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Why the Social Security deficit increased
Old 05-07-2012, 08:47 PM   #1
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Why the Social Security deficit increased

Here is an article that attempts to explain why the Social Security deficit increased.


Why Did Social Security
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Old 05-07-2012, 11:14 PM   #2
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The program faces a manageable financing shortfall over the next 75 years, which should be addressed soon to restore confidence in the nationís major retirement program and to give people time to adjust to needed changes.
Has anyone sent this to Congress? I don't think they've figured out what most of us know without reading the summation of that article.
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Old 05-08-2012, 05:26 AM   #3
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An increasing number of people who can't find a job are trying to qualify for a SS disability benefit. Really increases FRA benefit payouts & early.
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Old 05-08-2012, 07:01 AM   #4
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I know it's not "fair" because benefits are capped to a certain level regardless of what you have contrubuted, but I would remove the income limit on contributions and tax everyone at 6.2% for their full income amount rather than cut it off at $106,400. I say this even though this would personally negatively impact me as I make more than this limit today. I would think this would make the program "solvent" over night?

I do not believe we will EVER see cuts to the actual payout (benefit) amount because that is a death blow politically to whoever would implement it. So the choices are to raise rates on everyone or remove the income cap. The income cap would be politically more acceptable and that seems to be what motivates our politicians on both sides of the aisle these days!
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Old 05-08-2012, 07:08 AM   #5
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We may not see actual "cuts" to payouts but new formulae being used in the future with lower increases, which results will be the same as 'cuts'.
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Originally Posted by skyvue
I do not believe we will EVER see cuts to the actual payout (benefit) amount because that is a death blow politically to whoever would implement it. So the choices are to raise rates on everyone or remove the income cap. The income cap would be politically more acceptable and that seems to be what motivates our politicians on both sides of the aisle these days!
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Old 05-08-2012, 07:37 AM   #6
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I would remove the income limit on contributions and tax everyone at 6.2% for their full income amount rather than cut it off at $106,400. I say this even though this would personally negatively impact me as I make more than this limit today. I would think this would make the program "solvent" over night?
I'm not so sure that removing the cap would make SS solvent. I just don't think there are enough people making over the SS cap (which I think got bumped to $110K this year) to really make a huge difference. I tried googling it, and got mixed opinions.

One article, published back in 2004, estimated that removing the cap would push back the date of the SS cashflow deficit from 2018 until 2025, giving ss only 7 additional years of surpluses. Here's the article... Eliminating the Social Security Payroll Cap: A Bad Idea | Publications | National Center for Policy Analysis | NCPA . And, I'm sure the SS system is in worse shape now than it was back in 2004.
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Old 05-08-2012, 07:47 AM   #7
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There was a recent thread on SS How to fix Social Security This post (here) by Independent linked to a paper by the SS trustees that quantifies the impact of many of the changes commonly discussed.
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Old 05-08-2012, 07:59 AM   #8
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Originally Posted by skyvue View Post
I know it's not "fair" because benefits are capped to a certain level regardless of what you have contrubuted, but I would remove the income limit on contributions and tax everyone at 6.2% for their full income amount rather than cut it off at $106,400. I say this even though this would personally negatively impact me as I make more than this limit today. I would think this would make the program "solvent" over night?
Why just tax more for this issue? Why not tax everyone enough to balance the budget? For me, pols think it's their jobs to spend more & provide more benefits. & voters believe it or they wouldn't vote for people that promise more from government. That's the whole reason SS is in the hole - like every other program.
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Old 05-08-2012, 08:16 AM   #9
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I know it's not "fair" because benefits are capped to a certain level regardless of what you have contrubuted, but I would remove the income limit on contributions and tax everyone at 6.2% for their full income amount rather than cut it off at $106,400. I say this even though this would personally negatively impact me as I make more than this limit today. I would think this would make the program "solvent" over night?
If the question mark means you're not sure, the SS actuaries have already crunched the numbers. Long Range Solvency Provisions

It closes about 2/3 of the annual gap in the 2030-31 period.
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Old 05-08-2012, 08:18 AM   #10
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If the question mark means you're not sure, the SS actuaries have already crunched the numbers. Long Range Solvency Provisions

It closes about 2/3 of the annual gap in the 2030-31 period.
Thanks. That certainly is a big step but surprised it did not do more.
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Old 05-08-2012, 08:50 AM   #11
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I believe that a combination of removing the earnings cap and raising the rate are required together to remove the 75 year deficit as one possible solution. There are many other partial solutions that in various combinations might work. All that is required is the political will to do it.
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Old 05-08-2012, 11:04 AM   #12
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And then there's Medicare, a much more pressing issue, but Soc Sec still seemingly gets way more media attention.
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Old 05-08-2012, 01:32 PM   #13
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I believe that a combination of removing the earnings cap and raising the rate are required together to remove the 75 year deficit as one possible solution. There are many other partial solutions that in various combinations might work. All that is required is the political will to do it.
And some of them that have been thought to be partial "solutions" may not be solutions at all. One idea was to peg future benefit increases to inflation rather than wage growth, but in the last few years inflation has risen faster than wages, and as long as unemployment remains high there's little reason to expect that to reverse any time soon.
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Old 05-08-2012, 04:18 PM   #14
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And some of them that have been thought to be partial "solutions" may not be solutions at all. One idea was to peg future benefit increases to inflation rather than wage growth, but in the last few years inflation has risen faster than wages, and as long as unemployment remains high there's little reason to expect that to reverse any time soon.
So true. I browsed through some of the Trustee's reports from 1941 to present. A lot of smart people have put a lot of thought and effort into keeping the plates spinning. Reality trumps theory every time.
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