Payroll-tax break might alter thinking on Social Security

This week’s typical Washington compromise on taxes has been accompanied by typical Washington drama: about who won and lost, about whether President Barack Obama had a meltdown when he called Republicans “hostage takers” and his Democratic critics “sanctimonious” and “purist.”

Whatever. I prefer that tax rates stay low, but the fact that the extension of current income tax rates was for only two years just goes to show how fleeting these decisions are. If there’s one piece of the package that could lead to bigger, more far-reaching changes down the road, it’s the one-year payroll-tax reduction.

I don’t mean big changes in job creation. The 2-percentage-point cut comes out to about $1,000 on a $50,000 salary next year, totaling some $120 billion nationwide. But it is probably too temporary to spark a real employment surge.

No, the more significant impact is changing the way we think about Social Security.

There is an outdated yet widespread belief that Americans receive in retirement what they paid for during their working years. The actual linkage between taxes paid and benefits received is much looser.

Washington doesn’t sock away the tax revenues for later, much less put your payments in an account with your name on it. My payroll taxes fund today’s retirees; in theory, today’s toddlers and the as-yet unborn will pay for my future benefits.

The younger and more demographically aware you are, the more problematic you’ll find this pyramid scheme.

Already, with the first wave of baby-boomer retirement just now hitting, Social Security has gone in the red several years earlier than expected. The recession didn’t help, and the program is projected to be back in the black by mid-decade. But only for a few years, after which the shortfalls will get progressively worse.

So, how could it help matters to have a one-year reduction of Social Security revenue?

From a budget standpoint, it doesn’t. But a key to reforming Social Security is making people realize it’s an unsustainable entitlement program rather than the pay-as-you-go Old-Age and Survivors Insurance it was intended to be.

As crazy as it may sound, reducing the tax without enforcing a corresponding drop in benefits might help do that.

That supposed link between payments and benefits? It won’t exist in 2011. Guess what? It doesn’t exist today, either.

When there’s a funding shortfall, Washington doesn’t tell pensioners, sorry, there’s no more money. It closes the gap with other tax revenue.

That’s what was going to happen this fiscal year before the payroll-tax reduction, that’s what will happen due to the payroll-tax reduction, and that’s what will happen in future years when Social Security’s numbers don’t add up.

Maybe a one-year tax break will help more people better understand our grim situation, particularly those of us old enough to see that we’re going to get squeezed but young enough to make other arrangements.

If so, there may be an opportunity for a one-year tax break to grow into something else.

Why make us go back to paying that 2 percent of our income into Social Security in 2012? Why not let people below a certain age put that 2 percent, maybe even more, maybe even some of our employer’s share of the tax, into a true individual account?

In exchange, we would agree to forgo some future benefits. There would probably also have to be broader changes to Social Security benefits for others. Guess what? That’s going to happen one day anyway.

We can continue to make this a future generation’s problem, letting it grow until some future generation will find it impossible to solve. Or we can use this precedent as a launching point for real reform.

– By Kyle Wingfield

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71 comments Add your comment


December 8th, 2010
7:20 pm

Nice timely column on a topic that will not go away. And I agree with y9our bottom line.

Kyle, you do leave out of the equation the fact that the government has been borrowing the “Social Security Trust Fund” for decades. The problem is the money the government borrowed and now must repay. It is part of the $13.8 National Debt.

Same exact thing with Medicare.

Having said that, the problem of an unsustainable Social Security in the coming decades will not go away by wishful thinking. In a few years there will be 77 million people eligible for Social Security. Do we send them a check, turn them into the homeless or find a solution?

The obvious answer is do do what western civilizations have done for a couple of thousand years, let their kids take care of them. But I detect, based on the population of nursing homes, a reluctance to take care of old, infirm parents.

So what do we do? It is a real problem that will effect 90% of American citizens going forward. What we cannot do is kick the can down the road. And I suspect that is what we will do.

Finn McCool

December 8th, 2010
7:34 pm

young enough to make other arrangements.

You think total reliance on SS is an option? No one thinks of SS as an option.We are all busting our tail to make as much money as we can and we all realize SS is a safety net should something unforeseeable happen.

What Kyle is doing is projecting his own laziness on other people with this thinking: “SS is an option to me if I really don’t want to work…so those who are getting SS checks must have chosen that option – they are lazy people who didn’t work hard enough to not need SS.”

I think most workers understand that should they get hit by a bus tomorrow, or their spouse, or their parents get hit by that bus, SS, medicare, and medicaid will shield them from total financial ruin.


December 8th, 2010
8:08 pm

The problem with SS is that once they take about 12.4% of most workers incomes, that doesn’t leave allot of cash for a real retirement plan. It’s pathetic that something labeled as a safety net takes over three hundred k when that money could gave you an actual retirement. Another negative to the Ponzi is many people have to work until they are 67, the same money invested in bonds could let you retire 10 years sooner and you want live or die by a vote buying $250 COLA payment. Look how much better it would be having the early 60 somethings hitting the shuffleboard court and opening up jobs.


December 8th, 2010
8:21 pm

First, don’t bother to repeat all the promises of Social Security made over the years, or all the rhetoric attacking partial privatization efforts that would boost solvency and benefits, and by all means don’t call it what it is, a Ponzi scheme (otherwise known as a criminal enterprise in the non-government sector). Nooooo. Don’t do that.

Social Security and Medicare are TAXES, pure and simple. Taxes tied to promises, and I see no harm in pointedly reminding politicians of that. When the politicians start tinkering with my 401K investments or my ability to withdraw the money the deal is up. They might as well break down the front door because they’ll get a similar response.

Let’s note the so-called ‘greatest generation’ suffered and sacrificed greatly for this country, while at the same time laying enormous boondoggle entitlement liabilities at our feet, both in terms of government programs and public/private unfunded pensions. I for one am tired of paying for their “security” while holding their leaky bag of promises.


December 8th, 2010
8:36 pm

…there may be an opportunity for a one-year tax break to grow into something else…Why not let people below a certain age put that 2 percent, maybe even more, maybe even some of our employer’s share of the tax, into a true individual account? In exchange, we would agree to forgo some future benefits.

Wouldn’t the government requiring us to put a portion of our savings into a “true individual account” be equivalent to a, wait for it, MANDATE? Of course, they wouldn’t call it that, but yes, that’s exactly would it would be. Just another demonstration of the right’s double speak.

To be clear, this temporary tax break is referred to as a payroll tax cut because of how it’s calculated: it applies to the first dollar of income and is limited to income at or below the social security cap. But, to be sure, it’s a payroll tax cut in name only. Actually, not a dime of this “payroll” tax break would reduce revenue to the social security trust fund; every penny of this cut would come out of the general fund.

Conflating this temporary tax cut with Social Security taxes, which actually has zero impact on Social Security funding, appears to have confused Kyle—and if he has his way, the rest of America will be confused too.

No, this temporary tax break is not an excuse to privatize Social Security, or some portion thereof. No, it is not a teaching moment about our so-called “grim situation.” According to the 2010 OASDI Trustees Report, full payment of scheduled Social Security benefits are funded until 2037. If my arithmetic is correct, that’s about 27 years from now. In other words, and I know it’s politically incorrect to say this, the social security trust fund is in excellent shape.

However, if Kyle and others are really concerned about it, maybe they would consider removing the cap on social security taxes so that we replace a regressive tax with a flat tax. If we did that, we could even lower the rate for everybody while still extending the life of the trust fund by several more decades.

The problem with my idea is that Republicans aren’t feigning concern about a Social Security crisis that doesn’t exist because they want to extend the life of Social Security. In truth, they’re trying to scare us into agreeing to nibble away at benefits that would otherwise go to future generations under the guise of helping them. Ultimately, however, they want to kill it entirely, while shifting American’s savings to the corporate coffers.

With most scams, we lose. With this one, it’s our children and grandchildren who would suffer.


December 8th, 2010
8:45 pm

The next great division in this country won’t be between blacks and whites, or rich and poor. It will be between the old and the young, and it won’t be pretty.

John Franklin (JF) McNamara

December 8th, 2010
8:52 pm

The payroll tax was just another government giveaway. The actions this week proved that we aren’t going to reform social security or medicare. The Republicans wanted to pay for unemployment or cut benefits and didn’t and the Dems wanted to increase revenue by raising taxes. To compromise, the Dems got unemployment (a giveaway) and the Republicans got tax cuts (a giveaway). The compromise was to just give everything away and not pay for anything. That makes NO sense.

When that’s the negotiation, it’s a pretty good sign we aren’t heading towards more fiscal responsability or reform of anything. We’re headed towards both parties giving as much money away to their base as humanly possible to either win in 2012 or have a position so strong that the 2012 result won’t matter. If you’re a true fiscal conservative, its about to get ugly.

BTW…Social security only needs a little tweaking and it should be good to go. Its actually not that big a problem. The solution is to bump up the social security tax 1.5% and give more extreme tax breaks to children. The ponzi scheme was built on a constantly increasing population. The boomers having less kids threw off the equation, and our politicians, despite knowing for 25 years haven’t done anything. We need to jump start that and it no longer an issue.


December 8th, 2010
8:57 pm

“we all realize SS is a safety net should something unforeseeable happen.”

Article I read today would seem to disagree with this. Average middle class worker has saved only 7% of the estimated nest egg needed for retirement. Seems like they definitely see it as the preferred method of retirement income, rather than a safety net.


December 8th, 2010
9:07 pm

One more thing.

Kyle wrote, that the temporary 2 percent tax cut “is probably too temporary to spark a real employment surge.” In fact, most independent analysis to date indicate that that this tax cut is likely to create two to three times more jobs than extending the Bush cuts for the wealthy—which would cost about the same $120 billion. But Kyle isn’t one to let facts get in the way of ideology.

Prudent Man

December 8th, 2010
9:29 pm

“Why make us go back to paying that 2 percent of our income into Social Security in 2012? Why not let people below a certain age put that 2 percent, maybe even more, maybe even some of our employer’s share of the tax, into a true individual account?”

Fair question, but if that happened, and you were an investment advisor, how would you advise that money be invested? SS contributions are deducted from employment wage, FT or PT, for every job held until retirement. SS is invested in mostly govt treasuries and since its inception, SS investment earnings have outpaced inflation. Although SS contributions cannot normally be taken out lump sum, at retirement SS supplements pensions and “true individual accounts.” The administrative expense of SS is .25% and there are no sales commissions, loads, or custodial fees.

SS funds are backed by the full faith and credit of the federal gov’t who may use its taxing power to pay benefits if needed. Criticism of that fact notwithstanding, what investment would better serve basic retirement income needs when (note tense) the private markets fail? Find a similar annuity that has a more convenient and efficient contribution method, has the same returns, has never failed to pay an eligible benefit since the 1930s, is less expensive, and will bother to accept contributions amounting to a 2% increase on a small piece of a low wage worker’s SS tax.

Furthermore, if the 2% tax would be used for a true individual account and the contributor declined to contribute (likely), how would that affect the other pension investments? If there would be more risk with that 2% investment (which there presumably would be, why bother otherwise?), then pensioners may more closely scrutinize their fiduciary decisions and offset the risk in another investment in the pension account. If it’s in an IRA, what impact would the 2% have on individual risk taking including contribution in the overall retirement plan? There are lots of Wall Street firms that would love 2% of the SS trust money. Some have been calling them “job creators” on the right lately.

Kyle Wingfield

December 8th, 2010
9:36 pm

Finn @ 7:34: Oh, I’m making other arrangements for myself already — trust me. I’m 32. I’m not counting on getting a dime from S.S. But what about people 10 years older than me, or 20 years older than me? I’m sure those calculations are made on a sliding scale. And yes, those with above-average incomes are the ones who are best able to make other arrangements now and weather any reductions in S.S. benefits, for reasons bob alludes to @ 8:08.

As for CJ, this may be your most disingenuous comment yet, and that’s saying something.

The glaringly obvious difference between this scenario and ObamaCare is that we’re already “mandated” to pay into S.S., as opposed to buying health insurance. We may be able to get to the point where S.S. is entirely optional, or represents a true insurance program not intended for every retiree (and taxes a correspondingly small amount of tax revenue), but it probably isn’t practical or prudent to go all the way there in one fell swoop.

As for being “confused,” well then the president, the Congress and other analysts must be “confused” as well. And as for your comment about the job creation, in fact there’s a great deal of debate as to how effective this tax break will be, precisely because of its temporary nature, regardless of your conclusions about what’s “most” and what’s “independent.”

Politics to the right of Attila the Hun

December 8th, 2010
9:39 pm

Its not secret. In its present form soc sec is simply unsustainable. This gigantic ponzi scheme should never have been enacted in the first place.

Kyle Wingfield

December 8th, 2010
9:41 pm

Gordon @ 8:45: You may be right. The people who have been in charge while we’ve racked up all these debts and made all these pension promises (let’s not forget all the public-sector pensions that go above and beyond what S.S. has promised, and which for the most part are gravely underfunded) are all above a certain age. And the people who will be stuck with the bill are all below a certain age.

JF @ 8:52: So, let’s say we bump up the payroll tax by 1.5 percentage points. How many people at that point can’t afford to fund their 401(k)s — making them that much more reliant on S.S.? That is a “pile on” solution. We need more “unwind” solutions.

Kyle Wingfield

December 8th, 2010
9:44 pm

In my 9:36, make that “…and TAKES a correspondingly small amount…”

Michael H. Smith

December 8th, 2010
10:25 pm

What Kyle is doing is projecting his own laziness on other people with this thinking: “SS is an option to me if I really don’t want to work…so those who are getting SS checks must have chosen that option – they are lazy people who didn’t work hard enough to not need SS.”

Option is it? Is it an option to pay into SS? HELL NO IT ISN’T!

What you are projecting on other people is the GUB’MENT should have the OPTION not to pay any benefits to those who paid into the SS ponzi scheme now that the proverbial crap is about to hit the fan.

Not even a bad P’ poor try my liberal friend.

@ – jconservative

The obvious answer is do do what western civilizations have done for a couple of thousand years, let their kids take care of them. But I detect, based on the population of nursing homes, a reluctance to take care of old, infirm parents.

The problem is in fact the aging population and it is the same one many industrialized countries face. The kids will be so taxed they probably won’t have the means to care for their elderly parents even if they desire to do so.

Our wunerful GUB’MENT will do what it has always done in the past in reaching for the quick desperate fix (which is about what Mr. Not So Cool is bating the hook for), just raise the eligibility age on those receiving benefits so high that very few will live long enough to ever receive much from the system. Which is not a good answer.

The best answer is to get rid of everything that shouldn’t have been added to SS, reform the system nearer to what it was meant to be under the original intent, as a supplemental income, raise the dollar amounts on what the elderly can earn before the SS penalties kick in to encourage us old people to work longer and not draw the full amount of benefits. Which will answer at least some of the issues without causing the elderly to riot. Most of us know we cannot reasonably expect to get what previous generation got from SS in the way of benefits. We’ll make the sacrifice, provided our GUB’MENT is willing to deal honestly for the first time in its history. No more false promises, no more kicking the can down the road, no more using SS as slush fund to be raided to finance wars and other social programs. Eventually by slow transition to no more GUB’MENT control over our SS Trust so GUB’MENT will no longer have possession of our lock-box to pick!


No one in my generation (at least the sane among us) puts much faith in the safety net anymore and we have even less faith in a proven untrustworthy GUB’MENT. At best we may have a safety thread left. It is looking worn and very frayed and we know that most of us shall work until the day we drop dead.

PS. Is it just me Kyle, or do liberals always attempt to frame their tax and benefit arguments as the GUB’MENT is giving somebody something, like with this tax cut business: Giving the millionaires more money?

Government isn’t giving anybody (rich or poor) anything by taking less of their money from them. Fact remains the Government is still taking. In most cases it will take less from our left pocket and tell us how they cut our taxes (like it is some kind of gift), only to steal the difference from our right pocket, in hopes that we are not watching.


December 8th, 2010
10:35 pm

Kill it. Drive a stake through its criminal Ponzi heart and be done with it and never speak of it again. SS was the most despicable program ever devised and it has paved the way for the economic destruction of this country. Bring every troop home and sell ever overseas base and take the money and use it to buy annuities for all those who are currently dependent on the system. Set and age and just cut off everyone under that age and tell them too bad, the government lied (it most certainly did) and you are screwed. Free everyone from the slavery of the 12% total tax and let us just keep the money and invest it as we see fit.

End the Fed and restore a sound currency so that savings will actually be worth something upon retirement and encourage folks to give to charities so that the giant welfare charity that SS is will never be proposed or taken seriously again.


December 8th, 2010
10:46 pm

Kyle wrote, “We may be able to get to the point where S.S. is entirely optional, or represents a true insurance program not intended for every retiree…

This comment reinforces my assertion that the goal here is not to extend the life of Social Security, but ultimately, to kill it. In the meantime, Kyle is proposing a new mandate to pay into a private account (which he confuses with a tax paid to a general trust fund) until they have persuaded us to “unwind” entirely.

Kyle does make a good point. One man’s indicator of independence (e.g., an expert who forms conclusions using math and science) is another man’s indicator of liberalism.


December 8th, 2010
11:06 pm

Finn McCool

December 8th, 2010
11:10 pm

The real ponzi scheme is the 401k. I would guess there’s a 50% chance that the money I put into that will be there when I retire and I would guess there’s probably a 75% chance my SS benefits will be there. When Republicans hand the SS program over to the speculators on Wall Street there will be no safety net left and we will be back to the days of elderly people living with their kids and dying at home.

Our 401k’s are in the hands of speculators. the market is a casino. Sure people want to believe 50% of the value of their 401k’s evaporated between 2007 and 2008. That’s hogwash. Those funds were swept into banker coffers.

What’s in your 401k is not your money until you pull it out. Ask a retired person about their pension plan that was raided by their former employers. They’ll tell you all about safety and security and promises.

Remember the definition of "assume"?

December 9th, 2010
12:09 am

Your piece assumes that all people are paying into Social Security. You might be surprised to find that some employees right here in Metro Atlanta work for an employer that does not pay into Social Security and they only have a 401 defined contribution plan. They are living your privatized Social Security “dream” . . . . Only, it was a nightmare watching 25 – 40% of their retirement investments disappear into Wall Street bonus recipients’ pockets in late 2008. Proceed with this plan at your peril, America.


December 9th, 2010
12:26 am

Its a social program (the name not clue you in ?) NOT and individual account. Take your own money and start your own account. People you can’t go through life only thinking about yourself all the time.

barking frog

December 9th, 2010
4:24 am

VA Pensions are funded by taxes. Govt. employee
pensions are funded by taxes. 401k ’s safest investments
are treasury bonds that will be redeemed by taxes.
Many corporations on the stock market are almost
totally dependent on government contracts that will
be fulfilled with taxes. If you want to get critical consider
the US and the World economy a pyramid or Ponzi scheme.
The dollar is an iou and is only as good as the trust
in government it is based on. We can surely trust
private corporations with our retirement much more
than the government as they will take our money
take a cut and buy bonds that we could have bought.
Privatization didn’t work before SS and it won’t work now.


December 9th, 2010
4:51 am

Maybe you see this as some launching point for some real reform, but I see it as the opposite. This is simply running up the debt more so we don’t have to pay our bills now…nothing new there. I’ll see it as a launching point when they actually cut spending.

Why don’t we call it what it is – welfare for old folks. Push the age back to 70 and stop giving it to people who have income above a certain level. Why should we borrow money to give to people who don’t need it? I hear folks get all upset about that when I mention it because they paid into it for 40 years or more. That’s true, but that money is now gone. All of us pay into welfare programs that won’t directly benefit us.

Chris Matthews

December 9th, 2010
6:20 am

Why keep wasting all that money on foreign aid and on useless military bases?

Ayn Rant

December 9th, 2010
7:14 am

Social Security is a great program that doesn’t need extensive and powerful retooling, just some common sense re-organization.

SS Administration should be made a public corporation with a business charter, a Board of Directors, and a revenue source (the SS taxes). Every on-going national service that requires prudent and open management should be granted reasonable independence from the federal government, especially from the whims of the dysfunctional Congress. The “cap” on SS tax and benefits needs to be removed so that everyone, including the wealthy, pays a flat tax and receives benefits in proportion to the amount paid in. The “Trust Fund” needs to be made just that: an independent fund, managed by SS Administration, invested in Treasury-backed securities only.

The myths regarding social security need to be addressed in a publicity campaign. SS is a program whereby the moral obligations of working-age adults to support their elderly parents and their disabled siblings are discharged. It provides universal and reliable coverage of the elderly and disabled and allows them to maintain a degree of dignity and independence. It is not, and has never been, and can never be made, a retirement savings program. Working age adults who wish to maintain their lifestyles in retirement need supplemental retirement accounts (IRAs).

The proposals to “privatize” SS are clumsy, farcical attempts to destroy the program. The proposals to allow the SS Trust Fund to invest in the private sector are misguided: private sector investments fluctuate wildly and sometimes go bust. It’s better for the federal government to borrow from, and pay interest to, the SS Trust Fund rather than China.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

December 9th, 2010
7:27 am

Self sufficiency is not a concept the liberals will readily adapt to, just sayin…

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

December 9th, 2010
7:36 am

Polls add credence to conclusion – PRESIDENT BARACK OBAMA The statement:“There are polls showing right now that the American people for the most part think it’s a bad idea to provide tax cuts to the wealthy.”— From Tuesday’s news conference -Urinal

Aahhh, so he did it anyway.

But at least the dummycrats have their Truth – O – Meter to cling to.


December 9th, 2010
7:52 am

Generations of Republicans like Kyle have spent their lives fighting to kill Social Security. Kyle’s approach is just another effort to sell the “private account.” It’s the old camel’s-nose-under-the-tent approach—get people to buy into the notion that private accounts will take care of the problem of impecunious people in their old age, then continue to chip away at the monster. You didn’t hear a peep from Kyle and his buddies when our 401ks were raped after the collapse of the housing bubble and the stock market. Many of us have been around long enough to know what happens when the guarantee is taken away from retirement savings. Nice try, Kyle.

Interested observer

December 9th, 2010
8:13 am

That’s a pretty good spin to put on a really disastrous decision. It’s akin to the idea that giving tax breaks to bankrupt government is the way to trim spending.

Too many people have spent too much time and effort convincing the public that all taxes are evil. They’ve succeeded, and the inevitable result is the total financial collapse of the nation.


December 9th, 2010
8:19 am

Whiner can’t make any statement other than bashing liberals and democrats. As a liberal, I’m with you on this Kyle. But didn’t Ronald Reagan increase the payroll tax as president? Didn’t he do it with the idea of increasing the trust fund to keep it from going bust? And then as he cut taxes for the rich, he used that money from the trust fund (and other excise taxes – like airline tickets fees) to put in the general revenue bucket to fund the government. I’ve said this before, and I’ll say it again. I’m about 10 years from full retirement. I’ll gladly give up my SS benefits if I can get one conservative Republican politician to stand with me publicly and denounce SS. It will never happen. This is one entitlement program the white folks love. George Bush didn’t create the greatest expansion of Medicare by accident. People don’t want to depend on the stock market to destroy what is basically a defined payment. And finally, all you conservatives are on the debt thing right now since you are out of the White House. How will you ever balance the budget by cutting taxes, fighting two wars, and spending on entitlement and defense programs that the majority of voters want. You can’t have it both ways and you’re basically hypocritical.


December 9th, 2010
8:22 am

I don’t understand all this dancing around and doing nothing. There are 2 ways to take care of this, enact a law that the SS monies stay where they are until needed, in the lockbox with your name on it. Wow how hard was that? Or you can privatize it, make it mandatory but held with the owners name on it for their future. The only reason we don’t do this is trying to pry our money out of the hands of a politician is like getting blood from a stone….


December 9th, 2010
8:32 am

I make 2 assumptions, you are a liberal, and you think the government is the answer to every problem.

Please name ONE project that the government has EVER completed on time, on budget?

So assuming that the first sentence is true, there is no reason to discuss anything with you; Arguing with an idiot lowers you to their level.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

December 9th, 2010
8:43 am

Darwin- obozo is the one bashing liberals today, just sayin…

Road Scholar

December 9th, 2010
8:45 am

….so the deficit doesn’t matter!


December 9th, 2010
8:49 am

CJ 8:36 pm, It’s already a mandate. And you wasted allot of time on this post because after you said this “Actually, not a dime of this “payroll” tax break would reduce revenue to the social security trust fund; every penny of this cut would come out of the general fund”. I was rolling on the floor laughing ! Can you tell us what a social security trust fund is, was ? I can’t believe someone that has access to the net thinks money goes into a trust fund.


December 9th, 2010
8:56 am

When you are young and working and life seems filled with promise, it’s easy to attack Social Security. When you are sixty five and have gone thru many layoffs and have had to use all your savings just to have a roof over your head and food on the table, you will sing a different tune. Also, most of the money I put into SS was when the dollar was worth much more than it is now. I doubt I will ever get back in actual value what I put in.


December 9th, 2010
8:59 am

Ayn Rant: re: “The “Trust Fund” needs to be made just that: an independent fund, managed by SS Administration, invested in Treasury-backed securities only.” Uh, that is how it works now. In 1983 we boomers agreed to tax ourselves at a higher rate than needed to pay then current benefits and save the extra so that when we retired we wouldn’t be a burden on Kyle. The SSA Trustees put the extra money in the safest investment vehicle in the world, US Treasuries. We now have over 1 1/2 trillion climbing towards 2 trillion.

Of course a US Treasury bill is a loan to the federal government the same as a savings bond like my kids have or a war bond in WWII. Kyle wants you to think taxes will have to be raised to pay these treasury bills, but the government will pay maturing debts just like they did when my kids turned 18 and cashed in their savings bonds, issue new treasuries.

SS taxes are about 5% of GDP, have been for decades and will be for decades. SS payments are scheduled to climb from the slightly under 5 to about 6% in the next 15 years and then stay at 6% for 75 years. That is the shortfall, about equal to removing the cap on payroll taxes or not extending the tax cuts on income above $250. Or we could just decide a better way to divide the 5% in 30 years. Unless Kyle manages to do away with payroll taxes before then.


December 9th, 2010
9:01 am

Prudent man 9:30 PM.

Find a similar annuity that has a more convenient and efficient contribution method, has the same returns, has never failed to pay an eligible benefit since the 1930s, is less expensive, and will bother to accept contributions amounting to a 2% increase on a small piece of a low wage worker’s SS tax.
Here you go
These funds held up throught every downturn in the market. I am not familiar with some, but the pioneer fund has been giving way more of a return that SS. And how hard is payroll deduction ?

Road Scholar

December 9th, 2010
9:14 am

Boehmer/McConnell: Where are the jobs?


December 9th, 2010
9:21 am

Social Security got off on the wrong foot by providing for retirement income. I agree with having a plan for disability and survivor benefits. What family headed by 20-somethings could survive the breadwinner dying or becoming disabled? Those are unexpected events. But retirement? You know that’s coming and you have 40+ years to plan for it. Let’s remove the retirement component from SS.

Jim T

December 9th, 2010
9:22 am

CJ. Get in touch with reality. There is no trust fund, unless you consider an IOU with no collateral except future tax receipts a viable fund. We either have to raise taxes to “fund” these IOUs or cut other spending. The U.S. Congress has been scamming the U.S. citizens for many years – that’s why the SS System is called a Ponzi scheme. The Congress has been spending 30 plus years of annual Social Security (SS) surplus totals (current year collections exceeding current year payments of SS benefits) on many other vote buying projects (welfare programs, unsuccessful education spending, support for despots in undemocratic countries (Egypt, Pakistan, etc), support for the la la land United Nations, farm subsidies, earmarks, etc, etc, etc). My guess is that the U.S. national debt has increased about $3.6 TRILLION during the last 4 years under the Democratic controlled Congress (about $500 billion in 2007 & 2008 and $1.3 trillion in 2009 & 2010). I am having trouble dealing with all the zeros, but if my calculations are correct, each 1% rise in interest rates will cost $36 billion per year on just the increase in the USA national debt for the last four years. The total national debt is now about $13,800,000,000,000. A 1% rise in interest rates will cost U.S. taxpayers $138,000,000,000 (that’s $138 billion) each year to maintain the credit rating of the USA. That’s required before we spend the first dollar on Social Security benefits, Medicare, Medicaid, national defense, the salaries and benefits of U.S. Congressmen or Federal employees, etc. No wonder the Federal Reserve wants to keep interest rates low. I hope the rest of the world will allow us to do this.
Many journalists say they do not understand the Tea Party movement. Well, it’s easy to understand. Tea Partiers have caught on to the out of control spending. They understand the short term and long term effects it will have on our country – the unfavorable results that out- of-control spending will have on our generation going forward and future generations. I hope the domino effect is true and the first domino has fallen = the irresponsible Charles Rangel. How could New Yorkers have re-elected him? This goes to prove that vote buying does work. I hope there will be no more pork for Rangel supporters.
I hope the Tea Party movement will continue to grow. In 1775, the Tea Party in Boston (my how things have changed – instead of having patriots in Massachusetts, we now have Barney Frank) helped start a revolution that resulted in the creation of the U.S.A. I hope the Tea Party movement has started another revolution that will return us (the U.S.A.) to that which was intended by our Founding Fathers = limited government and liberty for the people. Social Security, Medicare, and Medicaid programs need to be fixed with the first attempts starting with the next U.S. Congress. STOP DEFICIT SPENDING NOW. Let the pain begin that will be necessary to change our course and fix this country.
Let’s BE RESPONSIBLE NOW. Let’s not ask, “what’s in it for me?” Rather, let’s ask, “What’s the responsible course to take for our future and future of generations?” Let’s be responsible builders and take action now. Let’s reestablish the foundation set in place by our founders so that we can pass along to future generations the solid foundation we received from past generations.


December 9th, 2010
9:30 am

People like Jim T and Bob are the main reasons not to do anything with SS now. If there is no trust fund, why modify the program to put more money in something that doesn’t exist (in their minds). When payroll taxes do not cover benefits, then make changes. Even Kyle admits this is not projected to happen until the second half of this decade (yes, I know that with unemployment high and incomes lower during this recession there is a temporary short fall).


December 9th, 2010
9:38 am

I will side with Jim T on letting all the tax cuts expire. They didn’t work to stimulate the economy when passed and I had rather take half of the increased revenues and put people to work building infrastructure for the future (just temporarily). I have a vision of city wide wifi.

Of course trying to balance the budget in a downturn is what transformed a 10% unemployment recession in 1930 and again in 1937 into a 25% unemployment Great Depression.

Kyle Wingfield

December 9th, 2010
9:47 am

CJ @ 11:06 pm: So, does that one link represent the “most” part or the “independent” part? For those who haven’t clicked the link, even the Times describes CJ’s source, the Center for American Progress, a “liberal research organization.” Now, being ideologically biased doesn’t necessarily mean one is incorrect about everything. But let’s drop the “independent” charade.

Ayn @ 7:14 am: Yes, by all means — because “public corporations” in this country have such a sparkling track record!

Th @ 9:30: “yes, I know that with unemployment high and incomes lower during this recession there is a temporary short fall”

So that doesn’t count?

Kyle Wingfield

December 9th, 2010
9:56 am

And to everyone citing the “guaranteed” nature of S.S. “investments” (i.e., U.S. Treasuries):

The fiction that these “investments” can’t lose is based on the idea that the U.S. government will make good on any revenue shortfalls and pay out all the benefits. As long as the U.S. government isn’t overly indebted, that may be true. But how much longer can we keep that up, given our trajectory? And if we have to print money to do it, the resulting inflation will have to be taken into account as well.

If it had been up to me, we wouldn’t have done a one-year payroll tax holiday. Yeah, I’ll be glad to have some extra cash in my pocket, but I side with those experts — and to CJ’s chagrin, they do exist — who don’t think such a temporary tax break will have a great effect. I hope I’m wrong. But if I’m not, this will be just another $120 billion in ineffective stimulus.

Since it appears that this is going to happen, however, I say we make the best of it. And to me, that means first getting people to understand that there is no iron-clad link between your payroll taxes and your S.S. benefits, that very soon we will be putting more and more general tax revenues toward S.S. benefits, and that we can’t keep this up forever. And then getting people to look at ways to unwind S.S. until it is a more limited program that we can sustain — and giving younger workers the flexibility to use the money now taken in payroll taxes to make more solid arrangements for our retirements.


December 9th, 2010
10:25 am


Only a Tea Partier would imply that a $120 billion tax cut to the wealthy is even remotely as stimulative as a $120 billion tax cut to the poor and middle class. There isn’t an economist on the planet (with the possible exception of Thomas Sowell) who doesn’t understand that the poor and middle class spend a larger portion of their incomes than the wealthy. There’s nothing liberal about CAP’s admittedly “back of the envelope” calculations which were generated with data reported by the CBO and Mark Zandi (McCain’s campaign political advisor who ceased being independent, by your measure, the day that he put out a report that contradicted your insistence that the Recovery Act didn’t saved jobs).

With regard to your comment that “very soon we will be putting more and more general tax revenues toward S.S. benefits,” by very soon, do you mean 27 years from now? Again, a program that’s funded for 27 years in advance isn’t even remotely a crisis. And again, if we want to extend the life of Social Security for another few decades, we can simply remove the cap on social security tax and even lower the rate a little. Crisis solved.

Swede Atlanta

December 9th, 2010
10:33 am

No arguments that SS needs to be modified.

The challenge is those in the near or medium term pipeline for retirement have factored their estimated SS benefits as part of their overall retirement planning. Granted there are some that hit retirement with nothing more than SS but many have planned on having that monthly annuity as part of their cash flow along with other sources of income.

For those early in their work lives, planning based on a significantly reduced or non-existant SS benefit is possible. But what do we do with those who have planned to have a SS annuity possibly in conjunction with other investments?

How do we fund the transition? As it is SS is hardly enough to maintain a place to live, put food on the table and medicine in the medicine cabinet. Without other sources of income we risk placing vulnerable seniors into extreme poverty.

I don’t have an answer but suggest that we have to think about transition. Sacrifies need to be made but I don’t know how you cut SS benefits by a significant amount or eliminate it without a disaster of unprecedented proportions.


December 9th, 2010
10:50 am

A one or two year tax break will work fine for me. I will retire when my taxes go up, and I can do it. Pity those who can’t. And how is it that a person making $200K a year is a millionaire or billionaire? What bs.

Kyle Wingfield

December 9th, 2010
11:04 am

A Patriot

December 9th, 2010
11:14 am

“Reform ‘ of Social Security is a stale statist argument.

Get with the program Kyle.

“Repeal” is the only way to go.

Let those who “wish” to join a government-sponsered ponzi scheme do so. Do not coerce the other intelligent people into participating.

Whether or not you or ,any government official, will admit it or not,

this is already happening.