Fixing Social Security game

[Linney]

We used to call those poor houses. I now call it dog pounds and I disagree that someone who has worked a hard labor job all their lives, paid 6.5% into SS all their lives and supported your relatives in their homes when they retired deserves such disrespect and distain. I cannot believe I am reading this. The lack of income might bring realities to people's circumstances but compassion costs nothing and is certainly more attractive.

Well Tadpole, what do you suggest for someone like this? Sleep on the street and eat at the soup kitchens and be 'free' of the poorhouse? Or are you suggesting that they get a more comfortable life with $2000 a month stipend, the extra money coming from a huge tax increase placed on the back of a still-working blue-collar laborer?

If my parents or friends need help when they get elderly my husband and I will do what we can to help make their lives better -- take them in to live with us, or help pay the bills. That's the compassion part. I worry about the elderly who are without family or have family who don't care (very very sad). I'd like to make sure they have shelter and food and do not have to live on the streets.

 

[Martha]

FWIW, the average SS old age benefit in 2006 was $955 a month. http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html

 

[Linney]

I've re-read my posting above and it does sound harsh. But I am looking at social security as it was originally envisioned -- as a safety net. Not what it has morphed into -- a weak pseudo pension system. Given today's situation with frozen or eliminated pension plans I would prefer a system that combined this safety net with a mandatory retirement system like the government workers' TSP plan that would help ensure that Tadpole's hard-working blue collar laborers could have a reasonable retirement to count on.

--Linney (who was raised in a blue-collar family and is angry at how today's government enacts tax breaks that on their surface appear to provide some help to the poor . . . while providing extensive benefits to those well off)

 

[Caroline]

Just take a look at what is called the Section 8 Housing. Basically, apartments for low income people. A very noble and good program for the very poor among us. But, now we see widespread "asset hiding" whereby, if you want this program what you do is take all of your assets and transfer them to some trusted person (children usually). Now... you can live "high on the hog" since virtually all expenses are paid by the taxpayer and your cash assets are safe and available for use to eat out and travel the 7 seas.

Geez. Sounds great, but I think the folks here in my neck of the woods have yet to figure this out. I live not too far away from section 8 housing and if those people are living "high on the hog" then it's news to me!

I myself wouldn't live in those icky apartments for any price. Of course, they ARE in line down at the Christian Help Center getting free day-old Wonderbread and canned beans... that's got to be good living right there!

Given the HORRIFYING school they have to send their children to, and the complete lack of an education they get as a result, I HOPE they're happy, because they sure are stuck.

 

[jdw_fire]

I've re-read my posting above and it does sound harsh. But I am looking at social security as it was originally envisioned -- as a safety net. Not what it has morphed into -- a weak pseudo pension system.

Actually, SS was set up as a "weak" pension system in the 1930s by FDR to get older workers to leave the workforce so there would be jobs for younger workers due to the high unemployment rate at the time. Granted it had other safety net provisions also.

 

[lets-retire]

Linney--Isn't the government's TSP plan basically a 401(k)?

 

[Nords]

Linney--Isn't the government's TSP plan basically a 401(k)?

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.

 

[Independent]

If boomers work longer than the projections assume, the economy trucks along as it has in the past, OR any other of the adjustable parameters comes in better than the intermediate estimate with all else being the same, the trust fund may not need to be tapped at all. Who knows? The assumptions used in the models are extremely conservative. If the estimates short range or so bad, are the long range ones better? It's all a crapshoot and I find it unconscionable that people would just decide to reduce benefits based on this long-range model that was moving out in time each year. The fund has been getting so flush so fast that they had to go to a more pessimistic future economy in order to keep it in crisis. Perhaps this estimate of the future is a better one; perhaps not. Besides, if benefits are reduced now, the trust fund just gets larger without bound. Remember that as long as it is not used, the interest is reinvested and earns interest, which is reinvested and earns interests, etc. That is what should scare people if the fund keeps over- performing. (Note, I have not independently confirmed all of what I have just written; I have just seen it referenced in many economic conversations. I think, though, the fact that the date of trust fund exhaustion which has moved from 2029 to 2042 and then back to 2041 last year seems to support these observations.)

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).

 

[jdw_fire]

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?

Actually, as I posted earlier, when the SSA redeems their bonds the Federal government will raise money elsewhere...

The money will come from the same place it comes from when you cash in a US gov treasury/bill/bond. The answer depends on when the cashing in takes place. If you cash in your treasury/bill/bond now the money will come from another investor (maybe even the SSA since right now they are still a net buyer) who is buying a treasury/bill/bond at this time. When the SSA starts cashing in their bonds the money will either come from another investor or if the US gov's budget is in surplus they can be redeemed out of said surplus.

Now this may increase the budget if the interest rate the US gov has to pay on the new bonds/notes/bills is higher then the interest the US gov is paying on the SSA bonds, however in reality the US gov will just be finding a new lender. (For the sake of this discussion my previous sentance of course assumes the US gov's budget in not in surplus.) Therefore neither 1) or 2) from the first quote is required.

 

[Independent]

Unfortunately, you are probably correct. The politically expedient thing will be to borrow even more money. That will probably mean that the interest rates we pay on all of our national debt will go up. (Simple supply and demand says that in order to find that "other investor", who isn't buying our bonds today, we will definitely need to pay higher rates than "what we would have paid, if our deficits had been lower").

I would like to believe that the disappearance of the annual SS surpluses, together with the reasonable projections that SS will run a deficit in all future years, would cause a lot of people to say "We can't stay on this course and keep on borrowing more and more money each year". But I'll admit that there is nothing in the current political culture to suggest that alternative is likely.

 

[brewer12345]

I've got it figured out: start drafting the 65+ crowd and send them to Iraq.

 

[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?

The boomers built the SSA surplus so why shouldn't it be spent on them?

 

[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.

 

[samclem]

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.

 

[Tadpole]

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 don’t think anyone realized how large the trust fund would grow. The estimate of how high the tax needed to rise in the ‘80s 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, haven’t 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 don’t 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 don’t 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 it’s 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 don’t 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 don’t think people will live longer unless we have giant breakthroughs in research on diabetes, cancer and other old age diseases like Alzheimer’s. You see the boomers, especially the early ones, grew up as children in a TV society that was increasingly polluted. I don’t 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? It’s 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? It’s complicated but each citizen that has enjoyed lower taxes has a bit of loan to repay. Now, if the US credit can be made “the best in world” again, perhaps there isn’t 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]

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?

 

[jdw_fire]

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.

 

[jdw_fire]

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 don’t think anyone realized how large the trust fund would grow. The estimate of how high the tax needed to rise in the ‘80s 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, haven’t 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 don’t 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 don’t 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 it’s 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 don’t 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 don’t think people will live longer unless we have giant breakthroughs in research on diabetes, cancer and other old age diseases like Alzheimer’s. You see the boomers, especially the early ones, grew up as children in a TV society that was increasingly polluted. I don’t 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? It’s 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? It’s complicated but each citizen that has enjoyed lower taxes has a bit of loan to repay. Now, if the US credit can be made “the best in world” again, perhaps there isn’t 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

 

[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..............

 

[jdw_fire]

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

 

[Tadpole]

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.

 

[MasterBlaster]

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

 

[jdw_fire]

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!

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.

 

[MasterBlaster]

jdw_fire:

... Party on Garth. You have nothing to concern yourself with

 

[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.

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.

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.

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.

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?