A ‘Race to the Top’ for Social Security
If you’re below a certain age, your annual Social Security statement is accompanied by a fact sheet titled “What young workers should know about Social Security and saving.”
The fact sheet explains that the Social Security Trust Funds are due to go broke by 2037 and that, as things stand now, payroll taxes won’t cover “the full benefit amounts scheduled.”
“However,” it says, “this does not mean that Social Security benefit payments would disappear. Even if modifications to the program are not made, there would still be enough funds in 2037 from taxes … to pay about $760 for every $1,000 in benefits scheduled.”
Benefits won’t “disappear”? Well, that’s reassuring!
The fact sheet presents this potential 24 percent haircut for Americans around my age as a worst-case scenario. Prudent souls will recognize that, with fewer workers and more beneficiaries who live longer, it may be the best case.
I fear the temptation to “fix” Social Security by giving Washington more authority is too great (witness the result of the year-long health-care debate). Pension reform for 300 million-plus people is most likely to result in bigger government, higher taxes, lower benefits.
But what about reform for 5 million, 10 million, even 20 million Americans at a time?
What I mean is a kind of “Race to the Top” for Social Security reform, in which states compete to devise solutions for the program on a smaller scale.
Give state governments two years to draft plans for people younger than a certain age; people above a certain age would remain in Social Security. Actuaries would set the appropriate cut-off, but let’s assume it’d be around age 50.
The feds would allow the best plans, or maybe any plan that’s sound, to move forward. They could be experiments for a federal reform or simply a devolution of power to the states.
Why would a state even want to participate? Because, in the states whose plans were chosen, jobs would be exempted from the federal Social Security payroll tax, a total 12.4 percent for employee and employer.
That would free states to create their own payroll taxes to replace a portion of the federal tax. But states would have every incentive to keep from replacing the entire amount, making themselves as attractive to employers as possible.
Talk about a job-creating stimulus. How would it work?
To gain broad support, I’d leave the ideological direction of the plans to the states themselves. They might be more progressive, perhaps by using means testing or graduated tax rates. But I would expect many states to be more free-market, with true private accounts.
Is it wise to let people invest more of their savings, given the losses sustained by some 401(k) accounts? There are of course risks, which states could address in designing their plans.
But long-term investments that are risk-weighted for the investor’s age and retirement plans can still provide a better return than Social Security has in the past. And given our national finances, there’s also risk in counting on Social Security.
The plans could be only for state residents, open to people in any state (like existing 529 college-tuition savings programs), or designed to draw new residents. They could be designed to take in state employees as a way to transition out of similarly unsustainable public pension plans.
Now, why would citizens want it? For one, it would allow for true reform that enhances personal freedom and limits government, which will be far more difficult to do nationwide.
It might also make government more responsive. In Georgia, a congressman has 14 times as many constituents as a state representative does.
This is, I admit, a radical proposal. But we need to consider ideas that are big in ways other than their price tags.
Tell us what you think about the site
Customer Care »
Vacation stops, manage subscriptions and more
AJC Services
Sections
Other Editions
Visitor Agreement | Privacy Statement
© 2013 The Atlanta Journal-Constitution
107 comments Add your comment
Not So Casual Observer
September 9th, 2010
11:39 am
Peter,
A taxpayer covered since 1937 and paid the maximum each year would have paid slightly more than $125,000 in Social Security taxes. Just why have you paid “well over $200,000″?
Assuming you were 16 in 1937 you would now be 89 years old.
Not So Casual Observer
September 9th, 2010
11:46 am
The only difference between Madoff and Social Security is the government has the power to send Madoff to jail and “we the people” are unable to send the Congress to jail.
There is no Social Security Trust Fund, all of the receipts go in to the general operating fund of the government – sort of the way Madoff took investors money in to his general operating fund. I believe this was changed during the Presidency of Lyndon Johnson, certainly under a Democrat President.
Dems lose big
September 9th, 2010
12:05 pm
“Boy, that hurt! That’s the most intelligent comment I’ve heard from a Republinazi in ten minutes or so. Your defining of the word triage was fascinating in its slavish recapitulation of the definition given in the dictionary. Your reference to an article in the New York Times came from a Republinazi web site, probably Hannity, and should not be construed as evidence that you have the intellect and taste to read the Times!”
Wow Cowbell, Republinazi? It must truly suck to be you, little girl. Carrot Top can come up with better put downs.
Like I always tell demotards like you. Go sell stupid somewhere else.
Dems lose big
September 9th, 2010
12:07 pm
“Your reference to an article in the New York Times came from a Republinazi web site”
The New York Times, like the AJC, is a failing newspaper full of left wing retards.
Jefferson Jackson
September 9th, 2010
12:20 pm
Dr. Pangloss sounds like Dr. Rose Colored Glasses.
Sandra
September 9th, 2010
1:15 pm
All I can say is for all of you who think you have the answers to EVERYTHING and primarily end up quoting things that are soundbites from Fox News, why don’t you put your money where your mouth is and run for office yourself. Also, please know that name calling is about as stupid as a person can get and that seems to be the primary thing that most of you are good at. I’m still not sure you even know what the definition of ‘liberal’ is other than for what you don’t agree with.
For those of you who won’t even put your name here but use names such as Dems lose big, it tells me just how
Gordon
September 9th, 2010
1:19 pm
“There’s nothing wrong with the current system that simply lifting the cap on earned income eligible for SS taxation won’t repair.”
Other people’s money is such a powerful addiction. The resources are running out, so let’s just take them from people who have more than we do and try to come up with a justification for why that is right. Expect to see more and more of this in the coming few years.
Dems lose big
September 9th, 2010
1:22 pm
“For those of you who won’t even put your name here but use names such as Dems lose big, it tells me just how”
Oh really, Sandra? I love how left wingers like you and others play the “innocent” card yet while you’re scolding others about name calling, you call people stupid. Nice, shows everyone just what a hypocritical hack you really are.
Of course people don’t use their real names. IT’S A BLOG! What’s really funny is the fact that you totally ignore the fact that I was name called by Calhoun before I ever threw out an insult at him/her.
Take your self-righteous attitude somewhere else.
Question Authority
September 9th, 2010
1:24 pm
And just what exactly makes you think you can wear the label “conservative?”
The government has absolutely NO business telling me what I should or should not do with my income! If you were a principled conservative you would know that.
SS is a Ponzi scheme. There is no lockbox, there is no fund. Every dollar that is taken from my paycheck and my employer (or every dollar taken from an independent businessperson) goes into the general fund and is used to pay current recipients. Despite the lie they have been telling everyone since 1934, your money is not yours, it is not somewhere earning interest, nor being saved for your retirement. If they wanted to tomorrow, they could just shut off the payments and say “up yours” to all americans. Frankly, every time they raise the retirement age or cut benefits, they essentially are doing that. YOU ARE NOT ENTITLED TO THE MONEY THEY STOLE FROM YOU. GET OVER THAT LIE. THE GOVERNMENT LIED. THEY CONTINUE TO LIE. THEY WILL ALWAYS LIE.
That being said, there is absolutely nothing the state could do that would improve the situation aside from secceeding from the union and freeing us all from the criminal gang that runs DC.
If we had a sound monetary system (gold and/or silver), a balanced budget, only a handful of people working in government jobs, a responsible foreign policy or non-intervention rather than empire, and other responsible government policies, there would be no inflation and thus no need to invest in risky stocks or other ventures just to stay ahead of government-created inflation.
These are not things the state of GA can fix aside from helping to dissolve the federal government and the union. Then they need to act responsibly as a state (something our current government size, political corruption, and deficit clearly show they need help with).
As far as SS is concerned, responsible congressmen like Ron Paul have already proposed sound measures to address the needs of those currently dependent on the system while allowing millions of other to simply STOP paying into this corrupt system. It is despicable that folks like Bernie Madoff will rot in prison for doing far less of the EXACT SAME THING that career criminals like FDR and every successive president have done to all americans through the Social Security system.
Dr. Pangloss
September 9th, 2010
1:39 pm
Rick
September 9th, 2010
8:12 am
Why do we allow legal immigrants or US citizens who haven’t worked in the system at all or for a very short time to collect SS benefits?
—————–
Rick, we don’t. This is an Internet myth. You can see it debunked at Snopes.com, Factcheck.org, Politifact.org and the SSA’s website. Like so many of the things the Tea Party types are angry about, it’s imaginary.
Jefferson
September 9th, 2010
1:42 pm
Another day in the playpen, how’s everyone today?
Dr. Pangloss
September 9th, 2010
1:50 pm
Oops … it’s Politifact.org.
Blue
September 9th, 2010
2:00 pm
Curious; I for one am deeply appreciative for your service. However, when you ‘call someone out’ just because they did not serve in military, you do yourself an incredible disservice. It is just plain tacky. It’s one thing if you want to say that to someone because they are anti-military, but not just to question someone becaues they were not in the military. Bad on YOU…and hope you get home safe.
Linda
September 9th, 2010
2:06 pm
State pension plans in 31 states will be depleted & are headed for financial disaster by 2030, according to a study at the Kellogg School of Management. There are $3 T in unfunded liabilities & there is no solution. If early retirement deals were eliminated & the retirement age is raised to 74, the unfunded liability for the promises made would still be over $1 T. Taxpayers will eventually bear the burden.
The problems were state officials over promising, causing problems to surface years after they were out of office & guaranteeing funds regardless of the success of the investments.
Part of the divisiveness we are being led into today is Main St. against Wall St. Yet, the truth is that the weaker the stock market, the more taxpayers, residents (homeowners & tenants) & businesses & consumers will pay.
Dr. Pangloss
September 9th, 2010
2:22 pm
There is no Social Security Trust Fund, all of the receipts go in to the general operating fund of the government – sort of the way Madoff took investors money in to his general operating fund.
————–
Nope. Doesn’t. Again, see the SSA’s website.
left wing
September 9th, 2010
2:33 pm
Dr. Pangloss @ 1:39 – Actually, illegals pay into the social security network, through the payroll taxes deducted from their earnings, but because they are not citizens, they don’t receive any benefit. Therefore, they are actually helping support the social security system!
I understand why Kyle would love to undo a system which has worked for over 70 years; conservatives can’t stand anything done by liberals which have worked as well as it has. However, it would be easier to simply adjust the income to the system to correct the problem. My preference would be to remove the “cap” (I believe it’s currently around 108,700). And yes, because my income is creater than $109K/year, I’d be paying more into the system. You want to talk “fair” vs “unfair”? How about everyone who makes less than that amount, being taxed on 100% of their income, versus the truely affluent, who pay a much smaller percentage. Ex; if Kyle’s income was $1,090,000 (he probably makes more) then he’d only be paying payroll tax on 10% of his income.
left wing
September 9th, 2010
2:37 pm
Dr. Pangloss @ 2:22 There’s actually 2 different standards of counting social security. I does have it’s own separate fund. However, because of Reagan’s “tweak” to social security (please no b#tching; I’m not criticising him) “excess” funds have gone into the general operating fund, and the ssn fund got IOU’s.
Because it is a separate fund, this is why they can calculate the 2037 date. Otherwise, if it was funded out of general operating, they could pay benefits indefinitely.
Michael Honohan
September 9th, 2010
3:01 pm
Kyle, you need to return to the Wall Street Journal up there in New York. Down here in the South, they don’t look to kindly on conservatives who make intelligent proposals. Do you not forget you hired to replace Wooten. You have yet to drop to his level of ignorance.
Dr. Pangloss
September 9th, 2010
3:02 pm
left wing, I didn’t think to mention the part about illegals paying in and not drawing out, but in this case the illegals are helping to support us legal folks.
Linda
September 9th, 2010
3:03 pm
Dr. Pangloss @ 2:22, I checked the SSA website & could not find any mention of a funded trust fund. Do you know how much is in it? Do you know specifically where this info is on the site?
According to the US debt clock, there is currently $14.5 T in social security liability + $19.2 T in prescription drug liability + $76.5 T in Medicare liability = $110.3 T total unfunded liabilities, in addition to the $13.3 T in national debt.
http://www.usdebtclock.org/
left wing
September 9th, 2010
3:13 pm
Linda
I tried posting with the full URL, but the blog gods don’t seem to like me (went to ‘awaiting moderation’). I seem to have this problem intermittently. Anyway, you might want to look at:
ssa.gov/OACT/TRSUM/index.html
ssa.gov/OACT/ProgData/fundFAQ.html
Linda
September 9th, 2010
3:22 pm
left wing @ 3:13, I’m the one who taught you how to copy & paste web addresses.
As I stated, I have already been to the SSA website. I do not believe there is a social security fund. I’m awaiting an answer from the Dr.
jconservative
September 9th, 2010
3:33 pm
“This is very much like the plan which the “evil” George Bush wanted to allow people to do with A PORTION of their Social Security Tax. But Democrats blocked that.”
Actually Republicans blocked that. Bush introduced the plan after the 2004 elections and it never made it out of any Republican chaired House or Senate committees. Dead on arrival as they say in the House.
Sorry your hate has been misplaced these last few years.
left wing
September 9th, 2010
3:35 pm
Linda</strong @ 3:22 I’m the one who taught you how to copy & paste web addresses.
Believe it or not, I’m fairly literate with computer technology. Your suggestion as I recall was ‘cut and paste’. Not really inciteful.
Posting with links appears to be hit and miss on these blogs. I’ve never gotten a single one to work on Cynthia’s blog, which is why I was surprised when I found it to work on Kyle’s blog.
You have an inflated idea of your worth.
left wing
September 9th, 2010
3:37 pm
Didn’t mean to post in bold. I must have left off the trailing chars.
jconservative
September 9th, 2010
3:42 pm
Kyle I know I am in on this almost 24 hours after your posting, but I like the idea. This is where I like you, new ideas.
If I have a problem with the states doing this it would be in the area of “the governors brother-n-law” being in charge of investing the funds.
Know what I mean Vern?
The concept is good. We will do a study. The leaders of each party in the House and Senate will each appoint 4 members giving us a 16 member committee with the President appointing the chairman and the tie breaking vote. After two years of hearings the committee will issue a report. Unfortunately, the 8 members of the committee voting NO will issue a minority report. We will then assign the bill to the appropriate House committee where it will never see the light of day again.
Have I got this about right?
Kyle Wingfield
September 9th, 2010
3:51 pm
Thanks, jconservative. You (and others have said this, as well) are probably right about the likelihood of an idea such as this going anywhere…but I thought it was worth putting out there anyway.
As for the problem of the gov’s in-laws…I first thought that the feds should (again, acknowledging the lack of likelihood here) devolve the program completely and leave it to all states to come up with answers. But there is something to be said for requiring a sound, hopefully conflict-free plan before moving ahead. That wouldn’t eliminate all possible problems along these lines, but it would be a start.
And, for the record, “a start” is all I consider this idea to be.
Linda
September 9th, 2010
4:28 pm
left wing @ 3:35, I spent a lot of time one day with you just recently trying to teach you how to post a site. I suggested that you go to one of Kyle’s old blogs to practice.
You can type a site word for word & symbol for symbol, which is prone to errors, or use cut & paste for speed & accuracy.
Tucker does not allow links to sites on her blog. Kyle encourages links to sites & minimally requires citation of sources to avoid potential copyright violations, but he prefers only one link per comment.
Not only do you not remember nor appreciate my taking my time to be of help to you, but now you are telling me I’m not “inciteful” (spelled insightful) but rather worthless. Why are you being so rude to me?
jm
September 9th, 2010
5:35 pm
Kyle – not a bad idea. But there’s not really a need. Chile and Univ of Chicago designed a very functional scheme ages ago. There’s not really much confusion over how it would need to work.
The other problem is since lots of people move around this country a lot for work (between different states), people would end up with multiple accounts in each state, which is kind of silly and inefficient. Ergo, a national solution is the best idea, but short of that, your idea isn’t a bad one.
Dr. Pangloss
September 9th, 2010
5:50 pm
Linda, look at Myth #4 at http://www.socialsecurity.gov/history/InternetMyths.html
Not So Casual Observer
September 9th, 2010
6:03 pm
Pangloss,
You are wrong. The SS Trust Fund has received IOU’s but in the true sense of a “Trust Fund” there is no such animal. The references to the trust fund are simply to an imaginary amount of money deposited into the fund represented by the IOU’s. There is no money collecting interest or dividends or any other type of return.
The Democrats established SS under Roosevelt with the promise the system would be voluntary and the money would be left untouched until those who paid in were of retirement age. The Democrats have been changing the rules ever since and made the decision to dump the receipts into the general operating fund of the government.
Obviously the system is no longer voluntary (thank you Democrats), there is no trust fund (again the Dems), and yet the Dems, led by the Liar in Chief, continue to scream the Republicans are trying to destroy SS. Lefties have no shame.
Not So Casual Observer
September 9th, 2010
6:12 pm
Pangloss @ 5:50p,
There is nothing in the reference to indicate there is a trust fund holding the SS taxes collected from individuals. The link simply states the trust fund is being managed as in the past. Just like government and the left to try and play word games rather than simply answer the question.
One of your left allies claimed earlier today he has paid more than $200,000 into SS. A person covered since 1937 who paid the maximum every year would only have paid slightly more than $125,000.
I am curious to know whether ANYONE in the program in 1937 is still paying into SS? I believe that to be highly unlikely since a 16 year old in 1937 would be 89 today. Possible but unlikely.
Linda
September 9th, 2010
6:24 pm
Dr. Pangloss @ 5:50, What this says is that the Social Security Trust Fund, created in 1939, was replaced in 1969 with the “unified budget,” a single budget with every function of the fed. gov. There is no Social Security Trust Fund nor a Medicare Trust Fund.
I quoted a site that sums up exactly what the US debt is for all unfunded liabilities. (The US Debt Clock is in neon lights in NYC.) If you disagree, I will wait for a site from you showing exactly what the amt. is in this separate funded Social Security Trust Fund that you claim exists.
No More Progressives!
September 9th, 2010
7:02 pm
Not So Casual Observer
September 9th, 2010
6:03 pm
Pangloss,
You are wrong. The SS Trust Fund has received IOU’s but in the true sense of a “Trust Fund” there is no such animal.
This is absolutley correct. Monies confiscated from us are sent to the great black hole (Washington, DC) where an IOU (a bond) is placed in the infamous lockbox. You’re banking on the full faith of the federal Gub’mint to make good on that bond when (or if) you retire.
There ain’t no cash in SS. There ain’t. It’s another reason the Feds keep several sets of books.
barking frog
September 9th, 2010
7:18 pm
Linda, No More Progressives, The Social Security Trust
Funds (2) contain paper that is just as good as the Federal
Reserve Note in your pocket, backed by the full faith and
credit of the US Government.
Michael Honohan
September 9th, 2010
7:20 pm
Trolls. One in particular appears here using a different screen name all the time. I do use my real name for the same I use my real name on letters to the editor. I believe in what I say and I am proud to be American who stand for freedom of speech. Anonymity is for trolls and cowards. The reasoning that this is a “blog” and therefore one should be anonymous is part of what we call “Internet stupid.” If could only post if we revealed our names, the level of intelligent discourse might improve around here.
Of course our anonymous “industrial engineer” will likely make another of his attacks, but really, what can you say about a cowardly stooge who is not man enough to confront others as a man?
Dr. Pangloss
September 9th, 2010
8:43 pm
Linda, et al: The SSA’s FAQ says the following:
The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been “put into the general fund of the government.”
DEWSTARPATH
September 9th, 2010
9:05 pm
Kyle:
– I’m all for controlling and, if possible, reducing the federal debt.
College savings programs are nice, but the REAL solution is twofold:
Americans need to (1) curtail spending so much on imported
goods and (2) reinvigorate the bulk of our manufacturing
base by coming up with better products in terms of efficiency.
Use the accumulated funds for the former to invest in the latter.
Kill two birds with one stone.
Dr. Pangloss
September 9th, 2010
10:05 pm
From the US Senate Special Committee on Aging (which oversees SS):
The Social Security trust fund represents funds dedicated to pay current and future Social Security benefits. However, it is useful to view the trust fund in two ways: (1) as the balance of an internal federal accounting concept, and (2) as the accumulated holdings of the Social Security program.
For internal accounting purposes, certain accounts within the U.S. Treasury are designated by law as trust funds to properly track revenues dedicated to certain purposes (or expenditures). A number of trust funds are in the U.S. Treasury, including those for Social Security, Medicare, unemployment compensation, and federal employee retirement. The monies in the Social Security trust fund in the U.S. Treasury are owned by the U.S. government, which can (by changing the law) raise or lower revenues to the trust fund, or payments from the trust fund.
By law, any positive annual balance (or cash flow surplus) in the Social Security trust fund must be invested in U.S. government obligations. The accumulated holdings of U.S. obligations are often viewed as being similar to assets held by any other trust on behalf of the beneficiaries. However, the holdings of the Social Security trust fund differ from those of private trusts because (1) the types of investments it may hold are limited; and (2) the U.S. government is both the buyer and seller of the investments.
No More Progressives!
September 10th, 2010
5:48 am
barking frog
September 9th, 2010
7:18 pm
Linda, No More Progressives, The Social Security Trust Funds (2) contain paper that is just as good as the Federal Reserve Note in your pocket, backed by the full faith and credit of the US Government.
Duping people into paying cash under the guise as an asset, then conveting the cash into paper or a bond would be called fraud if done on Wall Street.
The paper you speak of is only usable by the Gub’mint. It is not a marketable security. Therefore, it is worthless on the open market.
The paltry 1.5 to 3% phony interest SS returns is nothing but an accounting ploy, based on others paying into the system.
barking frog
September 10th, 2010
7:10 am
No More Progressives 5:48 Your post is irrefudiatable. Believe
what you will. My check cashes.
No More Progressives!
September 10th, 2010
7:12 am
Two more questions for the high-minded progressives and liberals defending SS:
1) If this is such a good deal, why isn’t Congress required to participate?
2) If this is an asset, why can’t you add your SS account to your net worth statement?
Because it’s not an asset; it’s a liability, that’s why.
No More Progressives!
September 10th, 2010
7:13 am
What check??
No More Progressives!
September 10th, 2010
7:14 am
“irrefudiatable” is not in my dictionary. Speak English, please.
Bush's fault.
September 10th, 2010
7:34 am
Our social security money is being paid to Iraqi Sunnis to play nice with the Shia Sunnis, ( and to build Iraqi infrastructure like electricity and plumbing). Bush’s fault. Iraq is our Watergate and our Waterloo and our Waterworld.
Word for the day: Pyrrhic
barking frog
September 10th, 2010
7:39 am
No More Progressives 7:14 “irrefudiatable” is not in my dictionary. Speak English, please
————————————————–
You are talking to a frog.
No More Progressives!
September 10th, 2010
7:50 am
Yeah……..a progressive frog at that.
Rick
September 10th, 2010
8:38 am
Dr. Pangloss September 9th, 2010 1:39 pm
Rick September 9th, 2010 8:12 am
Why do we allow legal immigrants or US citizens who haven’t worked in the system at all or for a very short time to collect SS benefits?
—————–
Rick, we don’t. This is an Internet myth. You can see it debunked at Snopes.com, Factcheck.org, Politifact.org and the SSA’s website. Like so many of the things the Tea Party types are angry about, it’s imaginary.
===============
I recently read a NY Times article where recent legal immigrants to the US were awarded “disability” benefits through the SS system. These benefits were essentially allowing these recent immigrants to support themselves in the US. Note: these recent immigrants were family members of US citizens who should have been sponsoring their family members and responsible for their care and support. Didn’t happen that way! Not sure why I should be supporting foreign nationals that have recently immigrated to the US when they were elderly and did not work much or at all in the US labor system.
Not So Casual Observer
September 10th, 2010
8:58 am
Pangloss is attempting to defend the indefensible.
Ok Pangloss, I have a deal for you. You give me $100,000 and I will create a “Trust Fund” for you into which I will place a note from me bearing interest at 2%. After 20 years I will begin to send you a monthly check in the amount of $1,000 and will do so for the remainder of your life. When you die the balance in the “Trust Fund” reverts to me. Of course, if I die or become insolvent, the checks will stop.
Gather some of your Left leaning friends and we will meet to consummate the deal – the more the merrier. I really do not see how you can resist.
Not So Casual Observer
September 10th, 2010
9:01 am
Pangloss,
I have one more condition to attach to the earlier offer. I will manage your health care and determine what treatments you will receive based upon your age and value to society. I promise not to allow the “Trust Fund” deal to influence any decision I might make regarding your health.