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Old 08-14-2013, 11:34 PM   #141
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Originally Posted by MooreBonds View Post
The author claims that productivity gains would account for the main reason why the system has been solvent despite the ratio of workers:retiree falling?

Perhaps those same "fans of arithmetic" Dean is addressing can look at the more likely causes of the system managing to last this long:

--In 1937, initial taxes were 2% at program start, capped at $3,000 in wages. That remained until 1950.

--In 1950, tax increased to 3%, and in 1951 cap raised to $3,600.
The "wage index" in 1951 was $2,799 (index started this year)
...
The SS wage cap in 2011 was $106,800.
The wage index in 2011 was $42,979
(I used 2011 since the wage index on SS's website only goes to 2011)

So if the wage cap on SS taxes had only matched the wage index growth, the 2011 SS wage cap would have been about $55,278.

This means that not only have SS taxes increased 520% (from 2% to 12.4%), but the maximum wages that is applicable to has gone up from $55,278 to $106,800, or 93%!

And that doesn't even add in the effect of drawing out the full retirement age from 65 to 67 for currently retiring (and those in the future).

Did productivity help increase revenue to the SS trust fund coffers? Of course it did. Was it anywhere near as large of an impact as raising the tax rates by 520% and raising the wage cap by 93%?

Hmmm......
Right. The payroll tax has increased both nominally and the "tax max" (amount of wages subject to payroll tax) has increased also. Did this result in impoverishment of the workforce struggling to feed the blood-sucking retirees? Not at all. The standard of living of both the workers and the retirees continued to increase.

I notice that, like all of the others whose only count heads, you never actually attempt to account for productivity increases. If these were not decisive, how could a workforce whose payroll taxes increased even as their numbers relative to the retirees has declined manage to experience a higher standard of living?

But instead of counting nominal dollars collected by the payroll tax, it is more informative to look at the percent of covered earnings subject to the payroll tax. Here is the graph from the SSA website:



The graph shows a small, recent uptick in a long-term decline in covered earnings. The mechanism has been: failing to raise the cap fast enough, increased compensation through non-covered earnings such as stock options, and the increase of unearned income to the 1% as cap gains, investment income, etc.

More of the income has gone to the upper 1% who have succeeded in escaping the payroll tax. Why should Warren Buffett and I pay the same dollar amount of payroll tax each year?
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Old 08-14-2013, 11:58 PM   #142
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Khufu said: "Why should Warren Buffett and I pay the same dollar amount of payroll tax each year?"

Because assuming you both paid in the max amount, you would get the same SS benefit amount that he would.
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Old 08-15-2013, 12:02 AM   #143
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Khufu said: "Why should Warren Buffett and I pay the same dollar amount of payroll tax each year?"

Because assuming you both paid in the max amount, you would get the same SS benefit amount that he would.
Well, call me a communist, but I think Warren should pay more. He thinks so, too, as a matter of fact.
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Old 08-15-2013, 12:24 AM   #144
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Well, not a communist but perhaps a socialist??
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Old 08-15-2013, 12:47 AM   #145
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Why is this considered a payment from the government?? All of the funds collected are from individuals and from companies that match their contribution. The "Govt" doesn't put in any money at all! The "Govt" just collects it and distributes it. So why is it even considered an "entitlement"?? The "Govt" is just doling out what we and our companies paid in.
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Old 08-15-2013, 07:54 AM   #146
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More of the income has gone to the upper 1% . . .
You are tipping your hand. The "income has gone to". . . reflects a particular view of things.

And if Warren wants to pay more (instead of just claiming he wants to pay more) I wish he would just send in the check. He knows how to do that. He doesn't want to pay more, he thinks other people should pay more. That's the common theme, isn't it? Warren has found good uses for his money (earning more money, philanthropy, etc) that apparently don't include sending it to the US government. But he thinks "other people" aren't so inherently good as he? Arrogance--or just wanting to gain favor on the cheap. It's not an uncommon trait, but I guess I expected more of "the Oracle"
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Old 08-15-2013, 08:04 AM   #147
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Why is this considered a payment from the government?? All of the funds collected are from individuals and from companies that match their contribution. The "Govt" doesn't put in any money at all! The "Govt" just collects it and distributes it. So why is it even considered an "entitlement"?? The "Govt" is just doling out what we and our companies paid in.
Agreed. Any time I hear someone say "the government" should do/fund X, Y or Z, I find that what they really mean is "other people".
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Old 08-15-2013, 08:21 AM   #148
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You are tipping your hand. The "income has gone to". . . reflects a particular view of things.

And if Warren wants to pay more (instead of just claiming he wants to pay more) I wish he would just send in the check. He knows how to do that. He doesn't want to pay more, he thinks other people should pay more. That's the common theme, isn't it? Warren has found good uses for his money (earning more money, philanthropy, etc) that apparently don't include sending it to the US government. But he thinks "other people" aren't so inherently good as he? Arrogance--or just wanting to gain favor on the cheap. It's not an uncommon trait, but I guess I expected more of "the Oracle"
Being a little obtuse, aren't you? Buffett's complaint is that the class of people that includes himself should be taxed more and that doing so would substantially address the funding needs of govt, such as SS. If he were merely to make a personal donation, his substantial resources notwithstanding, the net effect on govt programs would be close to zero. Of course, Buffett has already committed to giving pretty much all his wealth to Gates's foundation when he dies. Doesn't sound like a cheap trick to me.
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Old 08-15-2013, 08:38 AM   #149
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Originally Posted by Khufu View Post
Buffett's complaint is that the class of people that includes himself should be taxed more . . .
You didn't write that.

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Well, call me a communist, but I think Warren should pay more. He thinks so, too, as a matter of fact.
If Warren had said "I think other rich people like me should pay more money to the government, as I am doing with this $10 billion voluntary payment to the Treasury", then he'd have some moral authority and his thoughts on the subject would be especially weighty. But when says that he and others should pay more to the government, but then instead finds a better use for his own money (including philanthropy)--well he becomes just another of the fashionable and growing number of people buying admiration with other people's money. Warren--we're all making the same choice you are. Get off your high horse.
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Old 08-15-2013, 08:39 AM   #150
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You are tipping your hand. The "income has gone to". . . reflects a particular view of things.
A very particular view of things called, "reality." Let's see where the income gains in the USA for the year 2010 went, from that commie rag, The Washington Post:



In 2010, 93 percent of income gains went to the top 1 percent - The Washington Post
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Old 08-15-2013, 08:46 AM   #151
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Khufu, you're not getting my point (and it was a minor one). When someone says "income went to" instead of "income was earned by" it's a window into their world view.

I thought it interesting to hear people talk about their grades.
"Ms Jones gave me an "F" in English Lit"
"I got a "C" in Trig."
"I earned an "A" in Algebra"

I never heard "I earned an "F"". It's all about how we see the world, who we see as responsible for how things turn out--"them", "fate," "me" ?

I don't dispute that the share of total income represented by the top 1% of tax returns has increased from 2009 to 2010. But I also do not grant that these are the same individuals year to year ("the 1%") and that they didn't "earn" the money (through labor or putting their capital at risk in productive ways).
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Old 08-15-2013, 09:09 AM   #152
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You didn't write that.

If Warren had said "I think other rich people like me should pay more money to the government, as I am doing with this $10 billion voluntary payment to the Treasury", then he'd have some moral authority and his thoughts on the subject would be especially weighty. But when says that he and others should pay more to the government, but then instead finds a better use for his own money (including philanthropy)--well he becomes just another of the fashionable and growing number of people buying admiration with other people's money. Warren--we're all making the same choice you are. Get off your high horse.
It sure makes you wonder. I also find it insulting and dangerous that a handful of Gates friends will decide who benefits from all this wealth.
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Old 08-15-2013, 09:24 AM   #153
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It sure makes you wonder. I also find it insulting and dangerous that a handful of Gates friends will decide who benefits from all this wealth.
I don't get the insulting part. They could keep it in their own families, or build shrines to themselves. It's their money.

Dangerous? Sure, it could be. But I'm pretty impressed at some of the things the Gates Foundation is doing.

As far as Buffet and SS, he makes the point that I would about the original post. I'm not going to be the only one (or few) who turns down SS. It wouldn't make a bit of difference. With Buffet's money, it would make a slight difference, but I don't think he's saying that just to look good. What I'm hearing is that he is telling lawmakers that he would back taxing the rich more.

Someone, maybe it was the OP, said that people were getting judgmental about why others need SS and other help as part of their reason for not giving up their own benefit. At least I think that was their point. I would argue that many of us do this for charities as well. Even if the charity is doing good with the money, why do they need more money? Are they careless with it? Are the execs getting too much of it? How much is really going to the real charitable purpose? We have the right to make the same judgment on SS money we turn down. Which I have no intention of doing, btw.
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Old 08-15-2013, 09:57 AM   #154
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I don't get the insulting part. They could keep it in their own families, or build shrines to themselves. It's their money.

Dangerous? Sure, it could be. But I'm pretty impressed at some of the things the Gates Foundation is doing.

As far as Buffet and SS, he makes the point that I would about the original post. I'm not going to be the only one (or few) who turns down SS. It wouldn't make a bit of difference. With Buffet's money, it would make a slight difference, but I don't think he's saying that just to look good. What I'm hearing is that he is telling lawmakers that he would back taxing the rich more.

Someone, maybe it was the OP, said that people were getting judgmental about why others need SS and other help as part of their reason for not giving up their own benefit. At least I think that was their point. I would argue that many of us do this for charities as well. Even if the charity is doing good with the money, why do they need more money? Are they careless with it? Are the execs getting too much of it? How much is really going to the real charitable purpose? We have the right to make the same judgment on SS money we turn down. Which I have no intention of doing, btw.
The insulting part is that the ultra rich say "people like them" should pay more in taxes. I agree one hundred percent. But then they include "people like me" with "people like them" when the tax proposals are rolled out.
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Old 08-15-2013, 11:40 AM   #155
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I will take it and have no problem doing so. I've been self employed since 1989 and therefore have paid in double all those years. If it turns out I don't really need it then I will increase my charitable donations.
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Old 08-15-2013, 12:22 PM   #156
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Why should Warren Buffett and I pay the same dollar amount of payroll tax each year?
Because you should pay your fair share.

If you and Warren Buffett go to the same restaurant and order the same meal, the bill will be the same. Personally, I do not believe there is anything wrong with this. With SS, if you and Warren Buffett pay the same amount each year, your payouts will be the same. You get what you pay for.

My marginal tax rate is currently about 45% (federal AMT, state, medicare, ...). My marginal tax rate would rise to 51% if the SS payroll cap was eliminated. In fact, one could argue that my marginal tax rate would be 58% due to my 7% DB pension contribution (sort of a tax since it acts like SS). I have no complaints about the DB pension or its contribution, but I would still bring home only 42% for every extra dollar I earned.

You seem to place a lot of importance on productivity. I do too. What is the impact on productivity caused by increasingly higher marginal tax rates, such as those above 50%? At least for me, I can assure you that high marginal tax rates do not motivate me to work harder. I have turned down part-time consulting and teaching jobs due to the poor return.

Interestingly enough, one of the main reasons I did not ER during a company buyout two months ago was due to the ongoing growth of my pension. I receive something tangible for my 7% DB pension contribution (e.g., my pension payout would have been $74K/yr if I retired last June, but it will be $84K/yr if I retire next February). This financial incentive motivated me to remain in the workforce and thereby add to the country's productivity. However, there is very little financial incentive from my SS contributions since I am beyond the second SS inflection point. Take away the SS income cap and it reduces my incentive even more. It will cause me to leave work at an earlier date. This will decrease productivity. Equally so, it will reduce SS contributions since there will be no contribution even from those earnings below the income cap.
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Old 08-15-2013, 01:21 PM   #157
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Why don't you give it a rest, Bob? People can decide for themselves what they think.

Ha
Okay, I'm done resting now. You're all talking about my homeboy. What in the world has Warren Buffett done to deserve the bashing? He has accomplished to a much higher degree what most of us dream about and wouldn't turn away from in a million years. What do the critical know about him to be able to criticize?

For example do you think that because you don't hear about any of the charitable activities he and his family fund, and participate in, that they don't exist? I happen to know of several Buffett programs that help children from preschool to college in incredibly meaningful, effective, and not inexpensive ways. There are literally thousands of college graduates in Nebraska, and there will be more, that have had their tuition covered by the Buffetts. Their program didn't just hand out scholarships, it mentored those students through school and made sure they graduated. You should see the success rate for the program.

I'm going to go back and rest some more now, but you all better leave my homeboy alone. If you don't, I'll be back
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Old 08-15-2013, 01:39 PM   #158
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Okay, I'm done resting now. You're all talking about my homeboy. What in the world has Warren Buffett done to deserve the bashing? He has accomplished to a much higher degree what most of us dream about and wouldn't turn away from in a million years. What do the critical know about him to be able to criticize?

For example do you think that because you don't hear about any of the charitable activities he and his family fund, and participate in, that they don't exist? I happen to know of several Buffett programs that help children from preschool to college in incredibly meaningful, effective, and not inexpensive ways. There are literally thousands of college graduates in Nebraska, and there will be more, that have had their tuition covered by the Buffetts. Their program didn't just hand out scholarships, it mentored those students through school and made sure they graduated. You should see the success rate for the program.

I'm going to go back and rest some more now, but you all better leave my homeboy alone. If you don't, I'll be back
I don't think your paying enough attention between your rest breaks Bob. No criticism was leveled at Buffet's charity concerns. The criticism was around his call for others to pay more SS tax.
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Old 08-15-2013, 01:49 PM   #159
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I don't think your paying enough attention between your rest breaks Bob. No criticism was leveled at Buffet's charity concerns. The criticism was around his call for others to pay more SS tax.
Oh . . . well . . . then, I guess like Rosanna Danna used to say on SNL "never mind".
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Old 08-15-2013, 02:16 PM   #160
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Here's a different view from Dean Baker:

One of themes that recurs endlessly in news coverage is that the United States and other countries face a disastrous threat to their living standards as a result of a falling ratio of workers to retirees. This is one that can be easily dismissed with some simple arithmetic.

A falling ratio of workers to retirees means that a larger chunk of what each worker produces must be put aside to a support the retired population. (Btw, this is true regardless of whether or not we have a Social Security or Medicare system. The only issue is whether retirees are able to maintain something resembling normal living standards.) However, that does not imply that the working population must see a drop in their living standards.

Fans of arithmetic might note that the ratio of workers to retirees fell from 5 to 1 in the early sixties to 3 to 1 in the early 90s. This sharp drop in the ratio of workers to retirees did not prevent both workers and retirees from enjoying substantial improvements in living standards over this period. The reason is that productivity growth, what each workers produces in an hour of work, swamped the impact of a falling ratio of workers to retirees.



The 1.0 percent growth bar shows the impact of productivity growth assuming that going forward it is worse than at any point in the post-war era. (Even in the period of the productivity slowdown, from 1973-1995 growth was somewhat more rapid than this.) In this case the 25.7 percent increase in living standards allowed by higher productivity growth is more than three times the 7.8 percent decline resulting from a fall in the ratio of workers to retirees.

I note that in the three years following the crisis of 2008 the productivity growth of the US economy fell to about 1% per year. It's reasonable to expect it to increase as the economy recovers, but even if it did not, rising living standards would overwhelming the declining number of workers per SS beneficiary.

It's interesting to me that the people who believe SS will run out of workers never account for productivity gains. They implicitly assume that the worker of 2040 will produce the same output as the worker of 1935. If that were true living standards for both workers and retirees would never have risen above the 1935 level.


One of the problems with this math is that it is not counting the right item...

The item SS is concerned with is total number of workers that make less than the maximum that is taxable....

Let's go to an extreme... say there are only 10 people in the US who work.... and they can produce everything that is produced today... for SS, the taxes would be (about) $106K X 10 X 12.4% or $131K...

We all know that $131K will not be enough to pay all SS benefits.... productivity has increase tremendously, but the amount of money going into the SS has dwindled to almost nothing....

From this example, productivity actually HARMS the SS system... big time....

So, there has to be another reason that people have a higher standard of living.... and it is not the SS system and productivity gains...
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