Hey, ever hear of personal responsibility, family responsibility and private charity? Last, absolutely last on the list is a minimum-comfort government warehousing if you've had the lack of foresight to imagine you might outlive your money or any other available private resources.
Most of them PAID for their benefits they are receiving. They are receiving money they paid in all of their lives. And the fund will keep paying seniors for many more decades as guaranteed by republicans (Reagan administration) if Bush doesn't steel it away from them.

So go ahead and tell me how seniors would be treated now if there were no SS. Either have to take care of them (through taxes) or bury them out to sea.
But I can see you would probably like the bury at sea option because they "lacked foresight".

[errand]

Don't forget to mention the part about saving taxpayers hundreds of billions by not having to house, feed, clothe etc... millions of seniors who without SS is exactly what would be happening.

Riddle me these Beerslug......

Do you know anyone who can live comfortably on Social Security alone?

Who should have control of your financial future? You or the government?

Which gives you the best chance to retire comfortably...investing you money in the stock market, mutual funds, etc......or paying into Social Security?

If you could use the monies paid into Social Security and invest it in the private sector, would you do it?

If Social Security was an alleged crisis in '98, when the likes of Bill Clinton and John Kerry, and Senator Pelosi said it was, wouldn't it stand to reason that 5 years later and no changes forthcoming, it would be in even worse shape?

Are you counting on Social Security for your retirement exclusively, and if your not....will you reap more from your personal investments, or SS??

[errand]

But I can see you would probably like the bury at sea option because they "lacked foresight".

Poor planning on their part doesn't constitute an emergency on my part.

Who doesn't know that one day they will die? Well, guess what clowns, you will...buy some freaking life insurance.

Who also doesn't know that one day they will not work again, be it due to illness, death or retirement. Again, consider this a public service announcement.....save some freaking money, clowns!

[L.A. BRONCOS FAN]

Riddle me these Beerslug......

Which gives you the best chance to retire comfortably...investing you money in the stock market, mutual funds, etc......or paying into Social Security?


rofl

Maybe we should ask all of those pensioners who got hosed by Enron, Worldcom, et al?

The Bushies' war on Franklin Roosevelt

http://slate.msn.com/id/2112796/

Why are today's Republicans so hellbent on changing Social Security? Clearly they're not driven by concern over government deficits. After all, they've engineered a taxing and spending regime that intentionally created record deficits. (http://www.washingtonpost.com/wp-dyn/articles/A35029-2005Jan25.html) And it can't be that they oppose entitlement programs as a matter of principle. Medicare has an unfunded liability larger than Social Security's, and they just expanded it a couple of years ago with the prescription drug benefit.

Maybe it's because Social Security is an opportunity to refight—and perhaps win—a series of arguments the Republicans lost badly 70 years ago. To put it another way, it's a chance to knock down Franklin Roosevelt, finally. "For the first time in six decades, the Social Security battle is one we can win," Peter Wehner, Bush's director of strategic initiatives, wrote in a memo (http://www.j-bradford-delong.net/movable_type/2005-3_archives/000119.html) to supporters in early January. In a column advocating the dismantling of Social Security, George Melloan of the Wall Street Journal editorial page last week wrote that "The Social Security Act of 1935 was the worthy achievement of the New Deal—almost the only one of any permanence—that gave relief to a Depression-battered nation." (In an interview, Melloan said he's aware that the Securities and Exchange Commission, (http://www.sec.gov/) the Federal Deposit Insurance Corp., (http://www.fdic.gov/) the Tennessee Valley Authority, (http://www.tva.gov/) and Triborough Bridge (http://www.mta.nyc.ny.us/bandt/html/triboro.htm) are all New Deal products of permanence as well.) The Cato Institute, which has been leading the charge against Social Security, includes among its many distinguished fellows Jim Powell, author of the deeply ahistoric history FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression.

http://www.bartcop.com/mcflag.gif

[L.A. BRONCOS FAN]

Will anyone on the OM take on the following bet:

Pay me, in cash, what I have lost via SS taxation up until now (just the flat dollar amount, no compound interest, even!) and I will sign over to you any and all future SS benefits I am due, at such time as I am eligible to receive them.

Any takers?

Judging from the foregoing bet, either the facts don't match W*GS' perceptions and claims, or W*GS is < 18 years old.

Anybody want to take the bet that both are true? ;D

Social Security is financially sound and efficient

...that's why Bush wants to destroy it.

FACTS:

* According to the non-partisan Congressional Budget Office, without any changes at all, the Social Security program can pay all benefits through at least 2052.

http://www.cepr.net/publications/facts_social_security.htm

* Less that 0.6 cents of every dollar paid out in Social Security benefits goes to pay administration costs.

http://www.cepr.net/publications/facts_social_security.htm

[L.A. BRONCOS FAN]

When in reality-combat with your favorite wingnuts, it helps to have the right ammunition handy when they inevitably spew Cato/Heritage BS.

http://www.cbo.gov/showdoc.cfm?index=5530&sequence=3
THIS is the summary of conclusions from the CBO report on Social Security.

http://www.cepr.net/publications/facts_social_security.htm
And THIS is a comprehensive analysis of the CBO report which isn't saying that the system is facing eventual collapse at all.

http://www.cbpp.org/6-14-04bud.htm
And THIS analysis also disputes the ideology that Social Security is facing "perpetual shortfall" and is therefore unfixable.

http://www.npg.org/popfacts.htm
This website offers a few quick-reference charts and figures indicating that U.S. population is projected to increase by 47% from its 2000 level over the next 46 years taking into account both birthrate and immigration.

http://www.census.gov/cgi-bin/ipc/idbpyrs.pl?cty=US&out=d&ymax=250
Oh, and if your opponnent wishes to indulge an Attacking the Messenger Fallacy against NPG on ideological grounds to try to discount the facts given, this little dynamic population pyramid graphic at the U.S. Census website should underline the facts quite effectively.

And to reinforce the point, there are these tables at this page from the U.S. Census website:

http://www.census.gov/cgi-bin/ipc/idbagg

The numbers clearly undercut all the Chicken-Little BS that the U.S. population is going to flatten out or go into steady decline and that therefore Social Security will become untenable due to a hopelessly shrinking base.

To sum up the basic facts and figures:

• Social Security is projected to remain quite solvent through 2052, and that even if there are no changes in the structure of benefits as defined in current law, retirees will still be receiving higher proportions of benefits than the generations which proceeded them. The Congressional Budget Office report is in no way suggesting that the system is facing eventual collapse or that it is unfixable, but merely projecting possible trends as a guide to legislation, as has been done numerous times in the past.

• To fix the present projected imbalance would require little more than rescinding the more irresponsible of Bush's tax-cuts to the top 1% of earners (which threatens a general budgetary shortfall five times greater than the projected Social Security shortfall) and to raise the cap on the payroll tax to the $110,000 mark, while reforming the Estate Tax to asses only those estates valued at $7 million or above. These are, at most, minor adjustments to the present tax system which would more or less restore the pre-Bush status-quo.

• The payroll-tax increases required to support Social Security's long-term solvency at this point would amount to less than a quarter of the tax increases passed by Congress in the 1980s and signed into law by Ronald Reagan to ensure the solvency of the Social Security Trust Fund twenty years ago.

• The present condition of the Social Security system, even with the projected shortfall, is far better than what was projected back in 1965.

• Projected population trends clearly show the the U.S. population will increase by about 47% beyond the 2000 census level to a population of 408 million, factoring in both birthrate and immigration. Furthermore, the proportion of retirees to working-age members of the society of 2045 and 2050 is going to remain very clearly slanted in favor of the working age percentile. There is no demographic time-bomb ticking away which will explode the contributor base for Social Security.

In short, there is no immediate or looming crisis which requires the radical solution of privatization, no matter how much the wingnuts scream hysterically to the contrary and ignore, distort, or outright misrepresent the evidence. These facts and figures will aid in any debate on the point and should effectively nullify the rhetoric of the think-tankers saying that the whole system's about to collapse unless we give it to Wall St. NOW!

[W*GS]

Judging from the foregoing bet, either the facts don't match W*GS' perceptions and claims, or W*GS is < 18 years old.

So take me up on it, LABF.

Pay me what I've lost so far, and you'll be set for riches when I'm qualified to get on the SS gravy train.

Care to get together with an attorney and draw up a contract?

Let's see you put your money where your rhetoric is, kiddo.

[errand]

rofl

Maybe we should ask all of those pensioners who got hosed by Enron, Worldcom, et al?



Guess what LABF.........You are as stupid as you sound.

Those that worked for Enron and Worldcom sank their entire future into one stock...very high risk, because if the company goes under, so do you.

Anyone who knows even a little about investing knows that you do not put all your eggs into one basket. I'm sorry they never heard that bit of info before....

[Montaq]

Guess what LABF.........You are as stupid as you sound.

Those that worked for Enron and Worldcom sank their entire future into one stock...very high risk, because if the company goes under, so do you.

Anyone who knows even a little about investing knows that you do not put all your eggs into one basket. I'm sorry they never heard that bit of info before....

The reason that Enron employees had so much of their 401K sunk into Enron stock was because Enron would only match an employees investment with company stock and then not allow the employee to sell the stock until they reached age 50.

[L.A. BRONCOS FAN]

Guess what LABF.........You are as stupid as you sound.

Those that worked for Enron and Worldcom sank their entire future into one stock...very high risk, because if the company goes under, so do you.

Anyone who knows even a little about investing knows that you do not put all your eggs into one basket. I'm sorry they never heard that bit of info before....

You own the patent on stupid, as evidenced by the foregoing argument.

Enron and Worldcom didn't merely "go under" - these companies knowingly swindled their shareholders; their CEOs made out like bandits while thousands of people were bilked out of their savings.

What is it about right-wingnuts that they always blame the victim and excuse the crook?

Yeah, I know, I know...the technical term for it is "sociopathy."

[W*GS]

LABF, are you willing to take my bet?

[L.A. BRONCOS FAN]

LABF, are you willing to take my bet?

All that can be said with any certainty is that SS will be solvent at least until 2052 if the smirking moron and the rethugs don't f*ck with it.

That's a pretty big "if."

Thus, in the face of such uncertainty, yours is a sucker's bet.

[L.A. BRONCOS FAN]

The reason that Enron employees had so much of their 401K sunk into Enron stock was because Enron would only match an employees investment with company stock and then not allow the employee to sell the stock until they reached age 50.

Yep.

Everytime errant turns around he gets virtually bitch-slapped. :giggle:

[L.A. BRONCOS FAN]

Senate Dems say SS privatization is dead

"Not a single Senate Democrat will support President Bush’s proposal to divert a portion of the Social Security payroll tax to personal investment accounts, Minority Leader Harry Reid, D-Nev., said Tuesday.

If he is right, Bush’s plan will be dead on arrival in the Senate, where a supermajority of 60 votes will be needed to overcome a filibuster by opponents. Republicans have 55 seats.

...

“We want to make sure that the American people understand that we’re not for benefit cuts and we’re not for privatization,” Reid said. “There’s no crisis in Social Security.”

...

Reid said he had private commitments from all 44 Senate Democrats that they would not support diverting payroll tax revenues into private accounts, the key facet of Bush’s plan. The Democratic staff on the Senate Finance Committee has come to the same conclusion, based on polling Democratic members and their staffs."

http://www.talkingpointsmemo.com/archives/week_2005_01_30.php#004621

[L.A. BRONCOS FAN]

And let's not forget that the Republicans are backing away from Smirk's plan all by themselves because their constituents do not support SS reform and they are worried that it will cost them votes.

[L.A. BRONCOS FAN]

Bush Social Security Proposal Would Have Sent 7 Million Seniors Into Poverty, Non-Partisan 'Congressional Research Service' Study Shows (http://finance.senate.gov/press/Bpress/2005press/prb020105rpt.pdf)

[W*GS]

All that can be said with any certainty is that SS will be solvent at least until 2052 if the smirking moron and the rethugs don't f*ck with it.

That's a pretty big "if."

Thus, in the face of such uncertainty, yours is a sucker's bet.

So be a sucker and take me up on it.

[L.A. BRONCOS FAN]

http://www.bartcop.com/mouse-finger.gif