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Re: Fixing Social Security game
Old 01-22-2007, 02:15 PM   #61
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Re: Fixing Social Security game

I've got it figured out: start drafting the 65+ crowd and send them to Iraq.
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Re: Fixing Social Security game
Old 01-22-2007, 02:22 PM   #62
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Re: Fixing Social Security game

You know, come to think of it we probable need to have the SSA trust fund paid down some when the boomers retire. If it were to keep growing through the boomer's retirement then it would always keep growing and after the boomers are dead it would grow faster and faster giving the SSA a HUGE, rapidly growing asset. What would the SSA do with it?

The boomers built the SSA surplus so why shouldn't it be spent on them?
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Re: Fixing Social Security game
Old 01-22-2007, 03:16 PM   #63
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Re: Fixing Social Security game

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Originally Posted by jdw_fire
You know, come to think of it we probable need to have the SSA trust fund paid down some when the boomers retire. If it were to keep growing through the boomer's retirement then it would always keep growing and after the boomers are dead it would grow faster and faster giving the SSA a HUGE, rapidly growing asset. What would the SSA do with it?
Thinking about it some more I'll answer my own question. The SSA would loan it to the US gov, giving our politicians more funds to spend on pork. It wouldn't even look like a tax increase that is going to be spent on pork. Instead it would be titled fixing SS, a just cause. Therefore a SS fix that maintains or grows the trust fund through the boomer retirement is really a disguised general tax increase that on the books doesn't even help the budget (excluding SS) deficit.

So we really do need to have the SSA trust fund paid down when the boomers retire.
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Re: Fixing Social Security game
Old 01-22-2007, 05:45 PM   #64
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Re: Fixing Social Security game

Quote:
Originally Posted by Nords
I interpret that post as advocating mandatory enrollment in the TSP when first hired so that young workers will automatically begin saving unless they go through the gauntlet process of opting out.

Although there are some special-case situations for making extra TSP contributions, the military has still managed to avoid matching TSP contributions. The match's "enforced savings" really makes a difference between the civil-service & military versions of the TSP.
My >>guess<< is that the services don't want to fund matching TSP contributions because it would come out of pots they consider more important (operations, procurement, MILCON, etc). If they need to improve retention, they'd probably go with the tried-and-true re-enlistment bonuses or targeted pay bonuses. Like the population in general, many military folks are in denial about retirement, so bucks paid immediately have more pull.

I've also heard that servicemember advocacy groups are not pushing a govt match to military TSP, seeing it as the camel's nose under the tent toward eventually elimination of the present defined-benefit retirement plan.

So, with no strong boosters, I don't think the situation will change unless a new SECDEF or President gets the urge to radically reform military compensation. It sure won't happen in the next 2 years.
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Re: Fixing Social Security game
Old 01-23-2007, 04:21 AM   #65
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Re: Fixing Social Security game

Quote:
Originally Posted by Independent
Tadpole - You can check the long-term assumptions yourself. They are in table II C-1 in the 2006 Trustees report on the SSA website. I'll try posting a link here:

www.ssa.gov/OACT/TR/TR06/II_assump.html#wp95492

The most important assumptions are the demographic ones, because they determine the ratio of workers to retirees.

I think that the date when the "trust fund" runs out is less important than the date when SS first attempts to cash in some of those bonds. This is projected as 2017, and this date isn't so sensitive to a lot of long term assumptions.

At that point, we have the political problem of determining how the "general fund" part of government is going to repay "social security" for the $2 trillion of accumulated borrowing.

I agree with all the people who say that the real problem isn't Social Security, it is the rest of government that has been running big deficits for a long time. I think the big political issue around the "trust fund" is that Social Security is funded by a mildly "regressive" payroll tax, and the General Fund is funded primarily by "progressive" income taxes. The people who pay income taxes have been borrowing from the people who pay SS taxes since the SS tax rate was raised in the mid-80's. At some point before 2017, I hope we face up to that.

So when SS taxes don't completely cover SS benefits, will we: (1) Raise income taxes, or cut General Fund programs, so the General Fund can repay SS? or (2) Cut SS benefits, or raise SS taxes, so the General Fund taxpayers don't have to repay the debt?

Of course, a lot of people around the upper middle pay about the same SS tax as they pay FIT, so if it's a tax increase they really don't care if it's on the payroll tax or on FIT. But high income, and median to low income, people do care (or should, if they understand the issue).
I have read the trustee reports and demographics have nothing to do with my statement about what seems to be overly pessimistic parameters used in the models. Perhaps the US economy will be far worse than ever seen before, perhaps not. Who knows? So far it has performed better than even the low-cost model has been predicting. My comments are simply based on current cash reserve build-up in the fund. The problem is that, given the current trend, the trust fund will balloon beyond belief if we continue to buy only federal securities. I imagine that when the trust fund was first set up, it was thought that the 75-year pay-go would need less adjustment at the new tax rate but I donít think anyone realized how large the trust fund would grow. The estimate of how high the tax needed to rise in the Ď80s was evidently too high. Of course, this could mean that Greenspan was an idiot and everyone knows he is the shining light of all that is genus (NOT).

And yes, taxes should rise if for no other reason that the general fund is a debt of all the people, not just those that are regressively taxed under a SS cap. Those who had a little extra in their paychecks to invest, earn capital gains and dividends on and to buy rental property and McMansions will, quite simply, need to pay the money they borrowed back. After all, havenít we been told that money, privately invested over the last 50 years, has outperformed government securities by leaps and bounds? There should be a little excess ROI to repay a loan. What is happening is that a regressive tax is being used to reduce a progressive tax. Some may think that is just fine but I donít especially when the budget is not even balanced. I consider this phenomena to be, politely, exploitation of the worker.

The payback should be configured to be progressive. Some people like the Ball plan because it proposes to use the estate tax to pay the shortfalls. I donít know because, at the current time, the estate tax is going into the general fund and the general fund is not balanced. The money to replace the lost estate tax will need to come from somewhere. Other people propose a means test for benefits. I oppose this because it hits the highest achievers in the workforce the hardest and hardly touches the wealthy. A means test would need to eat way down the income level in order to have enough benefits cut to be useful because most the payback is progressive. To find enough benefits to cut to restore pay-go, you would need to hit moderate income retirees of modest means who sacrificed to save a little extra and have a house. By the way, many of us have lived in a higher tax rate era and somehow thrived.

I would rather pay taxes now while the boomers are still working and making their highest pay than to see thousands of people that are old, helpless, and cold. The Lafler curve just doesn't create enough revenues to make up the difference of lost taxes. I don't know how many times we are going to buy into this free lunch. Just look at the debt built up over the last six years. You can buy into your government projections of a balanced budget in just a few years but you better pray that normal economic cycles, which include recessions, do not occur. All you are doing while you wait for that balanced budget to raise itís illusive head is adding to the DEBT. Unlike the deficit, which goes to zero with a balanced budget, the DEBT just sits there and laughs at that balanced budget while it accrues interest.

What do I think will happen? A little of everything if the US economy remains viable. Dollar devaluation, benefit cuts, more old people in the workforce, lots of talking about rethinking euthanasia laws, and higher taxes. Perhaps we will even learn to spend money responsibly, but donít hold your breath on that one. I think, for the most part, people will get most of their promised benefits but the worth of those benefits will be eroded. So we will still need food stamps, Medicaid, etc. to help those at the bottom. Ultimately it will cost, one way or another, if people live as long as projected.

But I donít think people will live longer unless we have giant breakthroughs in research on diabetes, cancer and other old age diseases like Alzheimerís. You see the boomers, especially the early ones, grew up as children in a TV society that was increasingly polluted. I donít know how much DDT I ingested as a kid but it was a lot. Leaded gas was all there was. Factory chimneys had no scrubbers. Who knows the life span of a generation growing up under these conditions, especially with a lifestyle that was increasing sedentary and, for some, very unhealthy? Then too, who knows what medical research will produced? Itís a crapshoot.

Another point just for putting us, hopefully, on the same page. The boomer era is a curve of population that rises to a peak and then drops. Not all boomers will retire on the same day as pictured by some people.

I like to ask people the following question. I have a neighbor that has made the exact same salary as I have all our lives. He squandered every penny and I lived frugally and saved every penny I could. We are promised the same SS benefit per month and coincidentally my savings will buy an annuity exactly equal to my promised SS benefit. Should he get his and I lose mine? (This is, admittedly an exaggeration to make a point.) If you say that I should lose some of mine then why did I have to use my paycheck to save for his retirement? If you had told me that I would pay into SS and have my savings taken away, I would have known that I needed to live the lifestyle of my neighbor or increase my savings to save a pot of money for him too. The reason I use this example is to explain the effect of a severe means test on some moderate-income seniors. Finding a solution by pooling all the boomer assets and redistributing them is taxing a smaller population and making the per person impact more severe than necessary. The debt is owed by the general fund (all the people) not just the people who just so happen to be retired at the moment.

Hopefully, that was clear even if you disagree with the point it tries to make. Now, I have an ROI on the money I borrowed through my lower taxes; how much did I borrow that should be paid back? Itís complicated but each citizen that has enjoyed lower taxes has a bit of loan to repay. Now, if the US credit can be made ďthe best in worldĒ again, perhaps there isnít as much a problem as projected. But in order to replace some of the SS securities by selling new securities, the debt cannot continue to build. That is my reasoning and that is why I want taxes raised to pay for all these new ways we have found to give taxpayer dollars to people who contribute large amounts to campaign funds.
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Re: Fixing Social Security game
Old 01-23-2007, 04:33 AM   #66
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Re: Fixing Social Security game

Quote:
Originally Posted by jdw_fire
Thinking about it some more I'll answer my own question. The SSA would loan it to the US gov, giving our politicians more funds to spend on pork. It wouldn't even look like a tax increase that is going to be spent on pork. Instead it would be titled fixing SS, a just cause. Therefore a SS fix that maintains or grows the trust fund through the boomer retirement is really a disguised general tax increase that on the books doesn't even help the budget (excluding SS) deficit.

So we really do need to have the SSA trust fund paid down when the boomers retire.
The only way to do this is to give current retirees a windfall. I suggest we inact a special tax to pay down the trust fund debt and invest that tax in the name of the trust fund in investments outside of the federal treasuries. The special tax would be structured as a progressive tax which exactly inverts the regressive tax. This would mean that people who made above the cap would be taxed by the distance between themselves and the cap. This would be added to a per capita special tax on participants in creating the general fund indebtiness to the SS fund with number of years factored in so younger workers aren't held liable. Complicated, yes.

Otherwise I cannot see that your statement makes sense. How does stealing a worker's money solve the old-age problems?
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Re: Fixing Social Security game
Old 01-23-2007, 01:11 PM   #67
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Re: Fixing Social Security game

Quote:
Originally Posted by Tadpole
The only way to do this is to give current retirees a windfall. I suggest we inact a special tax to pay down the trust fund debt and invest that tax in the name of the trust fund in investments outside of the federal treasuries. The special tax would be structured as a progressive tax which exactly inverts the regressive tax. This would mean that people who made above the cap would be taxed by the distance between themselves and the cap. This would be added to a per capita special tax on participants in creating the general fund indebtiness to the SS fund with number of years factored in so younger workers aren't held liable. Complicated, yes.

Otherwise I cannot see that your statement makes sense. How does stealing a worker's money solve the old-age problems?
Tadpole, you are so interested in raising taxes you just don't see it. The way to "have the SSA trust fund paid down" is easy, just don't change SS and once it stops being "pay as you go" funded the SSA will have to cash in some of the trust fund to meet its obligations, thus paying down the trust fund.
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Re: Fixing Social Security game
Old 01-23-2007, 01:26 PM   #68
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Re: Fixing Social Security game

Quote:
Originally Posted by Tadpole
I have read the trustee reports and demographics have nothing to do with my statement about what seems to be overly pessimistic parameters used in the models. Perhaps the US economy will be far worse than ever seen before, perhaps not. Who knows? So far it has performed better than even the low-cost model has been predicting. My comments are simply based on current cash reserve build-up in the fund. The problem is that, given the current trend, the trust fund will balloon beyond belief if we continue to buy only federal securities. I imagine that when the trust fund was first set up, it was thought that the 75-year pay-go would need less adjustment at the new tax rate but I donít think anyone realized how large the trust fund would grow. The estimate of how high the tax needed to rise in the Ď80s was evidently too high. Of course, this could mean that Greenspan was an idiot and everyone knows he is the shining light of all that is genus (NOT).

And yes, taxes should rise if for no other reason that the general fund is a debt of all the people, not just those that are regressively taxed under a SS cap. Those who had a little extra in their paychecks to invest, earn capital gains and dividends on and to buy rental property and McMansions will, quite simply, need to pay the money they borrowed back. After all, havenít we been told that money, privately invested over the last 50 years, has outperformed government securities by leaps and bounds? There should be a little excess ROI to repay a loan. What is happening is that a regressive tax is being used to reduce a progressive tax. Some may think that is just fine but I donít especially when the budget is not even balanced. I consider this phenomena to be, politely, exploitation of the worker.

The payback should be configured to be progressive. Some people like the Ball plan because it proposes to use the estate tax to pay the shortfalls. I donít know because, at the current time, the estate tax is going into the general fund and the general fund is not balanced. The money to replace the lost estate tax will need to come from somewhere. Other people propose a means test for benefits. I oppose this because it hits the highest achievers in the workforce the hardest and hardly touches the wealthy. A means test would need to eat way down the income level in order to have enough benefits cut to be useful because most the payback is progressive. To find enough benefits to cut to restore pay-go, you would need to hit moderate income retirees of modest means who sacrificed to save a little extra and have a house. By the way, many of us have lived in a higher tax rate era and somehow thrived.

I would rather pay taxes now while the boomers are still working and making their highest pay than to see thousands of people that are old, helpless, and cold. The Lafler curve just doesn't create enough revenues to make up the difference of lost taxes. I don't know how many times we are going to buy into this free lunch. Just look at the debt built up over the last six years. You can buy into your government projections of a balanced budget in just a few years but you better pray that normal economic cycles, which include recessions, do not occur. All you are doing while you wait for that balanced budget to raise itís illusive head is adding to the DEBT. Unlike the deficit, which goes to zero with a balanced budget, the DEBT just sits there and laughs at that balanced budget while it accrues interest.

What do I think will happen? A little of everything if the US economy remains viable. Dollar devaluation, benefit cuts, more old people in the workforce, lots of talking about rethinking euthanasia laws, and higher taxes. Perhaps we will even learn to spend money responsibly, but donít hold your breath on that one. I think, for the most part, people will get most of their promised benefits but the worth of those benefits will be eroded. So we will still need food stamps, Medicaid, etc. to help those at the bottom. Ultimately it will cost, one way or another, if people live as long as projected.

But I donít think people will live longer unless we have giant breakthroughs in research on diabetes, cancer and other old age diseases like Alzheimerís. You see the boomers, especially the early ones, grew up as children in a TV society that was increasingly polluted. I donít know how much DDT I ingested as a kid but it was a lot. Leaded gas was all there was. Factory chimneys had no scrubbers. Who knows the life span of a generation growing up under these conditions, especially with a lifestyle that was increasing sedentary and, for some, very unhealthy? Then too, who knows what medical research will produced? Itís a crapshoot.

Another point just for putting us, hopefully, on the same page. The boomer era is a curve of population that rises to a peak and then drops. Not all boomers will retire on the same day as pictured by some people.

I like to ask people the following question. I have a neighbor that has made the exact same salary as I have all our lives. He squandered every penny and I lived frugally and saved every penny I could. We are promised the same SS benefit per month and coincidentally my savings will buy an annuity exactly equal to my promised SS benefit. Should he get his and I lose mine? (This is, admittedly an exaggeration to make a point.) If you say that I should lose some of mine then why did I have to use my paycheck to save for his retirement? If you had told me that I would pay into SS and have my savings taken away, I would have known that I needed to live the lifestyle of my neighbor or increase my savings to save a pot of money for him too. The reason I use this example is to explain the effect of a severe means test on some moderate-income seniors. Finding a solution by pooling all the boomer assets and redistributing them is taxing a smaller population and making the per person impact more severe than necessary. The debt is owed by the general fund (all the people) not just the people who just so happen to be retired at the moment.

Hopefully, that was clear even if you disagree with the point it tries to make. Now, I have an ROI on the money I borrowed through my lower taxes; how much did I borrow that should be paid back? Itís complicated but each citizen that has enjoyed lower taxes has a bit of loan to repay. Now, if the US credit can be made ďthe best in worldĒ again, perhaps there isnít as much a problem as projected. But in order to replace some of the SS securities by selling new securities, the debt cannot continue to build. That is my reasoning and that is why I want taxes raised to pay for all these new ways we have found to give taxpayer dollars to people who contribute large amounts to campaign funds.
Tadpole,

Your post is inconsistant. At the begining of it you state that the trust fund will grow out of control in the future (i.e. too much income) and then in the middle and end of your post you in essence say that SS needs to be fixed by raising taxes or lowering benefits (i.e. not enough income). You need to stop thinking of SS as a pay as you go system, it isn't. It is more akin to someone saving for ER. SS has built up a huge nest egg (the trust fund) and has a steady source of income like a pension/working spouse/PT job (its tax base). Let it run along a while longer and then lets see if it needs fixing.

Now your concern over the US gov general budget deficit/debt is shared by many but let's not try to fix that by tweeking with SS.

jdw_fire
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Re: Fixing Social Security game
Old 01-23-2007, 01:50 PM   #69
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Re: Fixing Social Security game

Can you point me where I can find info on this "huge trust fund" that SS is being pulled from? I have been unable to find it.................

It has been my understanding that the current workers are funding current benefits, which is why the fund is slowly eroding.........i.e. when it was invented, there were 35 workers for every retiree, and now it's 3 to 1..............
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Re: Fixing Social Security game
Old 01-23-2007, 02:42 PM   #70
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Re: Fixing Social Security game

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Originally Posted by FinanceDude
Can you point me where I can find info on this "huge trust fund" that SS is being pulled from? I have been unable to find it.................

It has been my understanding that the current workers are funding current benefits, which is why the fund is slowly eroding.........i.e. when it was invented, there were 35 workers for every retiree, and now it's 3 to 1..............
You are mixing up SS' income and expenses (FICA & SS benifits) which at the moment is net income for SS, and the SS trust fund which has been created over the years by a consistantly positive net income for SS. The trust fund is invested in US gov bonds (reread this thread). Here is a link that I just googled http://www.ssa.gov/OACT/ProgData/fundFAQ.html#n2
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Re: Fixing Social Security game
Old 01-23-2007, 05:38 PM   #71
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Re: Fixing Social Security game

Quote:
Originally Posted by jdw_fire
Tadpole,

Your post is inconsistant. At the begining of it you state that the trust fund will grow out of control in the future (i.e. too much income) and then in the middle and end of your post you in essence say that SS needs to be fixed by raising taxes or lowering benefits (i.e. not enough income). You need to stop thinking of SS as a pay as you go system, it isn't. It is more akin to someone saving for ER. SS has built up a huge nest egg (the trust fund) and has a steady source of income like a pension/working spouse/PT job (its tax base). Let it run along a while longer and then lets see if it needs fixing.

Now your concern over the US gov general budget deficit/debt is shared by many but let's not try to fix that by tweeking with SS.

jdw_fire
I posted quickly before work and realized as I drove in that the part I wrote about taxes might be misunderstood. The trust fund, yes, has enough "money" in it but in order to use that "money" it must be converted back from securities to money. There are two ways to do this. The easiest on the workers is to sell public securities and use the money from the sale to pay benefits. The hardest on the workers is to raise income taxes. To do it the easy way you need a good economy and people/countries willing to buy. That is why I would like to address the deficit and the debt. The less non-SS debt being redeemed by the public/countries the less the SS securities have to compete for exchange for newly issued securities. Also, the better the debt situation of the US, the more people/countries are willing to buy those newly issued securities.

My comment about taxes was income taxes and not payroll taxes. I really was thinking of all the people who would like to default on the trust fund debt or to divert payroll taxes away from it making it shortfall far earlier than in the trust fund reports. Putting together everything I have read and asking what is "fair" leads me to the conclusion that if some of the existing securities were exchanged now for non-federal holdings and future surpluses were invested outside the federal government then you would still have a trust fund that could be distributed progressively but it wouldn't fall to income taxes alone to cover selling assets as needed. If we are going to pre-decide to take the tax route then I think those that benefited from running the general fund deficit should be called on to pay the loan back. Note I didn't know, myself, how one would compute this but it just occurrs to me that last years deficit added to the debt and interest shouldn't be born by someone who was under voting age in 2004. It seemed fair since current voters made the decision accept the debt.

By the way I am willing to run it a while longer and see what happens but I am not willing to have a sudden decrease in income from it after I am retired. I guess my "I" in this case is retirees in general. Retirees as they get older have few options for adjusting to reductions in income because the COLA does not weight those things that increase the most with age.

You know, I am just musing here. But I honestly really don't like big deficits.
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Re: Fixing Social Security game
Old 01-23-2007, 05:50 PM   #72
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Re: Fixing Social Security game

Quote:
Originally Posted by jdw_fire
You are mixing up SS' income and expenses (FICA & SS benifits) which at the moment is net income for SS, and the SS trust fund which has been created over the years by a consistantly positive net income for SS. The trust fund is invested in US gov bonds (reread this thread). Here is a link that I just googled http://www.ssa.gov/OACT/ProgData/fundFAQ.html#n2
Many of us don't have any trust in the "trust fund" and we don't believe that it really is there when we might need it.

After all it really only is an accounting gimmick. The money is gone, spent, vanished.

Considering all of the promises that have been made, those in the know...know better. The choices a few years out are to...

1) raise taxes to fund SS and medicare deficits. These taxes may absolutely kill the economy and the whole thing goes down in flames

2) Rack up even more debt - which just may have to be repaid some day - again killing the economy

3) Cut benefits
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Re: Fixing Social Security game
Old 01-23-2007, 05:58 PM   #73
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Re: Fixing Social Security game

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Many of us don't have any trust in the "trust fund" and we don't believe that it really is there when we might need it.
How do you feel about Treasury bills/bonds/notes? I have read here often that these are the safest (not counting inflationary risk) investments available. Well, that's what is in the trust fund!

Quote:
Originally Posted by MasterBlaster
After all it really only is an accounting gimmick. The money is gone, spent, vanished.
Get your facts straight, the money is invested in US gov securities. Its not an accounting gimmic.
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Re: Fixing Social Security game
Old 01-23-2007, 06:15 PM   #74
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Re: Fixing Social Security game

jdw_fire:

... Party on Garth. You have nothing to concern yourself with
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Re: Fixing Social Security game
Old 01-23-2007, 06:30 PM   #75
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Re: Fixing Social Security game

Quote:
Originally Posted by Tadpole
I posted quickly before work and realized as I drove in that the part I wrote about taxes might be misunderstood. The trust fund, yes, has enough "money" in it but in order to use that "money" it must be converted back from securities to money. There are two ways to do this. The easiest on the workers is to sell public securities and use the money from the sale to pay benefits. The hardest on the workers is to raise income taxes. To do it the easy way you need a good economy and people/countries willing to buy.
You may be right about this, however when the economy is bad people tend to look for the safe, secure, guaranteed investment and that sounds alot like what the people think of US gov securities.

Quote:
Originally Posted by Tadpole
My comment about taxes was income taxes and not payroll taxes. I really was thinking of all the people who would like to default on the trust fund debt or to divert payroll taxes away from it making it shortfall far earlier than in the trust fund reports. Putting together everything I have read and asking what is "fair" leads me to the conclusion that if some of the existing securities were exchanged now for non-federal holdings and future surpluses were invested outside the federal government then you would still have a trust fund that could be distributed progressively but it wouldn't fall to income taxes alone to cover selling assets as needed.
However is there any other investment that is as safe, secure, and guaranteed as US gov securities. You were concerned above about the US gov finding a buyer for their debt in bad times, what about default of non US gov securities in bad times. For me I'd rather the SS trust fund hold US gov securities.

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Originally Posted by Tadpole
By the way I am willing to run it a while longer and see what happens but I am not willing to have a sudden decrease in income from it after I am retired. I guess my "I" in this case is retirees in general. Retirees as they get older have few options for adjusting to reductions in income because the COLA does not weight those things that increase the most with age.
I agree, I don't think any "fix" should change the way it pays out for anyone collecting or close to collecting.

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Originally Posted by Tadpole
You know, I am just musing here. But I honestly really don't like big deficits.
They are scary for us mere mortals, but, musing myself here a little, for a government that creates its own money (and more of it each year) maybe its not leathal. Since the gov can do the creation using multiple means it seems to me that by carefully manipulating the way it creates money it could manipulate the deficits. And if it can manipulate the deficits what's to be afraid of?
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Re: Fixing Social Security game
Old 01-24-2007, 06:29 AM   #76
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Re: Fixing Social Security game

Got to thinking about this "how to fix SS". I know this is way far afield from reality as it stands now. But with the change in control of the Congress AND the possibility of a fully "one party control" of the Govt possibly coming in 2008/9 this could come to pass. If sold properly it may even come sooner.

Democrats in Congress, most of them anyway, do not like the 15/5% capital gains rate in particular and most of the other tax cuts in general. So how could they get rid of the Capital Gains rate and make "us" like it? The first thing they do is resurrect something like the "lock box" concept whereby the difference in tax receipts between 15/5% and the new regular income rate or maybe a 20% or 25% rate is earmarked for the Social Security Fund to make sure the "baby boomer" has as good a social security benefit as their "parents". Class warfare seems to work lately.


Could it be sold?

If it could, then what happens to the Stock Market? Would people with substantial capital gains cash out under the deadline? Would be prudent if the tax rate to do so would be say 15% versus maybe a 28% or higher rate. Then where does the money go? Assume a significant period of turmoil in the stock market where it falls a significant amount and a prudent investor that took the lower rate and got out would have to find a "safe" place to place the funds while waiting for the "dust to settle". MMA, TIPS, CD's etc., as long as he/she moved fast enough before all the funds coming in would drop the rates.

I know this is "doom and gloom" and may be "cynical" and it may never happen but nevertheless we could see it given the increasing noise about Social Security problems we are hearing coupled with a need to "sell" higher taxes.
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Re: Fixing Social Security game
Old 01-24-2007, 08:54 PM   #77
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Re: Fixing Social Security game

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Originally Posted by Tadpole
I have read the trustee reports and demographics have nothing to do with my statement about what seems to be overly pessimistic parameters used in the models. Perhaps the US economy will be far worse than ever seen before, perhaps not. Who knows?

......

Hopefully, that was clear even if you disagree with the point it tries to make. Now, I have an ROI on the money I borrowed through my lower taxes; how much did I borrow that should be paid back? Itís complicated but each citizen that has enjoyed lower taxes has a bit of loan to repay. Now, if the US credit can be made ďthe best in worldĒ again, perhaps there isnít as much a problem as projected. But in order to replace some of the SS securities by selling new securities, the debt cannot continue to build. That is my reasoning and that is why I want taxes raised to pay for all these new ways we have found to give taxpayer dollars to people who contribute large amounts to campaign funds.
Wow, there is so much here, I don't know where to start.

I can agree that there is an equity issue here. Some people are going to want to wash away the "Trust Fund" saying that "it's just money we owe ourselves". However, the individuals who have benefitted from the SS surplus for the last 20 years tend to have higher incomes than the individuals who created the surplus, I don't think we should just wash away that fact. "Fully using the trust fund" should be part of any SS repair package. (at least, I think I'm agreeing with you on that)

Regarding the economy, I suppose that a big increase in real interest rates on federal securities would generate more income from the trust fund, but that's hardly "good news" to most of our economy.

But look at the other economic assumptions. For example, if wages grow, then SS taxes grow, but benefits also grow. There is some leverage because after-retirement benefits are indexed to the CPI rather than to wages, but wage growth doesn't help much with balancing the books in the long run.

I don't know which economic assumption you think is important enough to bail this out.

I think that demographics rule on this type of program. The key is that any fertility rate around 2 leaves SS with fewer workers per beneficiary than it has had in the past. So tax and benefit rates that made sense when the WWII generation retired (they had 3-4 children per couple), don't make sense when their children or grandchildren are retired.

I don't see any quick or easy fix. Every one that I've heard about falls down somehow. In the end, this (soon to retire) generation made promises to itself that it's children aren't going to want to keep.

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Re: Fixing Social Security game
Old 01-25-2007, 04:03 AM   #78
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Re: Fixing Social Security game

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Originally Posted by Independent
Wow, there is so much here, I don't know where to start.

I can agree that there is an equity issue here. Some people are going to want to wash away the "Trust Fund" saying that "it's just money we owe ourselves". However, the individuals who have benefited from the SS surplus for the last 20 years tend to have higher incomes than the individuals who created the surplus, I don't think we should just wash away that fact. "Fully using the trust fund" should be part of any SS repair package. (at least, I think I'm agreeing with you on that)

Regarding the economy, I suppose that a big increase in real interest rates on federal securities would generate more income from the trust fund, but that's hardly "good news" to most of our economy.
I was not referring to interest of the fund but to the estimates on GDP used in all of the models. Thus far, even though the new securities have carried low rates, the economy has been outperforming the assumptions used by the trust fund reports. This is predominately the reason that the trust fund estimates have moved from 2029 to 2041. The actual data has when updated in the models has put the newest data in at a level which has outperformed the low cost model. In fact, some people say that if the economy performs as poorly as the numbers used in the intermediate model, not only will the SS system be in trouble but also other elements of the economy including investments. Demographs is a parameter that is more tightly bound in the estimates, as well as longevity estimates. The economic estimates have a huge compounding affect as can be seen by the movement of the dates over the past few years. The lack of good fit of the estimates one and two and three years out really shows the error that exists fifty or seventy years out. Thats why I likened it to a crap-shoot. You need to plan down the road, but even your best or worst predictions become fuzzier with time. That said, they could also be fairly good since they are longer term smoothed (less volatile) than the nearby (in time) points. I only was pointing out that, thus far, the real data is out performing the projections. That out-performance also compounds down the projection time-lines.

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But look at the other economic assumptions. For example, if wages grow, then SS taxes grow, but benefits also grow. There is some leverage because after-retirement benefits are indexed to the CPI rather than to wages, but wage growth doesn't help much with balancing the books in the long run.

I don't know which economic assumption you think is important enough to bail this out.

I think that demographics rule on this type of program. The key is that any fertility rate around 2 leaves SS with fewer workers per beneficiary than it has had in the past. So tax and benefit rates that made sense when the WWII generation retired (they had 3-4 children per couple), don't make sense when their children or grandchildren are retired.

I don't see any quick or easy fix. Every one that I've heard about falls down somehow. In the end, this (soon to retire) generation made promises to itself that it's children aren't going to want to keep.
All I am saying is economics has won over demographics in the models. That is shown by the results so far. The ratio of workers is fairly static compared to other adjustable parameters.

When it comes to what the power brokers were trying to accomplish in '83, it is difficult to think they wanted the trust fund to grow as large as it is projected because of the problem of paying it back on a timed, non-optional cash flow model. People need to defocus from a fund that currently is maintaining a surplus cash flow and focus on what is really going to cause a problem when that cash flow is reversed and that problem is the borrower fund not the loaner fund. When, in the future, the SSA calls for withdrawals, so will some of the other holders of securities. I know my deferred savings has bonds and securities as does everyone else's and there is the massive build up of debt held by foreign countries over the past few years.

Remember that the current projections have the pay-go plus trust fund lasting the lifespan of the boomer wave so it is not a SS problem at this point so much as a general fund problem. I proposed moving the trust fund to "other than federal government investments" for a reason. I wanted people to see that the federal government would still be spending the money but would need to borrow it from someone other than Americans paying payroll taxes. In my mind there is a spin going on that makes people divert their attention to a future problem but obscures all of the root cause of that problem - the yearly compounding of debt with interest that general fund yearly deficits add to the debt at a time the SS funds would need to be drawn upon cannot be sustained. This would have left future workers with the same total level of debt whether the Social Security System with it's trust fund had existed or not. The trust fund has offset the level of borrowing from other sources to cover yearly deficits in the general fund. My challenge remains - why not start converting those trust fund debt certificates to non-federal investments as a pool which, according to pundits, will grow faster than it is growing currently and not need tax revenue to repay. Doing it now uses the higher earning years of most of the boomers while they are still working? It would also help uncover the TRUE deficit of the general fund since there will be less inter-transfer of funds between treasury accounts. Right now you have Susie's bank account running a $10 overdrawal and Joan's showing a $20 dollar surplus. So they get a joint bank statement that says both have a $5 surplus. How can Susie even know she is overspending when she barely glances at the statement and gets a false feel-good feeling?

Sorry, got to get ready for work. Got to end.

By the way, current high income current retirees are being taxed on SS and that some of that money is flowing back to the SS fund to purchase more securities which, in turn, are being converted to more "IOUs".


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Re: Fixing Social Security game
Old 01-25-2007, 06:22 AM   #79
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Re: Fixing Social Security game

when i plan retirement, i DO NOT plan on ss income. ESPECIALLY with DEMS in control....
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Re: Fixing Social Security game
Old 01-25-2007, 07:39 AM   #80
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Re: Fixing Social Security game

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Originally Posted by wstu32
when i plan retirement, i DO NOT plan on ss income. ESPECIALLY with DEMS in control....
Compared to the REPS?? Bush JR who single handedly took us into the RED? Who added
another layer of govt (Homeland defense)? I was a republican, bush jr, the worst 2 term
president in the history of the United States, changed that. What did the republican congress
do for the last few years(hint, they don't call them the do-nothing congress for nothing).

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