Social Security

[e1618978]

I have mixed feelings about Social Security. On the one hand, I want to get the money out of the hands of the government, because they invest the money in US treasuries, which is kind of like stealing it to spend on other stuff.

On the other hand, if you allow people to invest their own retirement money, a bell curve of success will follow, and some of those people will end up hassling me for money on street corners.

One thing that I am fairly comfortable with is having a gradiated benefit, depending on your other retirement earnings and wealth. The rich don't really need social security. How much could we lower the payroll tax if you had to be poor to receive benefits? It would become more of a "old age poverty insurance" like medicare is.

Comments?

[atomic_angel]

Originally posted by e1618978
I want to get the money out of the hands of the government

I agree.

Originally posted by e1618978
On the other hand, if you allow people to invest their own retirement money, a bell curve of success will follow, and some of those people will end up hassling me for money on street corners.

Possibly, but not necessarily so. One also must wonder how much the government should do to protect people from their own lack of industry.

Originally posted by e1618978
One thing that I am fairly comfortable with is having a gradiated benefit, depending on your other retirement earnings and wealth. The rich don't really need social security.

One of the first problems we have here is defining "rich" or "wealthy". These are not absolute things in either time or space. Example...If I make $100K/year am I "rich"? Depends. Where do I live for example.

This kind of thing starts to get tricky...but means-based benefits might be a way to start weaning everyone off the government and freeing up money to invest for retirement.

[BRussell]

Originally posted by e1618978
I have mixed feelings about Social Security. On the one hand, I want to get the money out of the hands of the government, because they invest the money in US treasuries, which is kind of like stealing it to spend on other stuff. It's exactly like stealing it to spend on other stuff. But it's not an investment program at all. The only reason they put it in treasuries now is that they take in more SS taxes than they need. In 20 years or so they'll not be taking in enough, so they'll redeem the treasuries. It's more of a temporary issue than a general strategy to invest all SS money in treasury bonds.

On the other hand, if you allow people to invest their own retirement money, a bell curve of success will follow, and some of those people will end up hassling me for money on street corners. People are allowed to invest their own retirement money right now. I certainly do, and I bet you do to. This is what I don't get about the "private accounts" argument. We already have private accounts. It's not some new-fangled idea.

[hardeeharhar]

Originally posted by atomic_angel
Possibly, but not necessarily so. One also must wonder how much the government should do to protect people from their own lack of industry.

Since when does one's "industry" equate with ones income?

[atomic_angel]

Originally posted by BRussell
People are allowed to invest their own retirement money right now. I certainly do, and I bet you do to. This is what I don't get about the "private accounts" argument. We already have private accounts. It's not some new-fangled idea.

This is quite true...but there is about 7% of my income that is taken away that I could also invest. More like 13-14% if you count the portion paid by the employer.

[Anders]

Originally posted by atomic_angel
This is quite true...but there is about 7% of my income that is taken away that I could also invest. More like 13-14% if you count the portion paid by the employer.

Isn´t the term "social security", not "social investment"?

[atomic_angel]

Originally posted by hardeeharhar
Since when does one's "industry" equate with ones income?

I wouldn't say that is equates so much as it (in most cases) will correlate. My question could perhaps be better worded as: How far should government (society) go to take care of people who do not show any industriousness in their lives, thus short-changing themselves from an income and savings perspective?

I realize the difficulty in measuring someone's industriousness...but income is perhaps the best correlative indicator that we have.

The ability to provide for one's non-earning years is a function of income and saving. If someone makes a large income but fails to save for their non-earning years, should society protect them from the (bad) consequences of that decision?

The income side of the equation is a bit harder...but maybe not as much as we think. People are able to advance/increase their earnings by working harder and smarter. If people choose NOT to do so, should society protect them from the (bad) consequences of that decision?

[atomic_angel]

Originally posted by Anders
Isn´t the term "social security", not "social investment"?

I am perfectly well aware of that. I didn't say it was. My point was merely that if SS didn't exist (as a program)...there would be 7-14% more of my income available to me to save for my non-earning years. That's not a statement of the "goodness" or "badness" of the program. It is just a fact. Now...would that be "better"? I don't know. Probably it would be...but that is only an opinion and I really don't have any facts to prove it.

[e1618978]

Possibly, but not necessarily so. One also must wonder how much the government should do to protect people from their own lack of industry.

I wasn't thinking of how much you earn, rather I was talking about the fickle nature of luck.

If you invest $10,000 for 35 years in stocks, and you are really luckey, you will end up with $1,000,000, but if you are unlucky, you end up with 0. The average will be about $320,000.

The advantage of the current government program is that everyone gets $40,000. The disadvantage is that everyone gets $40,000.

When I was talking about the bell curve problem, I was referring to all the people who would, through bad luck or unwise investments, end up with less than $40,000.

I calculated these things based on 3% for the treasuries, and 9% for the stock market.

[Kishan]

As I understood it, the original idea behind Social Security was to provide a fund into which we all pay and eventually could all draw upon in our time of retirement. Today, payouts to SS recipients are made from the SS tax that burdens people who are still working. What if the program were restructured to provide that fund only for people who chose it? What I mean is this:

Person A has a job at which they do not "make enough" (a perceptual problem that I will not dwell upon) to save/invest for retirement. Or perhaps Person A has not attained a level of education sufficient to guarantee job stability with a single employer for the duration of their career. Person A could use SS tax that he/she and their employer pay to serve as payments into their own personal retirement fund.

Person B is opposite to person A in the sense that they make enough money to invest for retirement or they can reasonably count on being employed by a single employer for the majority of their career. Person B feels no need for a government managed fund to guarantee their retirement security. So Person B ought to be able to opt out of SS altogther. Not pay a personal SS tax and not have their employer pay SS tax for them. The responsibility for securing their own retirement would rightfully then fall to them.

I saw an article (http://www.cnn.com/2005/ALLPOLITICS/02/08/poll.socialsecurity/index.html) today on CNN where they report on a poll that suggests the public wants the wealthy to bolster SS. I feel this is nonsense. As it stands right now, the wealthy and the not so wealthy are both paying SS taxes and therefore are entitled to the same benefit. That is only fair. If the the wealthy are to receive less benefit, then their tax burden ought to be proportionately less. Better yet, let SS be an alternative to private retirement funds and let people decide whether or not they want to pay into it, knowing full well that if they do not, there will be no benefit at the end.

Deficit spending now is a disaster for SS later. In managing my household expenses, if I knew there would be a huge expense coming on the horizon, I would plan for it by either saving now, or paying down debt now so that I would either have savings on hand, or available credit when the expense came. Our government is foolish in this regard. With the impending retirement of the baby boomers, SS payments will skyrocket. The national debt should be kept from growing now or even paid down so that the boomers' benefits could be paid without raising taxes in the future. Am I thinking too simplistic on this?

[hardeeharhar]

Originally posted by atomic_angel
I wouldn't say that is equates so much as it (in most cases) will correlate. My question could perhaps be better worded as: How far should government (society) go to take care of people who do not show any industriousness in their lives, thus short-changing themselves from an income and savings perspective?

I realize the difficulty in measuring someone's industriousness...but income is perhaps the best correlative indicator that we have.

The ability to provide for one's non-earning years is a function of income and saving. If someone makes a large income but fails to save for their non-earning years, should society protect them from the (bad) consequences of that decision?

The income side of the equation is a bit harder...but maybe not as much as we think. People are able to advance/increase their earnings by working harder and smarter. If people choose NOT to do so, should society protect them from the (bad) consequences of that decision?

Working harder doesn't correlate to being paid more. In fact, if we really looked at the function, I would wager that the opposite is true -- that those people who work more hours a day are generally paid less. What does correlate with income is education level, which is also correlated with pre-existing wealth.

If a person decides to serve society by being a social worker or teacher and get paid median wage, should society protect them from the (bad) consequences of that decision?

In any event, society should provide care to persons who are unable to care for themselves even if it is "their own doing".

[e1618978]

What if the program were restructured to provide that fund only for people who chose it? ... a poll that suggests the public wants the wealthy to bolster SS.[/B]

"Don't tax you, don't tax me, tax that fellow behind the tree"

Actually, I am weathy enough to be out of the running should they put a income/wealth litimus test on SS, and I don't really care if they take away my SS.

I was trying to figure out why I don't care, and I think that it is because my whole life people have been telling me that SS will be gone by the time I retire (I am 37).

If the alternatives are 1) raising the payroll tax or 2) putting a maximum income/wealth criteria on benefits, then I will choose #2 every time. Should something bad happen, and I wind up 65 and broke, I want SS to fall back on - I don't want to end up an old man working in McDonalds.

Remember, if they make it into insurance rather than a guarenteed retirement fund, then you still benefit even if you don't collect - just as you still benefit from insurance if your house fails to burn down.

Regarding the options for people to invest outside of retirement - I think it is a bad idea, now that I have had a chance to ponder it. It is all very well and good to have the survival of the fittest and all, but I dont want beggers all over the place either. You benefit from somebody else being saved from poverty.

[Kishan]

Originally posted by hardeeharhar
Working harder doesn't correlate to being paid more. In fact, if we really looked at the function, I would wager that the opposite is true -- that those people who work more hours a day are generally paid less. What does correlate with income is education level, which is also correlated with pre-existing wealth.

I agree. Education is what most closely correlates with wealth.

If a person decides to serve society by being a social worker or teacher and get paid median wage, should society protect them from the (bad) consequences of that decision?

A person who serves society (and presumably is paid less as a result) ought not to be punished by having the net of social security yanked out from under them.

In any event, society should provide care to persons who are unable to care for themselves even if it is "their own doing". [/B]

I agree with this only insofar as you mean society to mean a person's family. The way I was brought up was a blend of America and the home country of my parents (India). In the brief periods of time I have lived there, I would share the house with 3, sometimes 4 generations of our family. There is no need for a government program when children and grandchildren take direct care of their progenitors. This is a respect that I am honor bound to give my parents. The biggest breakdown of family values in this country has nothing to do with sex, working women or homosexuality. It has to do with the failure of children to take care of their parents.

[Kishan]

Originally posted by e1618978

Remember, if they make it into insurance rather than a guarenteed retirement fund, then you still benefit even if you don't collect - just as you still benefit from insurance if your house fails to burn down.

I don't disagree with this cogent point at all. I, at 26, am planning my retirement without SS in the picture. Its just a safer way to go. The point I started my post with (and admittedly did get away from) was the idea that SS was intended to be a trust fund of sorts. Along the way it was indeed well-botched. Now the issue is how to fix it in such a way as to avoid putting so much tax burden on people like me that I cease to be the good little consumer who helps make this economy go round.

[BRussell]

Originally posted by Kishan
As I understood it, the original idea behind Social Security was to provide a fund into which we all pay and eventually could all draw upon in our time of retirement. Today, payouts to SS recipients are made from the SS tax that burdens people who are still working. I'm not sure I understand what you're saying here, but I don't think it's right. AFAIK it's always been a pay-as-you-go plan: If you are currently working, you pay for current retirees, with the expectation that when you retire, then-current workers will pay for your retirement.

[hardeeharhar]

Originally posted by Kishan
I agree with this only insofar as you mean society to mean a person's family. The way I was brought up was a blend of America and the home country of my parents (India). In the brief periods of time I have lived there, I would share the house with 3, sometimes 4 generations of our family. There is no need for a government program when children and grandchildren take direct care of their progenitors. This is a respect that I am honor bound to give my parents. The biggest breakdown of family values in this country has nothing to do with sex, working women or homosexuality. It has to do with the failure of children to take care of their parents.

I have to say that while the "ideal" situation of having children care for their parents doesn't work when those children aren't able to do so either by distance or by economy. In the US when generations tend to be much longer and much smaller (and also tend to move), this is an unrealistic goal.

In essence, the government is operating like an extended family in this situation.

[Kishan]

Originally posted by BRussell
I'm not sure I understand what you're saying here, but I don't think it's right. AFAIK it's always been a pay-as-you-go plan: If you are currently working, you pay for current retirees, with the expectation that when you retire, then-current workers will pay for your retirement.

The reason I wrote this was based off of something I thought I remembered from an AP American History class that I took in high school. I did some brief online research just now and found this pdf file (http://www.ssa.gov/history/pdf/histdev.pdf) on the social security administration's website. Although this particular file does not detail the actual machinations of the current form of the program, it does refer to the "Old Age Insurance Program," the orginal name for the portion of the social security act that pays benefits to retired workers. Furthermore it talks about how special considerations needed to be made to railroad workers whose private plans tanked during the Great Depression. The problem arose when calculating "credit for service." In other words, railroad workers were not eligible for the new Federal program because they had not paid into it for a long enough period of time. Additionally, even though the Legislation was passed in 1935, benefits were not scheduled to be paid until 1942, implying a buildup of capital to make the program solvent. Like I wrote, this document does not talk about how SS works today, but I interpret the points I raise to mean that the original intent of the program was to serve as a fund, not a pay-as-you-go program. I could very well be wrong about this.

[hardeeharhar]

Originally posted by Kishan
The reason I wrote this was based off of something I thought I remembered from an AP American History class that I took in high school. I did some brief online research just now and found this pdf file (http://www.ssa.gov/history/pdf/histdev.pdf) on the social security administration's website. Although this particular file does not detail the actual machinations of the current form of the program, it does refer to the "Old Age Insurance Program," the orginal name for the portion of the social security act that pays benefits to retired workers. Furthermore it talks about how special considerations needed to be made to railroad workers whose private plans tanked during the Great Depression. The problem arose when calculating "credit for service." In other words, railroad workers were not eligible for the new Federal program because they had not paid into it for a long enough period of time. Additionally, even though the Legislation was passed in 1935, benefits were not scheduled to be paid until 1942, implying a buildup of capital to make the program solvent. Like I wrote, this document does not talk about how SS works today, but I interpret the points I raise to mean that the original intent of the program was to serve as a fund, not a pay-as-you-go program. I could very well be wrong about this.

It needed a bit of solvency to start out...

[Kishan]

Originally posted by hardeeharhar
I have to say that while the "ideal" situation of having children care for their parents doesn't work when those children aren't able to do so either by distance or by economy. In the US when generations tend to be much longer and much smaller (and also tend to move), this is an unrealistic goal.

In essence, the government is operating like an extended family in this situation.

Your point is well taken, but I would like to suggest that you are merely substituting one ideal for another. The ideal you advance is that a person ought to be taken care of regardless of their family situation. I feel that this philosophy, while admirable for its humanity, absolves the family of too much responsibility. In this country we are all aware of our entitlements and rights as citizens. I wonder, however, where good civic education has gone when there is no public discussion about the responsibilities and duties that a citizen has incumbent upon them.

For a history class I once took, I recall reading copies of letters sent to President Roosevelt during the depression in which housewives would beg the president for a loan, offering their wedding bands as collateral. Can you imagine such a mindset in America today? Unlikely, because something has fundamentally changed about the American character. We are no longer socialized to look to within ourselves for solutions to our problems. For every personal problem, there must be some external solution. Government must parent me. I absolutely don't mean to make any implications about anyone who disagrees with me, but in my opinion, dogged self-reliance and raw gumption were the foundations that made this country great. I feel silly writing like this as I am still young, but I see these social problems through the lens of my parents; two people who worked hard for everything they have and who asked nothing of anyone else except a fair chance to compete.

Getting back to the original point of idealisms, others may advance the ideal of the government being my parent from the day I am born until the day I am dead, but I would argue that the ideal of family and self responsibility would serve us all better as individuals and by extension, society at large.

[Towel]

There's a few major misconceptions in this thread. Here's a nice "FAQ" (http://www.socsec.org/publications.asp?pubid=507) about some of the talking points that get batted around. But a few fundamental things to keep in mind are:

1. SS is not an investment plan. It is a pay-as-you-go government program, always has been. You have to qualify for benefits by paying taxes for a certain number of years, but that does not mean your money was invested for you.

2. Our leaders saw the baby-boomer crisis coming twenty years ago, and took steps to meet the challenge. Ronald Reagan and Alan Greenspan hiked payroll taxes in 1983 far above what was then needed to pay benfits. The SSA has been accumulating US Treasury Bonds ever since (they hold as much as Japan and China combined right now). Even after SS stops running a surplus (in 2018), the interest alone on all those bonds will fully fund the deficit for another ten years; only then will the principle start to be drained. The system as a whole is fully solvent until sometime between 2042 and 2053, depending on whose estimates for economic growth you use. Even then, SS will be able to meet 70-80% of its benefits - which, remember, will have been growing along with American wages the whole time (since 1972, benefits have been indexed to average wages, not to inflation).

3. The estimate net deficit for the next 75 years, out until 2080, is $3.7 Trillion. That sounds like a lot of money. Like estimates for when the trust fund will be exhausted, it depends entirely on what projections you use for economic growth. But assuming it has some credibility, if you divide $3.7T by 75 years, you get $50B a year. That's less than one-third of the revenue loss of the 2001/03 tax cuts. It's one-twentieth of the federal budget. One-half of the annual cost of the war in Iraq. In other words, it's perfectly manageable by brute monetary force, should we decide to go that route. Of course, the actual cost of fully funding SS for the next 75 years would be far less than $50B/year, since any money we invest now will be earning compound interest in the trust fund for the next twenty-five years or so.

[Carson O'Genic]

Originally posted by atomic_angel
I am perfectly well aware of that. I didn't say it was. My point was merely that if SS didn't exist (as a program)...there would be 7-14% more of my income available to me to save for my non-earning years. That's not a statement of the "goodness" or "badness" of the program. It is just a fact. Now...would that be "better"? I don't know. Probably it would be...but that is only an opinion and I really don't have any facts to prove it.


Given that far too many Americans are putting second mortgages on their homes to pay off credit cards and buy new cars, I really do not trust Americans to save for the future. I would never borrow on the value of my home unless it was a real emergency.

We have IRA, 401b etc. I already have more accounts than I want to worry about. I'm happy to let the Federal Government worry about SS and let me worry about the rest of my money. I don't beleive that government is always the worst possible way to get things done. I certainly don't think that Wallstreet investment gurus are more efficinient and dedicated at managing my retirement money. They are as likely to be good or bad as any government agency.

Most importantly, I think the people who will most likley suffer from making bad decisions in investing their SS money are the ones who will most likely need it the most. I don't want to be steping over them and walking around them on the street every time I go outside my house 20 years from now.

If the government wants a higher rate of return, why don't they set up an investment strategy at the government level. They probably won't because of the risk, but yet they would gladly let you take the risk.

[BRussell]

Originally posted by Kishan
The reason I wrote this was based off of something I thought I remembered from an AP American History class that I took in high school. I'm quite certain it was always pay-as-you-go. Otherwise, how did they start paying at the same time they started taking in SS taxes? There was a fund, just as we have today, but the fund itself was and is pay-as-you-go.

[Towel]

Originally posted by Towel
Like estimates for when the trust fund will be exhausted, it depends entirely on what projections you use for economic growth. A little embellishment on the point of economic growth projections, from Irwin Kellner (http://cbs.marketwatch.com/news/story.asp?guid=%7BB1935269-866A-491F-90A6-A4A1F46B8EBB%7D&siteid=google&dist=google):The system's actuaries actually produce three long-range projections. The one that's been picked by the politicians, pundits and the press and turned into the conventional wisdom is their intermediate projection -- the one that expects the trust fund to be depleted by 2042.

But the assumptions underlying these projections are very pessimistic -- especially when it comes to economic growth.

The actuaries assume that the U.S. economy will grow by an annual rate of 1.9 percent per year over the next 75 years. This is far below the 3.6 percent average of the past 75 years -- a period that includes the Great Depression.

The system's actuaries have a somewhat more optimistic projection. It assumes, among other things, a slightly faster rate of growth of 2.7 percent per year over the same period.

While this, too, is below the economy's 75-year average, it shows that the system never runs out of money. That's right, never.

[BRussell]

Originally posted by Towel
2. Our leaders saw the baby-boomer crisis coming twenty years ago, and took steps to meet the challenge. Ronald Reagan and Alan Greenspan hiked payroll taxes in 1983 far above what was then needed to pay benfits. The SSA has been accumulating US Treasury Bonds ever since (they hold as much as Japan and China combined right now). Even after SS stops running a surplus (in 2018), the interest alone on all those bonds will fully fund the deficit for another ten years; only then will the principle start to be drained. The system as a whole is fully solvent until sometime between 2042 and 2053, depending on whose estimates for economic growth you use. Even then, SS will be able to meet 70-80% of its benefits - which, remember, will have been growing along with American wages the whole time (since 1972, benefits have been indexed to average wages, not to inflation). True, but I think it's important to note that the trust fund money doesn't exist in anything like a savings account, it will just have to start coming from general revenues collected in the future. That's the deal that was made - take in more SS taxes than necessary right now, and then pay it back with general revenues (mostly income taxes) in the future when SS taxes aren't enough. That's fine, I suppose (actually I think it's pretty stupid), but that means 1) it's extremely important to get our debt down and our finances in order now - oops, and 2) to talk about defaulting on the trust fund is really inter-generational reverse Robin-Hoodism.

[Carson O'Genic]

Just to expand this discussion a bit. The US is not alone in this problem. Although world population keeps increasing ( a bad thing to say the least), many industrialized nations are experiencing an aging population. This is a very good thing in terms of stabilizing the population, but it means an end to the gravy train of many workers for every retired person. Think we have it ba, be glad your not Japan or western Europe. Curious if anyone
tuning in from these countries has anything to add on how your country is dealing with this problem.

For the US, my vote is to keep the system the same, but make some adjustments as needed to keep it solvent. Suggestions: raise the retirement age in line with increases in life expectancy. Discourage early retirement. Increase SS tax (not a favorite idea for most I'm sure). Means testing SS is also not a very popular option and should be somewhere around last in line.

[SpcMs]

Originally posted by Carson O'Genic
Think we have it bad, be glad your not Japan or western Europe. Curious if anyone tuning in from these countries has anything to add on how your country is dealing with this problem.

Western Europe (Belgium) tuning in :). All i can say, it's pretty bad. Thanks to the Euro stability pact we have been reducing our national deficit (from some 150% of BNP to under 100% in the last 10 years) and have had balanced budgets for the last few years, but of course reducing debt doesn't equal saving for the future.
One of the biggest measures we took is putting all one-time incomes (mainly sales of old government agencies like railroads or telephony) into some fund to pay future social security benefits. (strangely enough the EU allows for counting this as debt reduction, so this 'balancing of budgets' and 'saving for social security' are actually one-time incomes that are counted twice :no: )
Everybody realizes big problems are coming, but no one seems willing to bite the bullet. The "social partners" (we have a "consultation model" where employers, employees and the governement make a deal ever few years about wages, retirement age, ...) are fighting for almost half a year now about some silly details while the really big issues (like early retirement) are pushed back.
In many ways i love our social model, but being unrealistic about things is never the way to go imo.

(Edited for really bad English :))

[trumptman]

Originally posted by BRussell
True, but I think it's important to note that the trust fund money doesn't exist in anything like a savings account, it will just have to start coming from general revenues collected in the future. That's the deal that was made - take in more SS taxes than necessary right now, and then pay it back with general revenues (mostly income taxes) in the future when SS taxes aren't enough. That's fine, I suppose (actually I think it's pretty stupid), but that means 1) it's extremely important to get our debt down and our finances in order now - oops, and 2) to talk about defaulting on the trust fund is really inter-generational reverse Robin-Hoodism.

Actually to not discuss defaulting on the trust fund is really intergenerational reverse Robin-Hoodism.

The generation from whom the money was taken, the Baby Boomers, they withdrew and spent the money while also spending a few trillion above that. They have left nothing but IOU's for the next generation to pay back. The benefits from those IOU's are being received today. The repayment is in the future.

If I run up a credit card with a million dollars of debt, then tell my son he will have to repay it because I'm now too old, his refusal to do so will not be him stealing from me.

The real problem is that many folks, obviously many around here as well, do not understand that the bonds that make up the trust fund are renegotiable at any time. That is why I find anyone who claims Social Security is solvent to just be hysterically funny. The claim is that the government would never default on the bonds. Why would they ever need to? You can simply redefine the terms of repayment at any time instead. Decide that you get to repay the bonds at pennies on the dollar, terms and conditions of the bond are met. No default necessary.

The most laughable thing is also people thinking that Social Security is a promise and that it is safer because there is a guaranteed benefit to be paid, or a certain return guaranteed. I already posted the links in this forum from the actual Social Security site along with relevent court case citations. Social Security is a government benefit just like welfare. The terms of what you receive can be changed at any time. It is by no means guaranteed and can even be withdrawn. There is no security when the person or group providing it can change the rules at any time.

Nick

[e1618978]

Means testing SS is also not a very popular option and should be somewhere around last in line.

You are wrong about this - CNN just did a survey about it, it is the most popular option. I am very oposed to paying SS taxes on all my wage (unless they exclude dividends and capital gain income), but I don't mind means testing SS benefits.

(CNN) -- Americans think the wealthy should help bolster Social Security, a CNN/USA Today/Gallup Poll released Tuesday suggests.

More than two-thirds of 1,010 adults contacted from Friday to Sunday said it would be a good idea to limit benefits for wealthier retirees and for higher income workers to pay Social Security taxes on all their wages.

[BRussell]

Originally posted by trumptman
Actually to not discuss defaulting on the trust fund is really intergenerational reverse Robin-Hoodism.

The generation from whom the money was taken, the Baby Boomers, they withdrew and spent the money while also spending a few trillion above that. They have left nothing but IOU's for the next generation to pay back. The benefits from those IOU's are being received today. The repayment is in the future.

If I run up a credit card with a million dollars of debt, then tell my son he will have to repay it because I'm now too old, his refusal to do so will not be him stealing from me.

The real problem is that many folks, obviously many around here as well, do not understand that the bonds that make up the trust fund are renegotiable at any time. That is why I find anyone who claims Social Security is solvent to just be hysterically funny. The claim is that the government would never default on the bonds. Why would they ever need to? You can simply redefine the terms of repayment at any time instead. Decide that you get to repay the bonds at pennies on the dollar, terms and conditions of the bond are met. No default necessary. First, the money isn't being taken just from baby boomers, it's also being currently taken from you and me, and everyone who earned a paycheck throughout the 1980s, 1990s, 2000s, and 2010s. That's when the trust fund was (and will be) in surplus.

The reason defaulting would be reverse Robin-Hoodism is that we are over-taxing payroll for a few decades with the promise that it will be paid back in the form of SS benefits out of income taxes. That was the deal made by Reagan and Greenspan in the early 80s. Because SS taxes fall harder on the lower/middle classes and income taxes fall harder on the upper classes, to default on that promise is to steal from the poor and give to the rich.

About defaulting: I read recently that George Bush has most of his personal wealth in treasuries, as have many presidents during their tenure. How about we "re-negotiate" that money? Let's just take all that money he invested and refuse to give it back to him. It would be theft, pure and simple. That's what you're talking about doing when you talk about defaulting or re-negotiating this SS trust fund.

The most laughable thing is also people thinking that Social Security is a promise and that it is safer because there is a guaranteed benefit to be paid, or a certain return guaranteed. I already posted the links in this forum from the actual Social Security site along with relevent court case citations. Social Security is a government benefit just like welfare. The terms of what you receive can be changed at any time. It is by no means guaranteed and can even be withdrawn. There is no security when the person or group providing it can change the rules at any time. I don't think anyone believes it's really a legal guarantee. It's a political guarantee. And if politicians break that promise, I think they'll pay the price.

[Towel]

Originally posted by trumptman
You can simply redefine the terms of repayment at any time instead. Decide that you get to repay the bonds at pennies on the dollar, terms and conditions of the bond are met. No default necessary. Wow. Tell that the Chinese and Japanese central banks that are funding our deficit spending by buying all these worthless Treasury bonds. How fast do you think they would stop? How fast would interest rates go through the roof? How fast would inflation reach Weimar proportions? How fast would the real estate market crater - and with it (on a personal note) the bulk of your personal wealth? How fast would our currency crater? How fast would oil markets no longer accept our now-worthless dollars as payment? Our prosperity is based on being able to export dollars and import everything else - which only works so long as our fiat money is perceived to have real value. What you propose so glibly is economic armageddon for our way of life.

I suppose you'll argue that we can decide that only those T-bills held by one particular organization will be so devalued. I doubt the legality and/or constitutionality of such a measure. And I doubt the effect would be disimilar, anyway. If SSA's bonds can be declared worthless by fiat, why not China's?

[BRussell]

Originally posted by Towel
Wow. Tell that the Chinese and Japanese central banks that are funding our deficit spending by buying all these worthless Treasury bonds. Yeah. I agree with trumptman that we're running into serious fiscal problems as a result of this trust fund (and he set me straight on that a few weeks ago :) ), but I don't think this idea that the money might not be paid back is at all plausible. And of course, if it doesn't get paid back, how are we going to pay for full SS benefits in the coming years? I don't even care so much about the legal or economic issues, although those may be important. To put it simply, I just think it would be immoral to not pay this.

[trumptman]

Originally posted by BRussell
First, the money isn't being taken just from baby boomers, it's also being currently taken from you and me, and everyone who earned a paycheck throughout the 1980s, 1990s, 2000s, and 2010s. That's when the trust fund was (and will be) in surplus.

The surplus is an accounting trick. The "excess" that has been taken from paychecks, no matter whom they are from, has been spent. To suggest that in the future, it will be possible to create a 600+ billion dollar MINIMUM turn around (current deficit spending being stopped, plus no spending of surplus, plus repayment of these bonds) per year without massive tax increases is just dishonest. The future generations will absolutely balk at this. I have no doubt that given the discretion to change the terms, they will do so be it benefits paid out, terms of bond payback, or both. That is why the true crisis is here today. If you want your grandchildren to address your own crisis when you are 80, good luck.

The reason defaulting would be reverse Robin-Hoodism is that we are over-taxing payroll for a few decades with the promise that it will be paid back in the form of SS benefits out of income taxes. That was the deal made by Reagan and Greenspan in the early 80s. Because SS taxes fall harder on the lower/middle classes and income taxes fall harder on the upper classes, to default on that promise is to steal from the poor and give to the rich.

Repeat after me. There is NO PROMISE. Social Security is no different then any other welfare program. The terms of it can be changed or cancelled in an instant. I don't care who made the deal. I don't what language they attach to it in an attempt to make us all feel better. Let me go a step further and say that every politician, be they Republican or Democrat who contributes to this language and helps create this distortion is part of the problem as well.

The reality is that the bonds that fill the Social Security Trust can be renegotiated at any time and even cancelled. The government cannot default to itself. The bonds issued to the trust fund are not the same bonds the general public or anyone else buys. They are special issue bonds that can only be purchased by the trust fund. This is again, because the fund is a just an accounting trick.

Let's think about it from the this angle. If you write a check to a third party or a check to yourself, which really has to be redeemed first?

About defaulting: I read recently that George Bush has most of his personal wealth in treasuries, as have many presidents during their tenure. How about we "re-negotiate" that money? Let's just take all that money he invested and refuse to give it back to him. It would be theft, pure and simple. That's what you're talking about doing when you talk about defaulting or re-negotiating this SS trust fund.

Those bonds are not renegotiable. The terms they were purchased under do not allow what you suggest. However think about that for a minute. How many people would buy bonds with such terms? Likely not a person on the planet. Yet these exact terms are what makes all of excess money that goes into the "trust fund" are declared "safe." Yet we have the most regressive tax possible toss every single person's money into a system with such terms and we call that "progressive."

Remember this quite plainly. You can't default or steal if the terms are what you agreed to do. Most politicians intentionally and falsely associate words with Social Security to obscure the fact that it is just another general assistance program paid for with the most regressive taxation. Case law has proven that monies paid in create NO , repeat NO governmental obligation. The rates paid can be renegotiated at any time or even cancelled. The "bonds" that secure the "trust fund" are special treasury bonds that cannot be purchased by anything besides the Social Security Trust. Those bonds are purchased under terms that yield the money and allow renegotiate of any of the terms for repayment at any time.

Security is the last word I would EVER associate with such a system.

I don't think anyone believes it's really a legal guarantee. It's a political guarantee. And if politicians break that promise, I think they'll pay the price.

I don't think they will. When the boomers are too old to make a difference, the political leaders in their wake will be cleaning up their mess. They will gladly vote to give them their comeuppance. Research the cumulative rate necessary to repay all these shortfalls and you will see it is roughly 80% of all income earned. No one will ever volunteer to have such high tax rates. Especially to support their free spending, take now pay later grandparents.

Nick

[trumptman]

Originally posted by Towel
Wow. Tell that the Chinese and Japanese central banks that are funding our deficit spending by buying all these worthless Treasury bonds. How fast do you think they would stop? How fast would interest rates go through the roof? How fast would inflation reach Weimar proportions? How fast would the real estate market crater - and with it (on a personal note) the bulk of your personal wealth? How fast would our currency crater? How fast would oil markets no longer accept our now-worthless dollars as payment? Our prosperity is based on being able to export dollars and import everything else - which only works so long as our fiat money is perceived to have real value. What you propose so glibly is economic armageddon for our way of life.

I suppose you'll argue that we can decide that only those T-bills held by one particular organization will be so devalued. I doubt the legality and/or constitutionality of such a measure. And I doubt the effect would be disimilar, anyway. If SSA's bonds can be declared worthless by fiat, why not China's?

I politely suggest that you look into the bonds that are issued to the Social Security Trust. They are not the regular marketable bonds that you mention above.

Here's a couple quick bites on the subject.

SS 1 (http://www.heritage.org/Research/SocialSecurity/em940.cfm)

SS 2 (http://news.corporate.findlaw.com/prnewswire/20050114/14jan2005092431.html)

Nick

[trumptman]

Originally posted by ShawnJ
Well at least we're not talking about it as a pyramid scheme. That's progress, Nick!

It still is a pyramid scheme. Please add your own understanding to the discussion.

Nick

[hardeeharhar]

Originally posted by trumptman
I politely suggest that you look into the bonds that are issued to the Social Security Trust. They are not the regular marketable bonds that you mention above.

Here's a couple quick bites on the subject.

SS 1 (http://www.heritage.org/Research/SocialSecurity/em940.cfm)

SS 2 (http://news.corporate.findlaw.com/prnewswire/20050114/14jan2005092431.html)

Nick

And if we hold the government accountable for its accounts, all of that money they took in social security taxes will be parsed out as if it were a real bond.

This is all just a money shell game, and a no interest loan to ourselves...

[BRussell]

Originally posted by trumptman
The surplus is an accounting trick. The "excess" that has been taken from paychecks, no matter whom they are from, has been spent. To suggest that in the future, it will be possible to create a 600+ billion dollar MINIMUM turn around (current deficit spending being stopped, plus no spending of surplus, plus repayment of these bonds) per year without massive tax increases is just dishonest. The future generations will absolutely balk at this. I have no doubt that given the discretion to change the terms, they will do so be it benefits paid out, terms of bond payback, or both. That is why the true crisis is here today. If you want your grandchildren to address your own crisis when you are 80, good luck. It will take increased taxes and/or decreased spending during that period, there's no question. But it would be wrong to not pay it back in SS benefits.

Repeat after me. There is NO PROMISE. Social Security is no different then any other welfare program. The terms of it can be changed or cancelled in an instant. I don't care who made the deal. I don't what language they attach to it in an attempt to make us all feel better. Let me go a step further and say that every politician, be they Republican or Democrat who contributes to this language and helps create this distortion is part of the problem as well.

The reality is that the bonds that fill the Social Security Trust can be renegotiated at any time and even cancelled. The government cannot default to itself. The bonds issued to the trust fund are not the same bonds the general public or anyone else buys. They are special issue bonds that can only be purchased by the trust fund. This is again, because the fund is a just an accounting trick.

Let's think about it from the this angle. If you write a check to a third party or a check to yourself, which really has to be redeemed first?

Of course there's a promise. By saying "there is no promise" what you're really saying is that it's a promise that you don't think needs to be kept. The fund is more than an accounting trick, it had a very real impact on people's taxes and on the way SS works, and it has a very real purpose and outcome.

Those bonds are not renegotiable. The terms they were purchased under do not allow what you suggest. However think about that for a minute. How many people would buy bonds with such terms? Likely not a person on the planet. Yet these exact terms are what makes all of excess money that goes into the "trust fund" are declared "safe." Yet we have the most regressive tax possible toss every single person's money into a system with such terms and we call that "progressive."

Remember this quite plainly. You can't default or steal if the terms are what you agreed to do. Most politicians intentionally and falsely associate words with Social Security to obscure the fact that it is just another general assistance program paid for with the most regressive taxation. Case law has proven that monies paid in create NO , repeat NO governmental obligation. The rates paid can be renegotiated at any time or even cancelled. The "bonds" that secure the "trust fund" are special treasury bonds that cannot be purchased by anything besides the Social Security Trust. Those bonds are purchased under terms that yield the money and allow renegotiate of any of the terms for repayment at any time. Again, I think it's a political obligation. I don't know whether it would be legal to simply not pay back the money to SS, I doubt it, but I don't know. But I know it would be wrong.

[Protostar]

I do think that Social Security needs to be reformed. I think that there are kinks in Bush's plan to reform it but at least he has a plan. The only other alternatives that Ive heard are to raise taxes (unacceptable, I still remember,how much money they took out of my first paycheck, and how I nearly had a stroke) or to reduce benefits (tolerable,for me at least, but still unacceptable for some). The real kink in Bush's plan is that can you really trust the common American man to invest in anything worthwhile? I foresee a good many people investing in stocks refered to them by emails. They will then end up broke when the stock bombs and the scammers run off with all of the money for the inflated stock prices.

[BRussell]

Originally posted by Protostar
I do think that Social Security needs to be reformed. I think that there are kinks in Bush's plan to reform it but at least he has a plan. The only other alternatives that Ive heard are to raise taxes (unacceptable, I still remember,how much money they took out of my first paycheck, and how I nearly had a stroke) or to reduce benefits (tolerable,for me at least, but still unacceptable for some). The real kink in Bush's plan is that can you really trust the common American man to invest in anything worthwhile? I foresee a good many people investing in stocks refered to them by emails. They will then end up broke when the stock bombs and the scammers run off with all of the money for the inflated stock prices. I don't think the problem with Bush's plan has to do with whether people know how to invest properly. Investing over a lifetime is pretty much idiot-proof. The problem is that his plan doesn't help the problem that he talks about when he pitches the plan, it makes it much, much worse. The problem is that there won't be enough being paid into the system when the baby boomers retire and that bigger-than-normal group of retirees starts getting benefits. You're right, the only way to deal with that problem is to cut benefits to them or raise taxes.

Bush's plan would make that problem worse because in order to put money into private accounts, you have to take money away from benefit payouts. But the problem is not enough money for benefit payouts. If we acknowledge that Bush's plan is an additional spending program, and we actually pay for it, it would be a different story. As it is, it just makes worse the problem it's supposed to solve.

[trumptman]

Originally posted by BRussell
It will take increased taxes and/or decreased spending during that period, there's no question. But it would be wrong to not pay it back in SS benefits.

Actually the future generations will probably find it quite wrong to have to pay it back. Morally it would be quite correct to drastically lower benefit levels seeing as the generation that built up the Social Security surplus will also have spent that surplus along with several trillion more dollars that will need to be repaid.

Of course there's a promise. By saying "there is no promise" what you're really saying is that it's a promise that you don't think needs to be kept. The fund is more than an accounting trick, it had a very real impact on people's taxes and on the way SS works, and it has a very real purpose and outcome.

Very incorrect. What I think has absolutely nothing to do with the matter. Court rulings have stated that Social Security is NOT guaranteed in any form. It is pay as you go. There is no return of investment or anything of that sort.

The fund is absolutely an accounting trick that would be decried as fraud if done by any business. In fact it is very much along the lines of what Enron did. When you use a part of government to hide debts of another part of the government, it should be a scandal. It certainly isn't security.

Please understand that the national debt actually stands 1.5 trillion higher than it is currently listed. It is hidden by Social Security excesses being spent and being called bonds issued from one part of the government to another. When you transfer losses from a parent to a partner in business, it is unethical and wrong. This is true as well in government.

Again, I think it's a political obligation. I don't know whether it would be legal to simply not pay back the money to SS, I doubt it, but I don't know. But I know it would be wrong.

BRussell, you are so wonderful to discuss things with. You are one of the few people on here who does not personalize disagreements. However I have to BEG you to please realize that a debt from yourself to yourself cannot be seen in the same light as any other party. That is why it shouldn't be allowed.

Let me give an example that might make it more clear. You have a 401k. It has 100k in it. You borrow 25k from it to buy yourself a car. It is your money. You have to pay 8% on the loan while the 401k gives you a yield of 6%.

You are driving around enjoying your new car when BAM, you are killed in an accident. Your heirs are now responsible for your estate. Along the way the matter of your loan against your 401k comes up. They simply choose to let them revalue your 401k at the true value of assets in it, 75k, instead of paying back the loan you took out and valuing it at 100k.

Did they do anything morally wrong?

If you can understand this example, we will be very, very close to you understanding why future generations will have no problem canceling or revaluing these special bonds.

Nick

[Carson O'Genic]

Originally posted by BRussell
I don't think the problem with Bush's plan has to do with whether people know how to invest properly. Investing over a lifetime is pretty much idiot-proof. The problem is that his plan doesn't help the problem that he talks about when he pitches the plan, it makes it much, much worse. The problem is that there won't be enough being paid into the system when the baby boomers retire and that bigger-than-normal group of retirees starts getting benefits. You're right, the only way to deal with that problem is to cut benefits to them or raise taxes.

Bush's plan would make that problem worse because in order to put money into private accounts, you have to take money away from benefit payouts. But the problem is not enough money for benefit payouts. If we acknowledge that Bush's plan is an additional spending program, and we actually pay for it, it would be a different story. As it is, it just makes worse the problem it's supposed to solve.

My first day of economics class: "There is no such thing as a free lunch!"

You are very right that the Bush plan only looks like it is offering a real solution when it is really just striking the first blow to kill the system as it currently stands and wash the governments hands of the whole SS problem.

[trumptman]

Originally posted by BRussell
I don't think the problem with Bush's plan has to do with whether people know how to invest properly. Investing over a lifetime is pretty much idiot-proof. The problem is that his plan doesn't help the problem that he talks about when he pitches the plan, it makes it much, much worse. The problem is that there won't be enough being paid into the system when the baby boomers retire and that bigger-than-normal group of retirees starts getting benefits. You're right, the only way to deal with that problem is to cut benefits to them or raise taxes.

Bush's plan would make that problem worse because in order to put money into private accounts, you have to take money away from benefit payouts. But the problem is not enough money for benefit payouts. If we acknowledge that Bush's plan is an additional spending program, and we actually pay for it, it would be a different story. As it is, it just makes worse the problem it's supposed to solve.

Understand that the true costs will look different because you cannot write debts to yourself and still call it investing when dealing with third parties.

You want to save for retirement, but you also want to live it up today. Each month you "save" $1000 in a retirement account. However by the end of each month you have borrowed from that account and written yourself an IOU that you must redeem against yourself at some future date.

In the second example you decide to keep your retirement with a third party brokerage. They won't let you withdraw the money. Now the costs are higher because you can't write IOU's to yourself and use that money today to live it up.

The problem is that no one in their right mind would call the first example "investing" or "security." They would call it what it really is which is lunacy. The costs are higher in the second example because in order to have real return on a real investment, you must have real money in the pot, not an intent to pay at a future date.

Originally posted by Carson O'Genic
My first day of economics class: "There is no such thing as a free lunch!"

You are very right that the Bush plan only looks like it is offering a real solution when it is really just striking the first blow to kill the system as it currently stands and wash the governments hands of the whole SS problem.

Perhaps you should have studied that lesson a bit harder. Free lunch is exactly what boomers are being told they will have with the current system. They are told that they can take their trust fund, empty it out and fill it with IOU's, spend that money today, and that sometime in the future, some future generation will actually refill that fund with cash plus interest, use it to pay for boomer retirement and actually be happy and fully willing to do this even if it prevents them from enjoying the same standard of living or saving for their own retirement.

Free lunch indeed.

Nick

[Gon]

Originally posted by BRussell
I don't think anyone believes it's really a legal guarantee. It's a political guarantee. And if politicians break that promise, I think they'll pay the price. Sorry, but I think there is no accountability like that in federal level US politics anymore. If you put "the other guys" in office, they'll screw you just the same: start wars, take more debt, fatten corporations in a decidedly unfree market, lead the economy toward cataclysm in a giant gamble that has no payoffs for the average citizen. Whether they do it with national socialist or just run-of-the-mill socialist overtones is icing on the cake.

[trumptman]

Originally posted by ShawnJ
1. :lol: (@ pyramid scheme comment)
2. My understanding is that you needlessly complicate political discussions, especially ones that are complicated by themselves. So I'll stay out of this one and try to sort the facts out on my own, TYVM. (Questions such as: what real problems social security faces and what changes, if any, are necessary to keep it solvent.)
3. Why can't people here just admit they want to phase out social security for ideological reasons?

I have no problem with Social Security being a government determined stipend to insure that the poverty rate among the elderly is not exceptionally high. Reading some facts on this matter would do you well. While the elderly poverty rate used to be much higher than average, it is now lower than the national rate and much lower than the rate for children. If you find it compassionate to burden children today with higher poverty so that somone who has lived their entire life may live well, or worse still further burden them in the future to a higher degree that is your preogative. We can do little about today, but we can do something about the future.

Why can't people here just admit (that person being you) that they know nothing about Social Security, it's history, it's origins, or it's mechanisms for funding and instead choose to support a position for nothing more than ideological team politics?

The reality is that Social Security is just another welfare program. People have been duped into believing it is a true retirement account. Most do not understand that it is pay as you go. Fewer still understand the false nature of the trust fund and that it contains nothing more than bonds from the government to the government. The interest paid on those bonds is not paid in any monetary sense. It is simply an exercise in book keeping. The government merely adds more to what it already owes itself and calls it "interest."

Write yourself a check for ten million dollars. Deposit it in the bank of ShawnJ. Once a month have the bank of ShawnJ pay interest to ShawnJ on the deposited "money." In ten years have ShawnJ attempt with redeem this money plus interest.

Better still tell ShawnJ that he is "secure" because of this money. Tell him that any attempt to go outside of this system is wrong and ill intended.

BTW, I find it quite amusing that you prefer to simply dismiss me instead of of engaging what I have posted. The truth of the "trust fund" and it's funding cannot be denied. Better still, realize that if the government counted this bond debt obligation as true third party debt, the national debt would be 1.5 trillion dollars higher.

When it won't count this promise to pay, these bonds, as debt, especially when they are bonds to itself that are renegotiable at any time, as debt, it really should give one pause. If it is a debt that they must repay, but they don't show it as such or call it such, shouldn't you question their motives regarding it?

Nick

[Towel]

Originally posted by trumptman
I politely suggest that you look into the bonds that are issued to the Social Security Trust. They are not the regular marketable bonds that you mention above. They're not regular marketable bonds, but they shouldn't be, because because regular marketable bonds need to be held until maturity - while the trust fund will need to regularly cash them in at a rate different from that at which they were bought. Yes, if they were marketable, SSA could sell them on the open market at a loss, but that would both be inefficient and cause huge distortions in the Treasury markets during the relatively short period when all those bonds are being redeemed. So instead, SSA owns special-issue bonds that are non-resalable, but permit face-value redemption at any time.

From the SSA's own website (http://www.ssa.gov/OACT/ProgData/fundFAQ.html) (which I still trust more than some random "the sky is falling" economist from the Heritage foundation):By law, all income to the trust funds that is not immediately needed to pay expenses is invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. Almost all securities held by the trust funds are "special issues." Such securities are available only to the trust funds. The DI Trust Fund holds a very small amount of "public issues" (marketable securities available to the general public). The OASI Trust Fund holds no public issues. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss or enjoy a gain if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash. Data on trust fund investments provide a breakdown by interest rate and trust fund for any month after 1989.Edit: The details of the bond issues are immaterial, anyway. Either they're backed by the full faith and credit of the United States Government, or they're not. They are. I find it difficult to believe that defaulting on any particular flavor of T-Bill will be seen by investors and foreign governments as substantially different than defaulting on any other flavor of T-Bill.