Social Security not a cause of, and not a solution to, national debt

Just like blaming CRA for the financial industry meltdown, there are many who will lie about Social Security in order to support their agenda

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The famous Clinton surplus was actually a result of including Social Security money in the federal budget. Democrapic smoke and mirrors.

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“In reality, the trust fund contains government IOUs that taxpayers today and tomorrow will have to redeem, probably through payeing higher taxes.”

As the boomer reach retirement age, it is the perfect time to ensure they have their benefits intact as their children shoulder what should have been their parents burden. Perfect, that is, if you are a boomer.

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And also you would not have to increase the retirement age to 70.

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The Republicans have been against Social Security from the beginning. Like the Roe V Wade opponents, they will not stop unitl they have overturned Socia Security. Deep down, the Republican philosophy is “every man for himself” and is some don’t make it, well, that’s life.

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Scout – before you cut and paste that crap AGAIN (what is this? the 3rd time, at least), would you please do a little research??

http://www.snopes.com/politics/socialsecurity/changes.asp

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Snopes is your friend.

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If nothing were done about the perceived Social Security deficit, the current dollars in the “trust fund” would continue to pay all recipients at a 100% rate until the year 2037; even then, the payout rate would be 70% of the requirement.

Increasing the ceiling for payment of the Social Security taxes from the current $106,000 to $500,000 yearly would be more than enough to handle future obligations.

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Matti,

“Snopes is your friend.”

And the truth is rarely Scout’s friend….

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JCB – 11:19 – I would go so far as to say that I don’t think they’re even on speaking terms …

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Dumdacrats stirring the pot again, twist and spin

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#1) Scout is not the final word on anything as he has been wrong before.

There. Fixed that #1 of yours for ya. No need to thank me.

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Well, I say get rid of SS total. But only after I draw mine and then die. This spending’s got to stop. Except maybe for war. And I don’t count Tax Cuts. They don’t cost nothing.

And keep the guvmint’s hands off of my Medicare.

Have a good dinner everybody.

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Social security, a great program that works. I’m glad its the third rail of politics and it should be strengthened to the point that people could retire at age 60 with full benefits.

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Social Security!

Been paying in for a lotta years, and am proud to call it ONE of the
plans we count on for our retirement.

Thanks Democrats for keeping safe from the GOP!

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Is hypocriting (I luvs how one can make nouns into verbs these days) a generally acceptable pasttime for Christians these days. Just wonderin’.

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Scout – before you cut and paste that crap AGAIN (what is this? the 3rd time, at least)

I really wish Jay would take it down, so that we could discuss Jay’s post, instead of getting waylaid once again over whether Scout is merely delusional, or a pants-on-fire liar.

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TV evangelists, etc.

You mean like the promoters of antique gold coins.

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The topic of today’s blog is a clear indication of the way the Repubs have framed the political argument by using half-truths and innuendos about “kitchen table” subjects.

Social Security, in no way shape or form, affects the national debt. Social Security is paid for by those who work, yet, the money is used by the politicians to fund many of their projects. Then we are told we are going broke because of Social Security entitlements.

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“Libs are always right in their on mind, but their usually wrong in everyone elses mind”

it’s called being reality-based rather than faith-based.

give it a try.

“Put yourself in that bucket while you’re at it.”

um. nope. I’ll put up my batting average against yours any day of the week (and twice on Sundays) … unlike you, I at least take the time to check my facts before posting

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Anyway, just so it’s clear, when you hear Very Serious and Responsible people going on about “entitlement reform,” what they really mean is “let’s screw the workers who thought they were actually providing for their futures all those years.”

And Jay, call the “bipartisan presidential commission looking for ways to reduce our national debt” by the name known to those who are actually looking at what they’ve been up to.

It’s the Catfood Commission. Featuring these lovely fellows.

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Finally!! A Jay post on which I totally agree. In fact, if the government does not honor the SS pledge, all will see what JohnnyReb looks like when I make the nightly news protesting in DC – it won’t be a pretty sight.

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JohnnyReb – Be sure to cover up your buttcrack!

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Jay, with regard to your previous blog, how do you think Barack Obama stacks up on the authenticity scale?

Well, I don’t know about Jay but I, for one, think he’s real, even without a long form certificate of authentication… like Beck offers with every purchase of doubloons or like comes with every Cabbage Patcher.

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Saw a great bumper sticker today, it read ( Educate a Democrat today, it will make for a better tomorrow. )

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“This crap again? See how well you do in the private marketplace investing in something that pays you a guaranteed annuity for the rest of your life.”

That should tell you it’s a bad idea. But what’s crap about the facts? SS is a bad deal for most workers.

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“SS is a bad deal for most workers.”

a regular guaranteed annuity to supplement your own retirement savings?

oooooo … yeah … bad idea …

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Jackie 11:40

“Social Security, in no way shape or form, affects the national debt.”

Absolute statement.

” Social Security is paid for by those who work, yet, the money is used by the politicians to fund many of their projects.”

So… if SS funds were not used to pay for those projects then, absent higher tax collections, we’d have to issue more debt to cover those projects.

So, Social Security, in some way or form, does affect the national debt.

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stands for decibels

“what they really mean is “let’s screw the workers who thought they were actually providing for their futures all those years.””

Actually, people qualify to receive benefits by their work and wage history. That can be changed at any time. What they pay over the years is not to pay for their retirement, but for current retirees.

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“So, Social Security, in some way or form, does affect the national debt”

Actually, no it doesn’t. The money was borrowed to pay for tax cuts, but SS *itself* is self-supporting. That stupid policiticians shoe-horned it into the budget process does not indict the SS system and does not make it part of the budget. The budget problems were only hidden by the borrowing, but were not affected by the SS system.

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Has anyone seen my lock box. When Gore and Bush were on the campaign trail, how did Bush counter Gore’s “lock box” talk. Did he promise to chase bin Laden to the Gates of Hell. No. Wait a minute. Wrong campaign promiser.

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What they pay over the years is not to pay for their retirement, but for current retirees.

Well, to a certain extent, yes. however. What’s being spoken of as somehow on the table is for the Catfood Commission to excuse, is that money paid into the treasury, which was supposed to be available to people who’d been paying in surplus going back to ‘83.

You tell all these people “oop, sorry, we spent it!” and you are stealing from them, plain and simple.

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@Paulo977

I’m glad someone noticed the way the Repubs handle things.

@Paul

The key to your 11:58 post is the word “if.”

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“Absent SS receipts to draw on for meeting general revenue obligations, holding other receipts constant, the national debt would have increased”

You’re saying the same thing I just said: “The budget problems were only hidden by the borrowing, but were not affected by the SS system”

The SS system did not cause the budget problems and is not part of the budget problems, it just made it easier for the politicians to lie to the public about the effect of their tax cuts.

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Jackie

“So… since SS receipts were used to pay for those projects, we have seemingly lower debt than we would have had.

So, Social Security, in some way or form, does affect the national debt.”

Care to reengage?

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@Paul

Technically, you are correct in your statement. The money in the Social Security trust fund is used by the politicians to pay for projects, therefore, the national debt is affected.

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Doggone/GA

I didn’t read it that way when I wrote ““So, Social Security, in some way or form, does affect the national debt” and you responded “Actually, no it doesn’t.”

Thanks for the clarification. As I said in my first post to Jay, it’s technically correct. But continuing current practices means there’s one more debt crisis we have to deal with and people are fed up with politicians saying “we have a problem” and then shrugging their shoulders.

Saw Larry Sabato of Univ of VA this weekend. I’ll have to reconsider an assumption which was that there’s a general anti-incumbency mood out there. He said no, the anger is being directed at the party in power and so Nov’s going to be worse for Democrats than they now see.

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Jackie

But it’s easy money to divert, and there’s so darn much of it, and any problems will be waaay after the politicians leave office (well, maybe not with our career Congress, but you get the idea).

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Maybe changing the military over to a defined contribution instead of defined benefits might help as well. $55B and change “borrowed” from the Treasury last year to keep it afloat. And the rules…20 years is 50% no matter how young you are when you hit the 20 years? Sweet!

actuary.defense.gov/cfo2009.pdf

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“You only pay 6.2% percent Social Security income tax, the employer pays the other 6.2%.”

I pay it all as does everyone. Half of it just doesn’t show up on the pay stub.

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Mick

Good point about the safety net. It’s not the be all and end all, but for too many people, sadly, that’s just where it ends up. I’d read on Sen Leahy’s website that SS is all that keeps 40 percent of seniors above the poverty level.

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Maybe one fix would be to make sure past practices (funding general obligations with SS receipts) doesn’t continue?

A lockbox? Fine with me, but given that this is revenue we’re talking about, those “general obligations” will just get called something else. But, okie doak. I think I agree on principle.

Beyond that, this blood-pressure raising political discussion really doe matter. A lot of this is cloaked in mystery, but here’s what I do know. People who should know better are BSing us by lumping a responsibly funded program that took the utterly unprecedented step decades ago to actually account for future shortfalls by funding THEM, as well, with every other Federal program in varying degrees of very real fiscal crisis (not to mention the patchwork quilt of State budgets in terrible shape, affected by all this).

Guys like Alan Simpson should be ashamed. Well, they really should be drawn and quarterd, but I’ll settle for ashamed.

Anyway, gotta run. Have fun batting down some of the crazier IT R A PONZEE SKEEM!!!! stuff that’s sure to arrive.

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If I start drawing social security benefits at age 62, I will deplete the principal (assuming I add no more to it between now and then) that was paid in over the years by myself and my previous employers in eight years.

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Simpson has always been one disgusting, nasty SOB. Such cretins never change – not even in old-age.

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@godless heathen

Seems that you have your facts wrong.

http://law.freeadvice.com/government_law/social_security_law/social_security_tax.htm

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Are there or are there not just IOUs left in the SS fund? The 2037 date is considered correct only if the IOUs are paid back. It’s $2.5T to pay back. That money has to come from somewhere and it’s going to add to our debt.

So, in reality, SS is not solvent until 2037.

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“in reality, SS is not solvent until 2037″

Actually, SS is solvent…it’s the general budget that is insolvent

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Paul–I forgot to acknowledge it, but really enjoyed the Kelley’s Hero clip. They don’t make ‘em like they used to, that’s for sure.

Mick–From last night, you’re cool in my book, whatever our political differences are.

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Plus, the David Walker of the Peterson Foundation makes it clear that SS isn’t really solvent and that our national debt is really $61.9T. $61.9T!!!

Walker is well-known and non-political. He served under many administrations on the left and right. He is very well respected. Watch I.O.U.S.A. for the real details.

SS is not solvent.

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Doggone,

They are the same thing. If we don’t have money in Pot A to give to Pot B then Pot B is no solvent.

Do you run your household finances with the same logic you apply to the national debt?

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I’m surprised that no one really sees the big picture. We can talk about how SS has been handled Iin the past, you can acuse one party or the other for managing, mismanaging and so forth, but the point we all should focus on is this clown in Washington who doing nothing to incourage small business today, many can’t make it today, they are unemployed and Oblamer does not care, screw SS people need to work now,all these stats are worthless, they don’t consider 10 percent unemployment. Oblunder wants to spend another 50 Billion stimulus when the first did not work. We should be out raged, I just hope to make it to the age of retirement, Oblamer is an Idiot and his croonies are giving bad advise, I can’t wait till Nov. we can get rid of some of those politicos who only serve them selves.

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Social Security, in no way shape or form, affects the national debt. Social Security is paid for by those who work, yet, the money is used by the politicians to fund many of their projects. Then we are told we are going broke because of Social Security entitlements.

Jackie–Just my opinion, but the “creative accounting” which the government employs by “merging” SS money with that of the general fund makes Big Business look honest when the quarterly earnings reports come out.

Sure, when there were 25 workers for every retiree it made sense. But now it’s a lot closer to 1:1.

Jimmy, another large part of the problem is that today’s retirees are drawing out waaaay more than they ever put in. And given the voting strength of the AARP, that’s never going to change.

Which is the answer to health care reform critics who say “government cannot, and has never, mandated participation in an insurance scheme. Auto insurance applies only if you have a car.

Paul–Hate to spill the beans, but an individual can reduce their contribution by setting up a corporation, then declare a significant % of the money they receive as “corporate earnings” rather than “personal income”.

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The US government does not issue IOUs. All instruments
issued are negotiable. The ‘dollar’ in your pocket could be
called an IOU as it is a Federal Reserve Note.

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Oblunder wants to spend another 50 Billion stimulus when the first did not work.

Deep Throat–In some positive news, the AJC announced a little while ago that:

“WASHINGTON — President Barack Obama will call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of showing action on the economy ahead of the November elections.”

http://www.ajc.com/business/official-obama-to-back-607961.html

I’m not sure if it’s just a political ploy, or maybe Obama finally woke up to the fact that Business, whether large or small isn’t the enemy.

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A lot of the GOP supporter would be hungry if not for SS. AND, so will many of the current supporters who think they can do better themselves.

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You’re right…it isn’t the cause or THE solution. It’s PART OF the solution. Raising the age to 67 would be a good idea.

“To repeat, Social Security is not to blame for our financial problems. And it should not be treated as a piggy bank to be raided and not repaid, at the expense of those who count upon it.”

That can be said about every entitlement program.

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Doggone,

Who gets paid back first? I can tell you who that is. That’s the people we owe money to. Our creditors…China, etc. If we don’t pay them back first then we can’t borrow more to do anything with. Then what do we do?

$61.9T in debt…the real debt, right now.

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What the US owes is actually not able to be calculated.
Predicted pensioners may not live. Politicians may
renege on promises. Other governments may not pay
debts. Corporations may fail. All statistics are guesses.

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Bruno 12:45, one can only hope, perhaps he’s feeling the pressure, but I’m afraid its just another political ploy , saying cut taxes here and gouging here, and why has it taken so long to react, the average person has known for several months the economy continues to drop. Just cheap politics leading up to Nov. elections.

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@Deep throat

I hope you don’t mind my disagreeing with you about the competence of the Obama Administration. If anything, they did not ask for enough money to re-invigorate the economy. You do realize the numbers showing the amount of cash on the balance sheets of corporations is at record levels; the productivity rate of workers is at record levels; the interest is at record low rates; inflation is under control; the demand side of the equation is at levels where economic activity could be robust; the number of jobs created during the recovery is at a greater pace than at any time since the Great Depression. The total number of jobs lost during the last 10 years is more than 8 million.

You make the statement that the small business requirements have not been handled by the Obama Administration in an adequate manner. You may want to look at the package the Repubs have blocked concerning the small banks and making loans to small business.

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Social Security exists solely for people that are too foolish and stupid to budget for their own retirement. I could do a lot more with the 6-odd percent that the government seizes from me every pay period through private investment than the government could ever hope to do through its bloat and corruption.

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@Bruno

The creative accounting the government uses is accounted for, outside the DoD. Big business uses derivatives, creative default swaps, write-offs and other tax avoidance gimmicks to mask their actual worth.

Getting back to Glass-Stegall and Generally Accepted Accounting Procedures that are transparent would go a long way toward putting our financial house in a position where we could begin to understand what is what.

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“they’re going to have an all-out RIOT on their hands.”

There, Jay, fixed that typo — you can send me a gift card for a steak dinner later. No need for it now. Thanks.

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Jackie 12:54THE NUMBER OF JOBS CREATED DURING THE RECOVERY IS AT A GREATER PACE THAN AT ANYTIME SINCE THE GREAT DEPRESSION.

Wow, I would love to see where you get your info, obviously you don’t get out much or listen to the news or talk to the neighbors or listen in on conversations at the grocery, Wow , I’mblown away by your lack of knowledge.

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The Supplemental Security Income program which is
administered by the Social Security Administration
is on budget and affects the deficit an debt. It is a copy
of SS except it is not direct tax funded and is need
qualified. Old, Blind, Disabled and never paid into
social security,you get money as long as you are
poor enough.

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At the same time that Social Security taxes were being “borrowed” to pay for general budget items, a tax on 50% of Social Security benefits above a certain amount of earned income went into effect. In other words, the government started taxing current recipients on the proportion of payments attributable to the employer’s tax contribution.

So not only is the government pretending that it has no obligation to repay the huge amount it borrowed and continues to borrow from the SS trust fund. Not only are opponents of SS claiming that the fund is insolvent (i.e., sorry, we borrowed so much from you that you’re broke and need to go into bankruptcy.) But also the government is piling a tax on a tax.

Can life get any better?

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bruno

Always happy to share the luck, everybody could use a break every now and then.

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Scout…I get that stupid Social Security BS in my email about 5 times a year….Sent by you guessed people like you.

It’s easily debunked, perhaps a little more research into what you post,
unless you think we are stoopid.

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maybe Obama finally woke up to the fact that Business, whether large or small isn’t the enemy.

In many ways, big business has become the enemy of small business. Then they point the finger and say, “Look! The Gub’mint is crushing you!” True competition does not exist where monopolies have taken over. “Free market” principles really only work when the little guy has a fighting chance at a piece of the market, and that happens less and less now that giant, multi-national corporations have more rights than average citizens, and essentially own our legislators and write whatever “regulations” they enact.

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Paul

September 7th, 2010
12:34 pm

Lots of disparagement of Sen Simpson here. Doesn’t say much about Pres Obama’s judgment, does it?

No it doesn’t. Especially when this knucklehead comes out with comments
like this. “Simpson, the Republican co-chair of the President’s Deficit Commission, who at one time chaired the Senate Veterans’ Affairs Committee, complained in an interview that veterans receiving disability payments for illnesses associated with their exposure to Agent Orange during their service in the Vietnam War run “contrary to efforts to control federal spending.”

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“the economy is the biggest problem we have faced and he has neglected to focus on it.”

Piffle

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popeye

Has there ever been a politician of national prominence who hasn’t come out with an occasional boneheaded comment?

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True competition does not exist where monopolies have taken over.

Matti–The government has been fairly vigilant in prosecuting cases in which “predatory pricing” or other illegal business practices can be proven. Wal-Mart has been hit with several lawsuits like that. In general, though, they succeed by offering a larger selection and better (legitimate) prices than Mom-and-Pop can. It’s hard for me to say that shouldn’t be legal. Personally, I shop with smaller retailers when quality is an issue. For single-use items, I shop based on price only.

In some instances, such as utility companies, a monopoly makes sense. That is with everyone but Comcast. They definitely gouge the consumer.

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Bruno,

Well, now that you’ve said that, you know that I’m just gonna do it more — to annoy you.

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Social Security, like all liberal government programs, is a totally awesome deal for working people. Pay in 12.4% of your income, every week for 50 years, retire, and then get a monthly check that is just about big enough to pay rent on a double-wide somewhere off Bankhead Hwy. Totally awesome!!!

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Nice column.

You can add the Medicare Trust Fund into the mix. Treasury borrowed that per Reagan in the mid 1980s. I believe Treasury has the authority to borrow up to $5 trillion from the Medicare Trust Fund.

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Well, now that you’ve said that, you know that I’m just gonna do it more — to annoy you.

I wouldn’t have expected any less from you, Bosch.

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Actually, a lot of retired people live in small trailers on little lots. That’s about all that their social security checks will cover and they don’t exactly have any other savings to draw on. Some even live in campers. There are entire communities of just such folks up here in North Georgia as well as in other places all over these fifty states. Well, I don’t know about Alaska and Hawaii. I hear it’s kinda hard to drive your mobile home to those places.

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Jay, as I pointed out regarding a previous post of yours about social security, you’ve now engaged in hypocrisy. Social Security is not a savings account. Furthermore, it is a huge part of the solution to budget problem, as Peter Orzag points out today in the NY Times (http://www.nytimes.com/2010/09/07/opinion/07orszag.html?ref=contributors). Finally, Medicare is a big part of the problem as well and will have to undergo further cuts, somehow.

Jay, I find this just irresponsible to delude people into thinking Social Security is ok. The facts don’t bear this out. I get hacked when Republicans engage in manipulation of the facts, and I just can’t say that this column is anything other than extremely irresponsible. Social Security is a slush fund moving money from one generation to the retired generation. There are no assets held by the trust fund. Social Security is breaking even now and will incur monumental deficits in the future. The only way to cover those deficits will be to borrow more money from the public. This will increase the deficits, the debt to GDP ratio, and risk causing a monumental financial crisis.

I for one hope the deficit / debt commission suggests a wholesale revision of social security so that in the long run it operates similar to the Chicago school of thought / the Chilean model. Good grief, I feel like a Republican today now.

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David Walker has never advocated debtor’s prison.

That’s why I used the phrase, “If he is advocating debtor’s prison… Geez.

Notice the first word is “if,” the same word in the FDL article that Granny Godzilla linked—On CNBC’s “Squawk Box” recently, Walker seemed to long for a return to debtor’s prisons. If he’s nostalgic for debtor’s prison, the next step is to advocate the return of debt bondage, or perhaps people being sold into indentured servitude.

I emphasized the words “seemed” and “if” just so you would understand that FDL was also expressing an opinion.

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I STILL keep asking the Libs why they picked Obama over Hillary, but can’t get a straight answer.

Because she’s unelectable.

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Not a Hillary fan but I do have more respect for her than some one who lies, and blames every one else because he is an idiot.

But will you still respect me in the morning.

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Kamchak,

You didn’t use the word ‘if’ in your first post that attacked him.

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Social Security should be for the destitute only. Think of it as it should be, welfare 2.0 for the most needy and utterly penniless.

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Granny…

piffle

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I still can’t figure out why the cons picked me. Then again, they also picked McCain so maybe it’s our good looks — like that Kennedy guy that got elected that time.

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USUK:

why I believe it was just last week that @@ nearly had an aneurism because I said I was surprised that a conservative on this blog was able to even spell the word “compromise”, much less understand the meaning. she accused liberals of being condescending and elitist and all sorts of other atrocities.

I’m sure she’ll be equally excoriating of Deep Throat’s post …

I don’t think so.

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If the employer didn’t pay that 6.2% to FICA, he would give it to me, so I pay the full amount.

HAHAHA. Is Tuesday “stand up comedy” day or what! That sounds a lot like that joke about companies charging less for their products if we get rid of their taxes and start paying 23 percent at the point of sale. The punch line there is that POS does not refer to Point of Sale. I’ll leave it to your imaginations since this may be a PG comedy show.

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I think everyone needs more socialism. It is just wrong to stay cooped up and alone all day by yourself.

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Jay, if you want to engage in criticizing the deficit commission. Otherwise you’re just hollering from the peanut gallery.

Since you apparently don’t believe in changing social security, here’s what you in essence suggest in some part or all:

1. A doubling of taxes paid
2. A permanent shutdown of the US military in its entirety, phased in over the next 10 years
3. An end to any discretionary spending.

The concept that nothing must be done to fix social security is so absurd as to be unbelievable. I need a beer. I may have just become a Republican voter in November after reading this absurdity.

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Hillary wanted an even larger healthcare reform than Obama and Democrats just could not go for that.

I don’t believe that for an instant. Socialized medicine is every Libs’ dream. Pelosi just didn’t have the cojones to propose it. So, instead, we get all the drawbacks of socialized medicine, with none of the benefits.

Because she’s unelectable.

I appreciate that honest answer, Kam. To be honest in return, I was surprised that McCain did as well as he did given his poor campaign, lack of personal charisma, and disastrous choice of a running mate.

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@Bruno

Your 1:46 posed the question as to why I think business is not moving in a positive direction.
I believe there are those who have the same attitude as the Tea Party; I want mine now, regardless of how it will affect the future.

Check out the Chamber of Commerce and any other conservative web site. They have more-or-less indicated they are trying to destroy the Obama Administration before America is destroyed. What nonsense!

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I may have just become a Republican voter in November after reading this absurdity.

Welcome to the Big Tent, jm.

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Jay, yes, you’re correct. But the key point that he also acknowledges is that something must be done to fix the giant long term hole. I’m fine with phasing the changes in over 5 or 10 years, but you can’t let this sit and fester on without reforms put in place. If you do, the US literally goes to belly up.

Again, to the problem is a long term problem, but it has to be fixed now, not when US debt starts trading at a 14% yield.

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@godless heathen

You prove my point. People like you purport to know what you are speaking of, pontificate this foolishness about your employer giving you 6.2% he paid into Social Security and you keep putting this foolishness out where other people can read it with some believing it. Does it give you a headache to keep telling things that are not true?

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To your second point – It happened, and yes, the SS IOU’s are treated the same as other debt. The problem is, its money we owe to ourselves so some people have a hard time understanding it. To “pay that IOU debt back”, we have to issue public debt. Therein lies the problem.

If all my assets are jointly owned with my wife, and I loan her $100k, but she’s not making any money, and then I ask her to pay me back (but she can’t because she doesn’t make money), so she pays me back by borrowing $100k from a credit card company, I then have a huge problem. That, in analogous form, is what is going on with SS.

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“At that same 5% assumed return, you could withdraw $41,000 per year to live on (roughly double what SS will pay you) and never touoch the principal amount, leaving you $832,000 to pass on to your heirs.”

Exactly. But libs think they are getting a good deal.

How long does it take to get that principal stashed away assuming you take 6.2% of your current earnings and stash it away while earning a whopping risk-free average annual yield of let’s say 5%, just for fun. Shall we do the numbers.

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@Jackie,

Your knowledge of business is the foolishness. The employers FICA contribution is part of the cost of hiring the employee. If the employer doesn’t pay it to FICA, he can give it to employee to invest as the employee sees fit. That allows the business to better compensate employees while making the same or more profit than if they sent a % to FICA. You are confusing employee compensation with welfare.

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“It was never intended as strictly a savings program.”

It’s a welfare program, in other words.

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afternoon all.. i like the year 2037.. of course.. thats just a myth.. kind of like some of the other posts on here. as jay likes to bring the cbo into the discussion all of the time… the cbo had stated in 2009 that the ss “tipping point” would not occur until at least 2016… well.. that has come and gone now.. 6 years earlier than expected..

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An article in the current Newsweek points out that the money needed to fix Social Security is just about the same as the tax cuts for the rich that Obama wants to eliminate.

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Harry 1:48, the sad thing about your retirement plan is your not factoring the Oblunder factor, which is he will want to tax you and give your money to some one who did not save for retirement

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@godless heathen

The conversation had nothing to do with FICA; it was about Social Security.

Secondly, you should read and understand what you are talking about before you make specious claims about what you know and what others don’t know. Time your time and read the big words for understanding.

http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax

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I think Hillary possesses the greatest political mind of our time, so quite naturally she would understand just exactly how polarizing and unelectable she is.

I remain convinced that Hillary lost the primary for one reason: her vote in favor of the war powers resolution. Barack Obama clubbed her over the head with that vote every time she appeared to be gaining some momentum.

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I did not speak precisely in that the Chamber of Commerce website had information pertaining to the right-wing effort to destroy the Obama Administration.

Really Jackie? Here are your words.

Check out the Chamber of Commerce and any other conservative web site. They have more-or-less indicated they are trying to destroy the Obama Administration before America is destroyed.

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G.W.

September 7th, 2010
2:13 pm

“How long does it take to get that principal stashed away assuming you take 6.2% of your current earnings and stash it away while earning a whopping risk-free average annual yield of let’s say 5%, just for fun. Shall we do the numbers.”

G.W., let’s try some reading comprehension, K? I already did the numbers. 6.2% of your income, plus the mandatory employer match, at 5% over 45 years, equals $832K.

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Kamchak

September 7th, 2010
2:19 pm

“I think Hillary possesses the greatest political mind of our time”

There’s your sign, sport.

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Union

September 7th, 2010
2:27 pm

“well.. the question i always found so curious was.. if ss was such a good plan.. why were county and federal employees given the option of opting out?”

Same reason federal employees are exempt from Obamacare…

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How long does it take to get that principal stashed away assuming you take 6.2% of your current earnings and stash it away while earning a whopping risk-free average annual yield of let’s say 5%, just for fun. Shall we do the numbers.

Here’s the math for you, G.W., since your three GT degrees have let you down again. The parameters that Harry Callahan laid out are as follows:

P = 40,000 x 12.4% = 4960, I = 5%, N = 46 (65-20 + 1). Plugging these numbers into the compound interest formula gives a final vale F of $836,678. My figure is different from harry;s because, even though he is a sellf-described math geek, he forgot to include the endpoint of the span from 20 to 65 in determining his value for N.

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The trust fund is just an accounting mechanism to keep track of how much money one part of the government (Treasury) owes another part of the government (SSA). If Jay or anyone else actually believes Social Security isn’t a major problem and there really is a trust fund, then why doesn’t the government just set up a trust fund for all its expenditures? We could have a defense, trust fund, for example, where the government designates a certain percentage of your taxes go. Then they “borrow” from the trust fund an put special government bonds in place of the actual assets. Then, magically, the trust fund will pay for everything in the defense budget.

You can’t spend and save the same dollar. Social Security is absolutely part of the problem. That doesn’t necessarily mean there should be Social Security cuts, but please don’t pretend the “trust fund” solves anything.

Jay, you’re too smart for this.

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Union

September 7th, 2010
2:27 pm

“well.. the question i always found so curious was.. if ss was such a good plan.. why were county and federal employees given the option of opting out?”

Same reason Obama collects millions from teachers unions and puts his own kids in private school…

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G.W., nice try on attempting to ignore the mandatory employer match on the 6.2% SS tax, but…it’s only y our side of the aisle that is gullible enough to buy that one…

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Paul,

No, Paul, No, I don’t wanna talk about Muslims and have Scout telling us for the bajillionth time that to ignore them we do at our own peril.

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“G.W., nice try on attempting to ignore the mandatory employer match on the 6.2% SS tax, but…it’s only your side of the aisle that is gullible enough to buy that one…”

Harry, it’s really sad how little ability 3 degrees from GT confers these days. BTW, I’ll let you off the hook for forgetting to include the endpoint for your given time span.

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Jay wrote the following at 2:03:

“Furthermore, if, as you claim, there are no assets in the trust fund, then China and Japan and a whole lot of people who bought T-bills also have no assets, because the debt we own those creditors is just as real as the debt we owe Social Security. People have been paying extra to SS for more than 25 years, and now you and others want to pretend that it never happened.

Except that it did.”

Here’s the difference: If you, I, Jay, a corporation, or China buy a T-bill, it is an accounts receivable on our books and an accounts payable on the government’s books. The bonds in the file cabinet in West Virginia that people call the Social Security Trust Fund is an accounts receivable for the government and an accounts payable for the government. The net effect is nothing.

I’ll say it again: you can’t spend and save the same dollar no matter what Jay Bookman says.

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“Lions and Tigers and Bears, Oh My !”

Headline (CBS): “Polls Offer Grim Outlook for Democrats in November”

http://www.cbsnews.com/8301-503544_162-20015666-503544.html?tag=stack

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And what does this self-proclaimed genius, Bruno, have to show for his fifty years on this earth? Nothing. Perhaps you would do better by concerning yourself with your own failings in life and not worrying about others so much.

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I changed my experiment to make it more real-world…

Since most of us start out at a low salary, and earn pay increases along the way, I amended my spreadsheet to show a $25,000 starting salary at age 20, and a 2% annual pay increase, resulting in a final salary at age 65 of $91,000.

Under this scenario, with the same 5% annual rate of return, your retirement sum is $838,904, and you can spend $41,945 annually, regardless of how long you live, and never touch the principal, which can be passed on to your kids and/or grandkids.

Or, you can stick with the government plan and get used to that double-wide…

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Headline (CNN): “Democrats to the president: Get a clear message”

“From union activists to Democratic members of Congress, the message to the White House is clear: They want President Obama to present a clearer, more coherent message about his plans to turn around the economy.”

http://politicalticker.blogs.cnn.com/

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G.W.

Haven’t you heard? It’s Libs that are supposed to engage in personal attacks to divert attention from the issues or for when they can’t make a coherent argument. Not Cons.

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How’s that “Hope & Change” working out for the economy ?

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Headline (ABC): “Bob Woodward’s New Book, ‘Obama’s Wars,’ to be Released Sept. 27″

Hummmmm …………. this can’t be good for the Dems. come November. I guess Woodward couldn’t be bought off.

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Jay, I refer you back to one of your older posts. I understand your sentiments here, but the discussion on SS requires not engaging in fear mongering. And now, until the Dem Party and anyone else defending SS stop believing in magic, adult discussion is impossible….

“Until GOP stops believing in magic, adult discussion is impossible”
http://blogs.ajc.com/jay-bookman-blog/2010/08/03/until-gop-stops-believing-in-magic-adult-discussion-is-impossible/

(incidentally, I think I agree with 100% of this earlier post by Jay)

To quote:

“That’s a critically salient point. When we increase government spending, we finance it by borrowing more money. Everyone gets that part. But the second part of Greenspan’s observation shouldn’t be controversial either: Tax cuts are financed the exact same way, by borrowing more money and adding to the deficit.”

“Every dime that taxpayers send Washington is spent, and once money is spent it cannot be “returned.””

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Harry,

How many people start out making $25,000 at the ripe young age of twenty and continue to work every year while enjoying a yearly raise of any sort all the way to the retirement age of 65. I think you might have a hard time pitching that one, for openers, given the number of people that cannot even land a minimum wage job right now. Let’s see, minimum wage would pull in a whopping 52 weeks x 7.25/hour x 40 hours/week or $15,080. Then again, there’s always overtime.

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“The Los Angeles-area Carson-Gore Academy of Environmental Sciences, named after Gore and pioneering environmentalist Rachel Carson , was built atop an environmentally contaminated piece of real estate, the Los Angeles Times reports. Some are now raising concerns that the $75.5 million school — which sits across the street from an oil well — may pose long-term health risks to its students, faculty and staff, as the groundwater beneath it is contaminated by chemicals.”

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Harry,

By the way, back when I was 47, I also earned substantially more than $91k per year in salary as well. But that was then. This is now. Now, I just reap the benefits. Math may have had a small role in it. Like any tool.

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People don’t save money.

If your Median HOUSEHOLD income is $40K, there more than likely more than 1 working and you won’t be saving much money after taxes.

5% is no lock, timing is everything when involved with markets.

People don’t save money.

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LOL at Jefferson…people don’t save money…stupid is as stupid does…

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Harry

“Anybody else note that Bookman, Kamchak, and Granny Godzilla all disappeared as soon as we started the math excercises?”

Ummm…. maybe they weren’t interested in a future-year money management discussion that doesn’t include discounting?

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Paul…Ummmm….maybe they weren’t interested in seeing the liberal sacred cow Social security exposed for the complete joke that it is?

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Paul…Ummmm…maybe the 5% annual yield I assumed is artifically low, and we could have used 8% – 9%, adjusted down for inflation, and arrived right back at 5% ???

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Jefferson, LOL at me if you wish, but I have substantial savings set aside.

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stands for decibels…why don’t you look into the historic return rates on stock market investments and get back to us?

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I asked this earlier:

See how well you do in the private marketplace investing in something that pays you a guaranteed annuity for the rest of your life.

Really should’ve added “with COLAs each year” in there.

Anyhow, still waiting for someone to provide me with real life examples for comparison.

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Harry, I said you could LOL at yourself, I could care less what you have nor am I laughing at you or calling you stupid. What you say won’t work in reality, that’s all.

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Mick:

That is so very fair of you.

Remember now, no reading of any books about socialism OR democracy !

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why don’t you look into the historic return rates on stock market investments and get back to us?

I have. There’ve been times when it sucked, times when it didn’t.

What you don’t seem to grasp is that SS was intended as a hedge against that investment. You want to invest above and beyond that safety net, swell. (I do). If you can parlay those dollars into a nice income for retirement, great.

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Anyone else chortle when Scout decided @ 2.22 to copy/paste a cheezy, unsourced email forward in reply to charges that he’d simply copy/pasted a cheezy, unsourced email forward @ 11.10?

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Jay seems to like charts. How bout this chart? (Link below; I know Heritage is a conservative think tank, but this is reasonably accurate). Even at 20% tax revenue / GDP, entitlements consume al tax revenue by 2065. Or you can double taxes and everyone stops working. Obviously, something has to be done to fix SS.

http://www.heritage.org/Research/Reports/2010/08/~/media/Images/Reports/2010/SolutionsforAmerica/Vol3_750px.ashx

http://www.heritage.org/Research/Reports/2010/08/The-Entitlement-Crisis

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Many of you are more or less young and full of vinegar. You think you are to good and smart to ever need social security. When you’re 65 and life has worked you over and the only thing between you and the street is social security, you’ll sing a different tune.

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According to snopes.com, snopes.com is completely accurate and legit. Therefore, it must be so.

Scout–Substitute the phrase “the Bible” for “snopes.com” in your above statement, and we can call it a wrap.

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For some who picked Obama over Clinton …so what is your point?

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A useful link concerning social security reform:

http://www.wharton.universia.net/index.cfm?fa=viewfeature&language=english&id=937

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Anybody else note that Bookman, Kamchak, and Granny Godzilla all disappeared as soon as we started the math excercises[sic]?

If you torture numbers enough Commie, you can make ‘em say anything.

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P.S. stands for decibels :

I am sure you can find that UCLA study if you Google it ……………

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Bruno:

The Bible is the one thing on this earth that doesn’t need ANY help from me !

“Heaven and earth will pass away, but My Words will last forever.”

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Sorry, Jay. But on August 28th at the Lincoln Memorial, America spoke. We are:

T axed
E nough
A lready!

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HC 3:32 – I do likewise. If you can’t learn to live within a standard of living that permits saving, you’re consigning yourself to future poverty. When winter arrives, only the squirrels who’ve been storing away will make it through.

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What we pay today goes to the parents and grandparents, it ain’t a savings account. It a social program, the name ought to tip you off. A little socialism goes a long way

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Paul…I don’t need to retype it…you need to re-read it…I was responding sarcastically to suggestionfrom Bookman and others that you can’t invest at a rate of return higher than inflation.

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Just more ignorance from the right. Cut military spending by 50 percent (after we get out of Afghanistan). How? By closing the thousands of bases around the world that we don’t need. Quit making weapons we don’t need. Get rid of this welfare for the military contractors. Leave SS alone.

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Harry,

Really. I’m not even old enough to draw social security but I won’t turn my nose up to it when I do get old enough. Besides, it would only be about $1500/month if I start taking it at 62 and I already get more than that from my pension.

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Jay, its also true that Social Security doesn’t exactly produce a great rate of return. Depends on your income level to some degree. Either way, the problem with Social Security isn’t so much “rate of return” as it is about mismatched liabilities and assets as a result of demographic shifts.

The problem is, the funds provided to retirees come from those working today. If the math there doesn’t work out, it blows up. Ergo, demographics are the problem. The only solution to always having the demographic shift problem is to transition to a system where those receiving payments are getting them from their own savings.

God forbid if the US population or economy ever decline over the longer run. Then things get really nasty really quickly…. none of the projections consider this unlikely, but possible scenario.

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The Bible is the one thing on this earth that doesn’t need ANY help from me !

Still couldn’t shake you, eh, Scout?? I’ll at least give you points for consistency.

BTW, for a good laugh, here’s a quote from Jay’s Jan 1, 2009 column:

“By Taxpayer

January 1, 2009 9:06 AM | Link to this

Happy New Year. I predict that 2009 will be the year of enlightenment.”

How’d that work out for you, Taxpayer?? Were you enlightened??

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FOR ALL THOSE HUNG UP ON THE RATE OF RETURN ISSUE, here’s some reading.

1.32% currently, negative if you’re a minority and / or have a short life expectancy.

http://www.heritage.org/research/reports/1998/01/social-securitys-rate-of-return

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sfd 3:43

I laughed. I shouldn’t have, but dang, that was funny!

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No ducking the truth by Callahan, Jay. Sorry.

But if y ou’re right, and Socail Security beats the market, how can the government provide Social security payments without increasing the debt? I anxiuosly await your reply Jay. Please don’t duck the truth.

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@RW(original)

There are many more of those links that show how The Chamber of Commerce and other so-called conservative organizations conspired to make things difficult for all of us to make a political point for the Repubs.

If you don’t believe, try a web search.

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SS is Old Age and Survivors, Disability Benefits. Not
an Investment but an Insurance Policy. If you pay in
an appropriate amount of time, and get disabled you
get paid. If you die your kids and wife may get paid.
When your wife gets old she can get paid on your
policy. When ‘investing’ you have to factor in an
insurance policy cost to compare.

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Jay, my numbers are FACT, and YOU know it.

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Jay,

I’d like to say thank you for not giving the crazy FL man the attention he obviously is craving.

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Well, it is not like we really have to worry about inflation too much given the most excellent reset buttons that we have in place these days. What with the stock market resetting itself to less than where it started over an eight year period and housing prices resetting. If only gas and electricity and healthcare and such would follow suit.

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Hmmmmmmm…….Got another ” Please help me” letter from Paul Broun….LOL!!

10 cents postage………………the other 32 cents subsidized by you know who ?

Poor guy, he must really be in trouble if he is asking ME for help. Its not like ive written him a dozen times telling him how i feel about issues. Of course, there was no response. And now he wants MY help. LMAO!!

I am going to send it back like i did the last time. Pfffffft……vote against a bill banning the selling of animal crush videos.

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Jay, please tell us what the average starting salary was for a 20-yr-old in 1954, cite your source, and I’ll be glad to run another iteration of my model.

Thanks in advance.

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Tick…tick…tick….

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Jay, still waiting, when did I say that my model assumed 1954 start date? Tick…tick…tick…

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If you’re a single black male that gets shot before 65, your rate of return is negative 100%.

Of course, as someone pointed out earlier, it is an insurance program of sorts. But that’s still food for thought. In some ways, the richest that will live the longest benefit the most from social security, while the poor with low life expectancy get hosed.

How’s that feel if you’re a liberal? It doesn’t excite me too much, and I’m not a liberal.

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It’s a good thing that the Federal Government doesn’t have to comply with Sarbanes/Oxley. If they did, there would be hell to pay.

Social Security funds have been plundered by our money spending leaders. Timelines really don’t matter. The truth is that the money has been used for something else and IOU’s don’t buy crap and there isn’t enough money coming in to pay for what is going out. Social Security was another progressive dream that had all “good” intentions (as all progressive programs do) but those pesky “realities” weren’t looked at with a critical eye (as is most often the case with progressive ideas). Roosevelt at least said, (though he probably knew better), “we shouldn’t saddle future generations with the costs of our actions”. Boy, if he could see what Obama and Co. are doing now he would just love it. Roosevelt was the man that wrote the bible on mixing progressivism and politics. He held no special loyalty to either one, only to himself.

And hey, if you want to know what progressivism will get you, try to catch at train in Paris today!

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social security can provide benefits to each spouse a
person has for 10 years or more. a good argument against
polygamy, from the government’s standpoint anyway.

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If you are opposed to socialism does that make you opposed
to Happy Hour?

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OK, just because a few of you don’t understand that the 5% assumption in my original model was a lowball assumption chosen for the specific reason of taking inflation out of the equation…

Let’s re-run the model…

Assumptions…

A) a 20-yr-old guy born in 1990 getting his first job in 2010
B) who has a starting salary of $25,000
C) who gets an annual pay increase of 2%
D) who works 45 years and retires in 2055 at age 65
E) who invests 12.4% of his income in a stock market based mutual fund, earning the proven long-term market return rate of 10%
F) but suffers inflation losses of 2.63% annually

This person will have accumulated $3,336,000 by retirement. At that same 10% earnings rate, he can withdraw $336,000 each year to live on, without ever touching the $3.36 million principal, thereby leaving it to his heirs.

Howver, the 2.63% annual inflation rate has reduced the buying power of his $336,000. Based on the formula;

(1 + .0263)^45 = 3.216213, his income is now only worth;

$336,000 / 3.216213 = $103,728

Now, I’m thinking $103K is better than social security, but whatever…

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I took the liberty of re-running the models with all of the same assumptions as 4:17. except a minumum wage startng salary of $15,080. Results are;

$2,012,335 retirement amount

$201,233 annual retirement income

$62,568 inflation-adjusted buying power in year 2055 of the $$201K

I anxiously await your responses, as always…

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I can already smell smoke from Paul & Jay’s heads exploding as they try to refute the updated model…

“But Harry, inflation is more than that…”

“But Harry, nobody earns 10%…”

1) If inflation is higher, wages go up by more than 2% annually also.

2) 10% is the long-tern yield on the stock market.

Read ‘em and weep, boys.

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Seeing how anxious you’ve been on this blog today, may I suggest:http://www.healthcentral.com/anxiety/find-drug.html

I was anxiously awaiting to see who would post something along those lines myself.

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My numbers still garbage Jay? LOL

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Jay 4:23 – of note, last paragraphs:

Advocates of privatization point out – correctly – that Logue’s analysis compares theoretical stock returns with what the Social Security Trust Fund earned – not what he himself would get from the system.

From that perspective, the investment approach looks better, they argue. Over the long run, a typical worker can expect to earn 4.6 percent a year (after administrative costs) on a diversified portfolio of stocks and bonds and only about 2 percent or less from Social Security, according to federal estimates reported by Michael Tanner of the Cato Institute, long a proponent of privatization. Hypothetically, someone earning $30,000 annually would at the end of a 40-year career receive nearly twice as much under the investment approach ($344,000) than with Social Security ($185,000).

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By the way, my model only assumes a 2% annual pay increase, which is les than the 3.42% inflation adjustment, which menas that my income numbers are WAY low. In real life, the model would make SS look even WORSE…

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Now, I’m thinking $103K is better than social security, but whatever…

What if someone had the bright idea of adjusting social security payments for inflation.

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Jackie,

It was your charge and it should be incumbant on you to provide the proof of this evil plot by the Chamber of Commerce. I won’t be going off on a wild goose chase on your behalf.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Interesting debate on the nest egg model. If someone started out in 1954 with the small number that Jay B states then doesn’t the rate of annual increase have to be adjusted way upward from the modest annual increases Harry built in to the equation?

Harry,

Just for kicks why don’t you adjust the annual increase in wages to accurately reflect the last 56 years and then project that over the next 45? (I’m not sure why Jay B is going forward 45 and back 56 years though)

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We need someone with your assumptive skills.

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Note to self: Next time copy your work and see if all your items have already been addressed before posting….

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As you approach retirement, you begin moving out of stocks and into less volatile instruments. Get a clue.

You mean like things that earn a rate of return more like treasuries? But, wouldn’t that impact your calculations too.

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Harry

“You want me to email you the Excel file Jay so you can learn how to do financial analysis?”

Oh, puhleeze. I don’t mean this snarky. Maybe. But you really call that example “financial analysis?”

As I said, take it to a certified financial planner and ask him/her if that qualifies as ‘financial analysis.” Be sure to tell him/her no matter what the response, you won’t be back to spend more money.

Then wait for the answer.

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This really doesn’t have anything to do with Social Security. They’ve been taking money from it to pay for other things for years. The chickens are heading home; it’s about roosting time. Follow the money.

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G.W.

September 7th, 2010
4:32 pm

“You mean like things that earn a rate of return more like treasuries? But, wouldn’t that impact your calculations too.”

Yes, you would earn less as you approach retirement, but as stated above, my 2% annual raise number is way low too. It is what it is. Get over it. Social Securtiy is a joke.

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Harry

“Paul, please purchase “Stock Market For Dummies”

As you approach retirement, you begin moving out of stocks and into less volatile instruments. Get a clue.”

Oops, you did it again.

I asked a couple questions about your assumptions, and that’s the response?

Lots of namecalling, overt as well as passive-aggressive, but no answers.

Diversion, diversion, diversion.

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Jay, I think your 4:34 is a fair and level-headed response, and I’ll try and take the high road as well.

I don’t think my numbers were garbage. I do this for a living. Social Security is in no way, shape or form a decent investment fro any working person.

If you look up the historic SSI tax rates, when the program began the tax was like 1% capped on the first $2,000 you made per year. It was great for the first retirees, because, like all Ponzi schemes, the people who got in at the bottom got back 10 times more than they ever paid in.

But now, unfortunately, we’re at the point where the music is stopping and there are no more chairs. We’re hosed. Social Security is a bankrupt joke.

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Jay 4:37 – what’s funny is that the government didn’t pay him out based on that. That was based on the returns the “fund” earned on its IOU’s. What he actually got out (or what anyone on average would get out) is substantially less. As the article points out at the end, returns have historically been around 2%. Obviously not great, not awful for what is supposedly a “guaranteed” investment.

Fact – SS returns are not great.
Fact – SS returns are not awful considering its a “guaranteed” “investment”
Fact – the biggest problem with SS is demographic (birth rate and life expectancy)
Fact – the demographic problem will drive the US into bankruptcy or hyperinflation if not addressed
Fact – either way, SS then become worthless
Fact – therefore, something has to be done to fix SS

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HC 4:41 – very true.

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Jay 4:37

Now add in longevity increases over those 45 years….

And Harry

I just assumed in my earlier post some things were self-evident. Like the comparison of your 10 percent return compared to a local gov’t entity calling 8.5 ‘dreamy.’ Or the concept of a sensitivity analysis – varying an input and seeing what effect it has on output, especially to see if the input has a greater effect than other variables or what was expected. Like increasing an investment return from 7 percent to 8.5 percent, giving far rosier projections and leading to horrendous consequences when life doesn’t follow the plan.

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Jay

September 7th, 2010
4:37 pm

“For 45 years, the defense-industry analyst paid into the system until his retirement in 1994. But with all the recent hoopla over reform, Mr. Logue, a Massachusetts Institute of Technology graduate, decided to go back and check his own records. Would he have done better investing his money than the bureaucrats at the Social Security Administration?

He recorded all the payroll taxes he paid into the system (including the matching amount from his employer), tracked down the return the Social Security Trust Fund earned for each of the 45 years, and then compared the result with what he would have gotten had he been able to invest the same amount of payroll tax money over the same period in the Dow Jones Industrial Average (including dividends).

To his surprise, the Social Security investment won out: $261,372 versus $255,499, a difference of $5,873.”

See my 4:41…

If he retired in 1994 after 45 years, he began paying into SSI in 1949.

The initial rate was 3%, as compared to 12.4% today, and capped at the first $3,000 of income;

Year Social Security Tax Rate
1950 3%
1960 6%
1970 8.4%
1980 10.2%
1990 12.4%
2000 12.4%
2008 12.4%

source… http://www.justfacts.com/socialsecurity.asp#Taxes

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I still say lifting the income cap from 106,800 to 500,000 or 1 million would fix the system

Why should the middle class have to have all their income taxed for SS and the wealthy just a fraction.

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Larry 4:49, wouldn’t matter in some ways. Most of the wealthy income isn’t earned from wages, its from investment gains or dividends. But supposing you applied SS tax to investment income, it would work. Of course, the rich already pay some of the highest marginal tax rates in the world in the US. So on top of state taxes, federal taxes, corporate taxes (since their income comes from investmetns) and full SS taxes, they would be getting to keep something like 73% in taxes assuming all the current tax cuts expire at the end of the year, which they need to.

If I get to keep 27% of my earnings, hell, I’d go to the beach and move my money to Asia.

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I’m not sure why anybody would invest in just the Dow, but if he died a few months after turning 65 how much would his family keep out of these two amounts?

That would depend on whether he had children and what their ages are and if he had a spouse, of course. And if he were single, who would get his estate? Perhaps he willed it to his cats or donated it all to embryonic stem cell research or had every last cent go toward paying for life support in his final days. Too many possibilities.

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Harry, what you don’t understand is that most Americans are either too stupid or too lazy to invest much thought or time into planning for their financial lives. That quality in the populace is what the Democrats rely upon for building their base. They want people dependent upon the government so they can dictate to them how to live. You’ll never convince them dude. Numbers don’t matter to progressives, only polly-anna emotion.

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Pogo, no doubt. But I still naively believe all humans have the capacity to learn.

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Pgog,

“what you don’t understand is that most Americans are either too stupid or too lazy to invest much thought or time into planning for their financial lives.”

With so many unscrupulous bankers and financial advisor’s out there, it is so easy for someone who is not in the finance industry to get sound advice. Ask Mr. Madoff.

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Harry

I was going to give you the serious answer, but Jay beat me to it.

It’s kinda like people who work at companies where they get socialistic-subsidized Cadillac plan health insurance. Med providers get a low percentage of what was billed, maybe 20-30 percent. People without insurance get billed the full amount. So, people at lower incomes, without insurance, subsidize those of higher incomes whose premiums are already being paid by someone else.

And they don’t get taxed on the benefit, either. Unlike people who buy their own.

Wealthy get a lot of welfare and subsidies from those who earn less.

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“Bump and Grind” dancing and Hip-Hop in the East room of the Whitehouse. Both of which, as we know, are such positive influences in our society today. That should win Obama and his merry band of Democrats a lot of points in the midterms. If it wasn’t so sad it would be funny but it isn’t funny. I am really beginning to believe Obama is living by the “Party like its 2013″ philosophy. He obviously is not considering another run because how else could you explain his behaviour.

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Paul 5:02 – I need to also add, most of those places that have higher tax rates also provide your health care. So in return for higher taxes, you get government managed and paid for health care.

I don’t like gov’t healthcare, just something to understand regarding what is embedded in the “you get what you pay for” tradeoff, assuming you ever get what you pay for in gov’t.

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First, it’s called Social Security for a reason. Whatever else those of us who like to play the market, gamble, “invest” or what have you think about our own skill, expertise or wishful thinking, we’re a minority. Most American workers lack the knowledge to even understand what most of us are talking about, and even if they did certainly aren’t in income brackets to consider such, living paycheck to paycheck. Leave if alone. It serves a purpose and a necessary one the security of the society…

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Jay

September 7th, 2010
5:04 pm

“Ah yes, but when Social Security funds are hijacked to offset tax cuts for the rich, and SS recipients are then told sorry, benefits must be cut because we have no money to pay you, THAT’S when the subsidy thing comes into play.”

Right…they raise taxes on the top 10% of wage earners to make up the social security for EVERYBODY. Sounds like the rich subsidizing the poor to me.

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Jay, I already think Deal is a crook.

Fun choice: to vote for those who steal, or those who enable “stealing” with the tax code. Both parties are guilty. At least Barnes isn’t a crook.

Both parties frankly make me ill.

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At least Deal released his tax returns. A couple of follow-up questions;

1) Has Deal done anything illegal or unethical regarding his taxes? He didn’t write the tax codes to my knowledge.

2) Has Obama released his tax returns?

3) Are his tax returns hidden away with his birth certificate and the Rose Law Firm billing records?

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Bruno, why don’t you share those supposed flaws in my model with the group. Thanks in advance.

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JAY
@ 5:24

And he is, after all, a Republican….

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Do you suggest we eat them?

Perhaps some fava beans and a glass of Chianti?

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jm

I understand many of those countries have a health tax in addition to a national tax. Paid for by very nearly everyone.

Which is one reason it’ll never fly here!!

But as my dad said to me when I was quite young “at least people in those countries feel like they’re getting something for all the money they pay in.”

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K’chak

With some garlic bread and maybe avocado slices and hearts of palm?

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Charlton…
Disposal of the bodies would be a logistical and sanitation nightmare otherwise…

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What’s wrong with “subsidizing” the poor? Do you suggest we eat them?

Would Vegans get an exemption? And isn’t that the tax code got in the mess it’s in?

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Harry 5:19

“Paul, a couple of questions that should be easy for a smart guy like you;”

See, that’s a handler or politician lead. Fake compliment, underhanded jab intended on the surface to be complimentary.

I do notice you’re quite fond of asking questions. But never answering them. Unless I’ve missed an answer along the way.

Manners?

“The people without insurance get billed the full rate, but in most cases they never pay, so how are they subsidizing those of us with insurance again?”

Many people self insure and pay their bills. For those of meager means, medical facilities work out payment schedules. Or, they turn bills for those who haven’t paid over to collection agencies. Many will not settle for much less than amount owed. That’s how the subsidizing works. I know it makes those with insurance feel better to think all who don’t get free care and skip paying, but that’s not reality.

Jay

How did Deal do that? What write-offs or deductions?

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Bruno, why don’t you share those supposed flaws in my model with the group. Thanks in advance.

Harry, you started off with a model that assumed a flat income throughout one’s lifetime. You then revised your model to start with unrealistic wages for 45 years ago. Then, when pressed on that, you claimed your model was forward-looking beginning in 1990, not backward-looking to 1955. And in all the scenarios, you miscounted the actual number of years of contribution by failing to include the endpoint year in your time period.

For the sake of any hypothetical clients you have, I sincerely hope that you’re not a financial planner.

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Hi josef nix!

How’re the new crop of kiddies?

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Jay

Thanks.

See Harry? That’s another example of how the poor or modest-means households subsidize the very well off. By contributing to the government treasuries a much higher percentage of their income. All legal (moral’s another matter).

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Jay

September 7th, 2010
5:28 pm

How much of a percentage of his income did President Obama donate to charity?

Seems less would be required through the form of taxation if more gave “more” to charitable contibutions

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Paul 5:26 – several fair points. I think capital and labor should be taxed equally (if we have to, and can’t use a VAT in lieu). So the hedge fund carried interest and other breaks are pretty bogus in my book.

But double taxation is real, and even the gov’t realizes its a problem, which is why the set up sub-S chapter corps. But that doesn’t cover the vast majority of corporations.

Here’s the double tax problem:
1. Rich people will always do stupid things to game the system
2. You can’t just tax the corp earnings, because if they’re not distributed, the owners have no $ to pay the tax
3. If the co earns money, but doesn’t distribute (because they want to reinvest, or avoid taxes in a 0% corp tax world), the shareholders are making $ for now, but not having to pay tax
4. But ultimately you’re taxed on the cap gains and dividends through those taxes, so technically, you do get to pay the taxes. But again, in a 0% corp tax world, people would defer earnings forever and then when they have a huge hit, hire an attorney to try to help them out of it.

Its a real conundrum, I don’t have an answer. But the double taxation distorts a huge amount of economic behavor, to the detriment of everyone in this country.

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PAUL
They’re great! We’ve got a bumper crop of those who didn’t have pre-K due to the lack of slots available and one of my charges is trying to get them ready for regular kindergarten. Had one that the regular teacher was all ready to refer as having learning problems…couldn’t hold a pencil or crayon…talking to him, I found him quite bright and alert, but I had to admit that the samples the teacher gave me were not real good…so, I started with him on holding the fat crayon…no wonder he couldn’t produce…the little b*gger is left handed…it was all I could do to keep from telling the teacher “duh, Doris…” and then I realized she’s new and that master’s in education curriculum from her prestige school had never told them to check that…oy, gevalt!

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jm

Good information, thanks. Seems like it’s another case of tax theory meeting reality.

That last example I gave? I became aware of it just a week or so ago from one of my friends. I can see his point – a decade of risk, lower salaries, horrendous hours, etc, all banking on a big payout. But… he did all that because of the then-tax code. And now, ten years later, it’s a new set of rules and the tax hit could be tremendous. Got me to thinking if there really shouldn’t be a different rate for those who just earn a wage or salary and those who start companies, build them up, then sell. Then again, the streets are littered with those who had the same dream and saw it all go south.

No easy answers.

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You is supposed to make the southpaws sit on their left hand so they learn how to do things proper like.

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1.) “With no changes in taxes or benefits, Social Security can continue to pay 100 percent of all promised benefits between now and 2036. It can do so by tapping a $2.5 trillion trust fund created precisely to cover the retirement years of the Baby Boom generation.”

When I read the above statement I wrongly concluded that this author, like the vast majority of journalists who write about Social Security, did not know what he was talking about. But, later in the article, the author does expose the great Social Security scam–the fact that, for the past 25 years the government has routinely “borrowed” or “stolen” (Whichever word you prefer) every dollar of the surplus revenue, generated by the 1983 payroll tax, leaving the trust fund empty.

I have been trying to expose the scam ever since I first stumbled upon it, while doing research for a Social Security book more than ten years ago. I have spent the past decade researching Social Security funding, which has resulted in the publication of four books on the subject. I have been warning about the Social Security fraud for longer than Harry Markopolos tried to warn the SEC about Bernie Madoff’s Ponzie fraud with the same lack of success. Only recently have my warnings begun to see the light of day. Allan Sloan quoted me and referred to my book, “THE BIG LIE,” in his August 10 Washinton Post column. To the best of my knowledge that is the first time that the awful truth about the trust fund has been reported by the mainsteam media during my ten-year crusade to expose it. Below is an excerpt from Sloan’s article:

“Let me show you in two different ways how useless the fund is. The first is a quote from the introduction to the 2009 Social Security trustees report, the second is the graphic by my Fortune colleague Robert Dominguez that accompanies this article.
Allen Smith, economics professor emeritus at Eastern Illinois University and author of “The Big Lie: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” spotted the 2009 quote, and it is telling.
It says: , “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”
In other words, the trust fund is of no economic value.”

I am so pleased that the author of this article is also reporting on the awful truth about the trust fund. For 25 years the United States government has been looting the Social Security contributions of working Americans and using the money to fund tax cuts for the rich, wars, and other government programs in violation of both federal law and the public trust. I don’t think it is an overstatement to call this scandalous activity as “THE CRIME OF THE CENTURY.”

For more information, please visit my website at http://www.thebiglie.net.

Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University

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The charity figure and income figure do not include the $1.4 million Nobel Prize money, all of which was donated to charity.

You’ve got admire that he was smart enough to dodge the taxes on that Nobel award. I guess it paid to have Timmy around.

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extension to 5:52 – and even that proposed solution doesn’t work well. Because what really counts is just cash. Corporate earnings are very changeable and subject to all kind of theoretical BS, which is why taxes on cap gains and dividends make more sense than corp taxes.

But again, if you only tax cap gains and dividends, people leave all their earnings in the corp forever.

I guess a VAT is the way to go. The VAT is probably what Orzag dreams about at night. And on the weekends.

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Remember, that God (who instituted the “tithe”) commanded that the very poor give 10% and the very rich give 10%.

So, Deal needs to fork over another three percent or so. How ’bout you, Scout. Did you pay Uncle Sam ten percent of your income.

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Scout

That was Old Testament. Malachi, wasn’t it? New Testament: many of the churches held stuff in common, gave according to their ability to support others. Not just ten percent. Lotttttssssss more.

Bloody Christian socialists…..

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Ronald Reagan, Alan Greenspan, and the Great Social Security Heist

When Ronald Reagan became President in 1981, he abandoned the traditional economic policies, under which the United States had operated for the previous 40 years, and launched the nation in a dangerous new direction. As Newsweek magazine put it in its March 2, 1981 issue, “Reagan thus gambled the future—his own, his party’s, and in some measure the nation’s—on a perilous and largely untested new course called supply-side economics.”

Essentially, Reagan switched the federal government from what he critically called, a “tax and spend” policy, to a “borrow and spend” policy, where the government continued its heavy spending, but used borrowed money instead of tax revenue to pay the bills. The results were catastrophic. Although it had taken the United States more than 200 years to accumulate the first $1 trillion of national debt, it took only five years under Reagan to add the second one trillion dollars to the debt. By the end of the 12 years of the Reagan-Bush administrations, the national debt had quadrupled to $4 trillion!

Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later. It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built. Ronald Reagan was a cunning politician, but he didn’t know much about economics. Alan Greenspan was an economist, who had no reluctance to work with a politician on a plan that would further the cause of the right-wing goals that both he and President Reagan shared.

Both Reagan and Greenspan saw big government as an evil, and they saw big business as a virtue. They both had despised the progressive policies of Roosevelt, Kennedy and Johnson, and they wanted to turn back the pages of time. They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich. Since we don’t know the nature of the private conversations that took place between Reagan and Greenspan, as well as between their aides, we cannot be sure whether the events that would follow over the next three decades were specifically planned by Reagan and Greenspan, or whether they were just the natural result of the actions the two men played such a big role in. Either way, both Reagan and Greenspan are revered by most conservatives and hated by most liberals.

If Reagan had campaigned for the presidency by promising big tax cuts for the rich and pledging to make up for the lost revenue by imposing substantial tax increases on the working class, he would probably not have been elected. But that is exactly what Reagan did, with the help of Alan Greenspan. Consider the following sequence of events:

1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)

2)The Greenspan Commission Recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.

3)The 1983 Social Security amendments enacted hefty increases in the payroll tax in order to generate large future surpluses.

4)As soon as the first surpluses began to role in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything. The surplus Social Security revenue, that was paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.

5)In 1987, President Reagan nominated Greenspan as the successor to Paul Volker as chairman of the Federal Reserve Board. Greenspan continued as Fed Chairman until January 31, 2006. (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus revenue.)

6)In 1990, Senator Daniel Patrick Moynihan of New York, a member of the Greenspan Commission, and one of the strongest advocates the the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers. Moynihan locked horns with President Bush and introduced legislation to repeal the 1983 payroll tax hike. Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the jar should be emptied, so there would be no surplus Social Security revenue for the government to raid. Although the Moynihan proposal was supported by the conservative Heritage Foundation, the liberal Institute of Policy Studies, and the U.S. Chamber of Commerce, it was vigorously opposed by the Bush administration. President Bush would have no part of repealing the payroll tax hike. He was not about to give up his huge secret slush fund.

The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, beginning in 2016, the government will be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything.
Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University
Website: http://www.thebiglife.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812

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Jay

I gave an incomplete account. Part of the angst was their very good and very expensive tax attorney making them aware of tax law changes that could hit around the time of their proposed sale. I don’t know enough of the specifics, but my impression was it’s significantly different from today’s tax scheme. Sorry.

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Jay 5:59 – possibly depends on how it was set up legally…. LLP and LLC’s would be cap gains. Not sure how it would work with sale of a C or S-Corp, but I’m guessing it should be cap gains as well.

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Matti

Malachi. Third chapter.

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Retro-Teacher :

A heck of a lot more than that !

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Hillbilly D,

Paste the long URL in the box here and make a little one

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Hillbilly

I was always taught that those who feel obligated to make a point of it have insecurities as to their worth as a human being…

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I’ve just always thought it tacky to brag about one’s degrees and/or salary.

Obviously a sticky subject for some but I suppose it could just as well be a matter of one’s perspective. Perhaps pride or something else. Then again, one could show a little more humility and refer to one’s degrees and or salary with a select adjective, such as “darned”, tacked on just to help tone it down a little. Anyway, that’s how I would have to honestly refer to my corn crop this year — darned corn crop. Excuse me for my language.

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Retro
Well, there’s pride and false pride..

“Pride goeth before destruction, and an haughty spirit before a fall.” Proverbs 16:18

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Matt

Sure. Far as I recollect, it’s the only part where the concept is referenced as a command. Malachi, the prophet, said “Bring the whole tithe into the storehouse.’ So he was referencing that which was understood – a tithe – it wasn’t a new thing. As Scout pointed out at 6:19, the NT reference is to that which was understood.

‘course, as I picked up from your earlier post, I’d hazard a guess that a main purpose was to help out the unfortunate and carry on the work of the ministry. Not so the local minister could get a new Mercedes 600 and lease a Gulfstream.

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josef:

Proverbs 21:9
“It is better to dwell in a corner of the housetop, than with a brawling woman in a wide house.”

Proverbs 21:19
“It is better to dwell in the wilderness, than with a contentious and an angry woman.”

Amen and Amen !

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PAUL
The concept of a “tithe” was originally to bring in a certain percentage of the crop for storage as a hedge against drought, crop failure and famine….