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Discussion: (32 comments)

  1. The “liberals” Know that SS needs to be fixed but:

    1. – it’s not a crisis right now – 20 years from now, yes
    2. – much less a significant impact to the current budget
    3. – so why are Conservatives lumping it in with the
    other items in the budget that need to be fixed now?

    1. if it’s privatized, they can profit of the baby boomers retirement…

      1. re: privatizing SS.

        for those not familiar.. you should take a look at the Federal Employees -Thrift Savings Plan.

        It’s the Fed equivalent of a 401(K) but it’s very good and the fund belongs to the individual.

        but I’d also point out that the Feds also pay FICA taxes and they pair SS with a voluntary 401(k) that is very well run, trustworthy, and has very low administrative costs.

        1. “for those not familiar.. you should take a look at the Federal Employees -Thrift Savings Plan.”

          Larry are you advocating for privatization?

          “but I’d also point out that the Feds also pay FICA taxes and they pair SS with a voluntary 401(k) that is very well run, trustworthy, and has very low administrative costs.”

          They also have a defined pension plan. So they can save 10% of their base salary (tax free) with the Thrift Savings Plan, accrue a full federal pension and collect social security. Why don’t we do away with defined pension plans for governmental employees and make generous contributions to their individual type 401K’s (Thrift Savings Plan). These plans coupled with SS would provide a decent retirement, No?

          1. “Larry are you advocating for privatization?”

            I’d advocate for the ADDITION of private 401(K) plans like the govt offers it’s employees.

            “but I’d also point out that the Feds also pay FICA taxes and they pair SS with a voluntary 401(k) that is very well run, trustworthy, and has very low administrative costs.”

            “They also have a defined pension plan. So they can save 10% of their base salary (tax free) with the Thrift Savings Plan, accrue a full federal pension and collect social security. Why don’t we do away with defined pension plans for governmental employees and make generous contributions to their individual type 401K’s (Thrift Savings Plan). These plans coupled with SS would provide a decent retirement, No?”

            the defined benefit pensions plans went away in the late 80′s. All Federal employees now have a defined contribution plan – the TSP where the govt puts money into it and additionally matches dollar for dollar contributions up to some limit.

            So right now – they have 3 tiers, SS, govt-defined contributions, and employee contributions.

            I note also that all military personnel have the same thing and includes Social Security and the military moves their retirees and DOD civilians to Medicare when they hit 65. They can keep their health plans (and pay for it) as Secondary/GSP coverage.

    2. Wrong. And you know it.

      1. the percent of the general revenue budget that is adversely affect by SSl AS COMPARED to OTHER expenditures is a gnat on a dogs butt.

        What makes SS more of a priority right now ?

        it has little to do with the current budget realities.. so why?

  2. “the defined benefit pensions plans went away in the late 80′s. All Federal employees now have a defined contribution plan”

    Larry, I’m married to an Air Force physician. They most definitely have a defined pension benefit. All military members do. The TSP is in ADDITION to that plan.

    1. Federal Employees =

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

      The military is a defined benefit system – you are correct:

      http://dbb.defense.gov/pdf/DBB_Military_Retirement_Final_Presentationpdf.pdf

      in both cases – the TSP is IN ADDITION to the pension and both of them include SS.

      my point was/is that most people already have the ability to ADD to their SS so why would you want to privatize it?

      SS is there to protect other taxpayers from those who would not save towards their retirement.

      As a country, we would not refuse to help destitute seniors and that’s why and how SS came into being.

      Every single industrialized nation in the world, bar none, has a similar arrangement – an individual mandate because the lesser of the two evils is to have the mandatory FICA tax on the front end than have taxpayers picking up the tab for destitute seniors who did not save for their retirement.

      this is especially true of lower income people. people called the ‘working poor” – they work their entire lives but would never have enough for retirement if it were not for social security.

      1. No nation industrialized or otherwise has the legacy costs that are embedded in Social Security.

        “SS is there to protect other taxpayers from those who would not save”

        Actually it is insurance against old-age. Benefits are completely independent of past saving. The cost of Social Security now makes it more difficult for workers to save, so SS is causing the savings problem not protecting anyone.

  3. Drum isn’t counting on the changing demographics. Today only 22% of Americans expect to retire to scheduled benefits. People as old as 63 expect to outlive full benefits. That percentage never gets better.

    Long before 2033, you will see a fracture in the elderly as though who want the system to pay less depleted benefits over a longer period of time butt heads with those who want as much as they can get now.

    Today anyone 46 or younger will retire after the Trust Fund is depleted. That is 50% of the voting aged Americans.

  4. 1775Concord

    I see no mention here of the intentional underfunding of SocSec by Obama’s proclamation that the employee contribution be decreased from 6.5% to 4.5%, which he called a “tax cut.” And he takes credit for it, though it is simply an underfunding of America’s retirement (and safety net) plan.

    1. If not mistaken, I believe the stimulus made up the difference and continued the full funding of FICA.

      1. Where did the stimulus money come from?

        1. The general taxpayer backfilled the revenue shortfall. So there wasn’t a tax cut at all. We simply shifted the burden of Social Security from the covered worker to the general taxpayer.

          In the net, the payroll tax holiday is actually a plus to Social Security if any new job was created by the tax reduction. How many were created is a matter of debate, but you can’t argue that Social Security was made worse off by the tax holiday.

        2. borrowed by selling T-bills… right?

          1. Not exactly. It was borrowed from Social Security. It is close to printing money.

          2. other way. they borrowed money to pay for the 2% reduction.

            So they lowered FICA by 2% to put more money in paychecks but they maintained the FICA contributions into the trust fund by borrowing money and putting it into the trust funds.

            If they had not done that – then the date that the trust fund runs out would advance by two years, right?

          3. But when you say it borrowed it, where did it borrow the money from ? It was borrowed from the Trust Fund. The taxpayer put $103 in the Trust Fund which by law lends it back. If this were the private sector someone would be getting fitted for the big-Orange jumpsuit.

          4. ” But when you say it borrowed it, where did it borrow the money from ? It was borrowed from the Trust Fund. The taxpayer put $103 in the Trust Fund which by law lends it back. If this were the private sector someone would be getting fitted for the big-Orange jumpsuit.”

            no, you fundamentally do not understand that the trust fund only has money in it from somewhere else.

            Most of the time the money that goes into the trust fund come from FICA taxes but some of the money is interest earned – paid from the Treasury who gets it by selling T-notes to the public.

            When they lowered the amount of FICA tax that was taken from paychecks that normally would have been put into the trust fund – they replaced that funding stream from another source.

            I speculated that they had done that by selling more T-notes to keep the funding stream the same.

            but I might be wrong – read this:

            http://politicalticker.blogs.cnn.com/2011/12/17/how-will-congress-pay-for-the-payroll-tax-cut-extension/

            so to recount:

            1. – People had less FICA tax taken out of their paychecks – for a temporary period of time.

            2. – the FICA funding cut was made up by new taxes on mortgages according to the CNN article.

          5. I don’t buy into the whole IOU, future-revenue stream, accounting trick. The Trust Fund owns government securities that the market says have substantial worth. I will take the side of the market.

            The article that you referenced says that the govt plans to pay for a tax decrease with a tax increase. That might be meaningful if the govt wasn’t running a deficit. There is no way to say what the tax on mortgages pays for. This article says that it is the payroll tax holiday specifically. But tax revenue is fungible so you can’t really single out a single expense.

            The $103 billion went into the Trust Fund where it is by law required to buy government securities. The government paid Social Security $103 billion which Social Security then lent to the govt.

          6. ” I don’t buy into the whole IOU, future-revenue stream, accounting trick. The Trust Fund owns government securities that the market says have substantial worth. I will take the side of the market.”

            the securities are worth – dollar for dollar what T-notes are worth – right?

            “The article that you referenced says that the govt plans to pay for a tax decrease with a tax increase. That might be meaningful if the govt wasn’t running a deficit. There is no way to say what the tax on mortgages pays for. This article says that it is the payroll tax holiday specifically. But tax revenue is fungible so you can’t really single out a single expense.”

            Not sure what you mean.. What does a tax on mortgages have to do with the deficit?

            “The $103 billion went into the Trust Fund where it is by law required to buy government securities. The government paid Social Security $103 billion which Social Security then lent to the govt.”

            you have to think of the Trust Fund as a checking account.

            money goes into the account but the govt immediately uses that money to pay bills but when the time comes that the money originally deposited is needed to pay other bills, the govt then sells T-notes to the public to repay the temporary loan.

            the only thing that is going on is that money that goes into the trust fund/checking account is temporarily loaned so the govt does not have to sell more T-notes on the open market until that money it borrowed is needed, then it has to essentially re-finance the loan fro the trust fund to selling T-notes to the public.

            the essential point here is that this process has nothing to do with Social Security uniquely.

            the same process works for every trust fund – more than a hundred of them for everything from airport fees, to gasoline taxes, to premiums for FEMA flood insurance, etc, etc.

            they all work this same way and yes.. when we are running a deficit…the money is borrowed and spent – but then repaid by ultimately selling Tnotes to repay the loans.

            When someone makes the argument that Social Security trust fund operations are unique and financially questionably, it’ simply not the truth unless one thinks the way the govt does trust funds in general is questionable and in that case, you’re not talking just about Social Security any more – you’re talking about something different.

            The propagandists have successfully misrepresented the truth about this – but anyone who wants to spend a little time on their own to get the actual facts will soon realize that what the propaganda folks are doing is deceptive and dishonest to suit their real agenda – which is to question the concept of Social Security but instead of attacking it as a concept – they attack it as if it has a uniquely illegitimate financing method and totally ignore the fact that the other 100+ trust funds, including funds like the military pension funds, work essentially the same way.

            The govt “credits” the money in the military trust fund to signify that they owe that money to be paid in benefits.

            but that money is not there – and it won’t be there until the govt sells Tnotes to get it.

            same process except the military pension money comes from the general revenue budget, not FICA.

          7. There is a vast difference between the Social Security Trust Fund and all other Trust Funds maintained by the government. Social Security has promises, but those are not legal obligations of the general taxpayer. If you look at a pension fund where the benefits are obligations then the securities are book-keeping entries.

            The Trust Fund is just like any other under funded pension. It receives cash, and invests that cash wisely or not in government securities.

            Whereever the government got the money for payroll tax holiday, once the money was deposited the money was then lent back to the government. For all extensive purposes, the government may never have borrowed a dime. I might well have simply put bonds into the Trust Fund’s account.

          8. “There is a vast difference between the Social Security Trust Fund and all other Trust Funds maintained by the government. Social Security has promises, but those are not legal obligations of the general taxpayer. If you look at a pension fund where the benefits are obligations then the securities are book-keeping entries.”

            what do you mean? Social Security does not “promise” any more or any less than any other trust fund does. Social Security is not a pension fund. It is an insurance annuity. And the promise is that it will pay out benefits ONLY to the extent that FICA generates revenue.

            “The Trust Fund is just like any other under funded pension. It receives cash, and invests that cash wisely or not in government securities.”

            what?

            “Whereever the government got the money for payroll tax holiday, once the money was deposited the money was then lent back to the government. For all extensive purposes, the government may never have borrowed a dime. I might well have simply put bonds into the Trust Fund’s account.”

            it works like all the other trust funds. If the govt has a balance in the trust funds – it will use that money for current expenses – and then pay it back when the money is needed for the original purpose.

            there is nothing particularly unique about the FICA/SS trust fund relative to most other trust funds except that the propaganda folk have tried to make folks believe that it is.

            As I’ve said over and over – get the facts, don’t be gullible.

            If you have problems with SS as a concept then by all means hold a principled view about it but at least get the basic facts correct so you really do have a principled position.

          9. Actually I am very comfortable with the facts. I see that you are repeating most of what I am saying. The only difference that I see is whether the Social Security Trust Fund is any different than other Trust Funds.

            In Flemming V Nestor the Supreme Court ruled that Social Security benefits are very different from those of other obligations supported by trust funds. If you are saying that the obligations are different but the trust funds are the same. That isn’t a difference of fact. It is a difference of symantics.

            The Federal Government owes nothing for future benefits. It owes what is held in the Trust Fund and that is it. The government borrowed that money and spent it. There is no reason that the system shouldn’t expect repayment.

            Here is a longer article on why I discount the message that the Trust Fund contains ‘markers’, ‘IOUs’, or the rest.

            http://www.fixssnow.org/blog/post/2012/11/30/The-Trust-Fund-And-The-Critics.aspx

          10. Actually I am very comfortable with the facts. I see that you are repeating most of what I am saying. The only difference that I see is whether the Social Security Trust Fund is any different than other Trust Funds.

            In Flemming V Nestor the Supreme Court ruled that Social Security benefits are very different from those of other obligations supported by trust funds. If you are saying that the obligations are different but the trust funds are the same. That isn’t a difference of fact. It is a difference of symantics.

            no it didn’t. It ruled SOLELY on the issue of whether or not people are legally entitled to benefits and had NOTHING TO DO with trust funds at all.

            It’s NOT “semantics”, it’s willful ignorance of the facts. You can’t make it what it is not by making unsubstantiated assertions.

            If you think Nestor was about the trust fund itself, then give some credible cites.

            “The Federal Government owes nothing for future benefits. It owes what is held in the Trust Fund and that is it. The government borrowed that money and spent it. There is no reason that the system shouldn’t expect repayment.”

            you are wrong. As long as FICA tax is collected – benefits will be paid – regardless of the balance in the trust fund. the trust fund holds ONLY the EXCESS of what FICA generated in years past. The primary funding source – FICA generates almost 800 billion a year no matter what the trust fund does.

            do you actually read and understand ? you’ve got it wrong guy.

            “Here is a longer article on why I discount the message that the Trust Fund contains ‘markers’, ‘IOUs’, or the rest.”

            the link you gave is not a credible site. It’s more propaganda from who? Tell me who the people are who wrote this? Who are they? What are their qualifications to write about SS? Where are the references and footnotes to what they claim?

            the trust fund is a checking account that receives the 800 billion a year that FICA generates.

            It goes into the Trust Fund then it comes out of the trust fund to pay benefits.

            that’s all the trust fund is.

            you can verify this at a number of credible websites.

            you have chosen to pick a non-credible site that is spouting more propaganda.

            Have you read this:

            http://www.gao.gov/new.items/d01199sp.pdf

            or this:

            http://www.census.gov/compendia/statab/2012/tables/12s0476.pdf

            you are confirming your own biases rather than seeking actual facts from credible sources.

            if you are “comfortable” with this, I’d suggest that you are pretty darn gullible.

            get the facts guy. resist the urge to feed your biases with propaganda.

          11. this ought to have familiar ring to it except it’s not about the SS trust fund but another trust fund:

            http://www.prnewswire.com/news-releases/congress-is-looting-federal-worker-military-retirement-funds-says-william-fruth-founder-of-10-amendments-for-freedom-84465732.html

            at least this guy is focusing on the way that trust funds in general work … rather than arguing something other than the truth about trust funds.

            but you also might ask yourself WHERE does the money come from that goes into the military trust fund?

          12. “no, you fundamentally do not understand that the trust fund only has money in it from somewhere else.”

            Oh, and here I thought the trust fund spontaneously generated income.

            “Most of the time the money that goes into the trust fund come from FICA taxes but some of the money is interest earned – paid from the Treasury who gets it by selling T-notes to the public.”

            Wow, now I understand why these SS arguments are futile. Larry, you don’t get it. The interest accrued in the SS trust fund has absolutely zero to do with T-notes. Nothing is sold. The trust fund contains non-marketable securities that act as markers(IOU’s) against future SS obligations.

            “borrowed by selling T-bills… right?”

            Now you’ve got it. T-bills are sold to finance government debt (money the government has already spent or is planning to spend).

            “other way. they borrowed money to pay for the 2% reduction.”

            And that would make this a wealth transfer payment, correct? Since everyone who earns ordinary income pays FICA but, only the top 50% of earners pay federal income tax. And it is federal income tax that pays the interest on those T-bills.

          13. Oh, and here I thought the trust fund spontaneously generated income.

            “Most of the time the money that goes into the trust fund come from FICA taxes but some of the money is interest earned – paid from the Treasury who gets it by selling T-notes to the public.”

            Wow, now I understand why these SS arguments are futile. Larry, you don’t get it. The interest accrued in the SS trust fund has absolutely zero to do with T-notes. Nothing is sold. The trust fund contains non-marketable securities that act as markers(IOU’s) against future SS obligations.

            the “non-marketable securities” is part and parcel of the propaganda.

            ALL 100+ trust funds WORK THIS WAY and what the govt does is pay interest on the money when it borrows it the very same way it pays interest on T-bills.

            The non-marketable securities are backed dollar-for-dollar with marketable T-bills.

            It’s the way it was set up for ALL TRUST FUNDS,

            NOT JUST SS – as you and other propagandists imply.

            “borrowed by selling T-bills… right?”

            Now you’ve got it. T-bills are sold to finance government debt (money the government has already spent or is planning to spend).

            had it all along but not sure you do yet.

            It’s NOT debt UNTIL the T-bills are sold, we get money and THEN we have debt.

            “other way. they borrowed money to pay for the 2% reduction.”

            And that would make this a wealth transfer payment, correct? Since everyone who earns ordinary income pays FICA but, only the top 50% of earners pay federal income tax. And it is federal income tax that pays the interest on those T-bills.

            No.

            you’re conflating about 3 different things here which means either you’ve bought the propaganda or you are helping to spread it.

            1. – FICA taxes pay for SS and the govt borrows the FICA tax temporarily to pay for other govt spending then finally sells T-bills to pay back the FICA – with interest.

            2. – it does the same exact thing with all 100+ trust funds including the military pension trust funds

            3. FICA is no more a wealth transfer than the money spent on the military trust fund. In both cases there are essentially money taken from wages to pay for future benefits.

            4. – Federal income tax pays for T-note interests – yes.

            and it does that no matter what the money is spent on – whether it is to repay FICA with interest, US military pensions or a federal highway.

            there is nothing unique in this process with respect to FICA and SS despite your lack of understanding OR your refusal to admit the truth of it.

            Govt trust funds and govt borrowing are not wealth transfers.

            taxation of SS benefits is means-testing – the very same means-testing that is advocated for Medicare..

            SS is not a pension fund – it is Annuity Insurance. The insurance guarantees you benefits – if you are in need of them. that’s why it is called formally: Old-Age & Survivors Insurance and NOT Old-Age & Survivors Pension Fund.

            you have to want to know the facts here.

          14. “the “non-marketable securities” is part and parcel of the propaganda.”

            Propaganda? When does a simple statement of fact become propaganda?

            “Govt trust funds and govt borrowing are not wealth transfers”

            Of course they are when one group receives the benefits and another group pays for those benefits.

          15. “the “non-marketable securities” is part and parcel of the propaganda.”

            Propaganda? When does a simple statement of fact become propaganda?

            by using it in a context that implies that it is not legitimate

            “Govt trust funds and govt borrowing are not wealth transfers”

            Of course they are when one group receives the benefits and another group pays for those benefits.

            you mean like military pensions or farm subsidies or public schools?

            what’s your point? that all taxes are wealth transfers?

            don’t masquerade here.. declare what you are and are about.

  5. similar to make-work-pay – a 400 credit on tax returns for anyone with a job – and it was funded by selling more T-bills – like other stimulus spending.

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