Posted on 11/09/2014 3:07:50 PM PST by TBP
To quote Jack Kemp, “Liberals measure their compassion by how many people they’re helping. We measure compassion by how many people no longer need our help.”
On average, people take more out of Social Security than they put in.
Unfortunately, social security is welfare, for exactly the reasons you describe.
1. There is no asset balance in your name. You are only entitled to the benefits provided by law, and the law can be changed.
2. You have no contractual right to benefits. This was ruled by the U.S. Supreme Court back in 1960.
3. There is no direct relationship between your contributions and your benefits. They are heavily skewed toward lower incomes. At the very bottom, each dollar of additional average income yields 90 cents. At the top 1/3rd, every additional dollar of average income yields about 15 cents. This is effectively means testing.
Almost every dollar you have paid in social security taxes was immediately paid to beneficiaries in that fiscal year. A small percentage was invested in the equivalent of US treasury bonds, but those will be gone by 2033. After that — by law — social security must reduce benefits to match incoming taxes. That’s expected to be a 25% reduction.
If you had invested your (and your employer’s) contributions in US treasury bonds, you would probably have a lot of money. I did the calculations: after 40 years of contributing since 1974, I would have about $850,000. By the time I actually plan to start benefits, it would be close to $1.4 million.
Social security was not sold as welfare. It was pitched for everyone, to broaden the appeal. But Roosevelt even admitted one reason for SS was to get older people with jobs to retire, so younger people could take the job and reduce its nemployment.
One way or another, SS will end in the next few decades. It is unsustainable, because future generations can’t afford the taxes needed to keep it going in the present form. I can’t afford to give up all of my benefits, but I am willing to take a significant cut in order to reform it and transition current taxpayers into a private, actuarially sound retirement plan.
My parent’s generation didn’t have the courage to end SS In an orderly manner. Mine has to find it, for the sake of our children and grandchildren.
The article says the combination of social security and Medicare yields more, not just social security. And, if you read closely, you will see that the average couple actually does get less social security benefits than they pay in taxes. Medicare is where they come out ahead.
There are two problems with this:
1. it assumes everyone spends the same amount on medical care. Someone that takes care of themselves will have less medical expenses. Of course, they will probably live longer, tipping they scales toward more SS benefits.
2. The average income couple is representative of a very small set of people. I did the calculations: the couple with median incomes “break even” on SS: their taxes and benefits almost balance out. But, if your average lifetime income is less than the median, you get a better deal. If your income is higher than the median, you get a raw deal.
The farther your average lifetime income departs from the median, the better or worse deal you get. This is the part that few realize, and if it was better known, there would be a lot less support for SS - because it would expose the means testing that makes it almost indistinguishable from other welfare programs.
I’m not arguing with the way it is. I’m just saying it is misleading to call it welfare in the modern sense of the word. The word entitlement is used with SS payments, but that’s equally misleading. It is a deferred payment scheme, and a bad one from an investment sense, as you point out. Personally, I think I should have the option to quit SS and, upon signing those rights away, my employer would still have to pay his share, but I can direct it to where I think it should be. This also means I have a titled asset should I die. Bush tried to get this through, but people said “it’s too complicated...I don’t know anything about investing!” So, because the average voter has the economic IQ of dust, all of us are screwed.
Fine, just give me my SS & Medicare taxes back with appropriate interest and inflation adjustment and I’ll take care of myself.
Welfare my ass. I had that money stolen from for all my working life. Why is SS always being threatened with running out of money, but welfare never is?
No, “welfare” and “entitlement” is the correct term. It has all the hallmarks: redistribution of income and means testing. The fact that you were forced to participate doesn’t make it any different.
However, I think you have the right idea for reform: the ability to opt out or at least switch to directing your contributions (and your employer’s contributions on your behalf) to a titled asset.
The problem is the transition period: current employees will have to pay taxes to fund the benefits for those that have already retired. And that will be on top of their own contributions.
Beneficiaries (like me, in about a decade) really have to step up and accept lower benefits, in exchange for reducing the burden on our children, and eliminating it for our grandchildren.
Back in the 80’s, it would have been much easier to do this. It was obvious that Social Security was unsustainable, but they just raised taxes and kicked the can a little farther down the road. Now, it will be much more difficult. And every year we wait, it will get harder.
There isn't any money to give you (well, at least not much). Almost all of it was paid to beneficiaries almost as soon as it was collected from you. That's why it is correctly described as an income transfer program, or welfare.
There is a relatively small amount in the "trust fund". But, that's just the equivalent of US Treasury bonds. Redemption of those bonds comes out of the general fund.
Welfare my ass. I had that money stolen from for all my working life. Why is SS always being threatened with running out of money, but welfare never is?
The fact that you were forced to pay taxes doesn't make it anything but welfare. It was just given another name, so it could be sold to an unsuspecting public. Social Security is running out of money because it is actuarilly unsound: meaning that it doesn't have enough assets or prospective income to meet its obligations. A traditional pension fund in the same condition would put the administrators in jail.
It's that way because politicians have voted to give out more money than it can afford. Adding the the automatic cost of living adjustment back in the 70's was popular, but not sustainable. And in the 80's, the "intermediate" economic assumptions used to justify the tax increase were actually hopelessly optimistic. It's turned out that the "pessimistic" scenario is actually closer to the truth, but even some of those factors were too optimistic, thanks to the Democrat's Great Recession.
We are already paying more benefits than can be funded with tax receipts. So, we have started cashing in the trust fund -- several years earlier than planned. Under the law, when Social Security exhausts the trust fund (in 2033, or earlier), it will have to lower benefits to the point that can be funded with tax receipts. Currently, that's about 75% of the benefits provided by law.
So, you should plan for a 25% reduction in your expected Social Security benefits, starting about 2033. Or, they may decide to adjust the benefit formula and screw the upper middle income taxpayers even worse than they already are. Or, they may means test Social Security benefits, so that any income or assets from any other source will lower or eliminate your benefit. The only thing Congress has to do is enact a change in the law: you don't have any contractual right to benefits... period.
As I noted in my last posting: The 80's were our last opportunity to reform Social Security, relatively painlessly. Now, it's going to hurt either taxpayers or beneficiaries, or both. And every year we wait, it's going to hurt worse.
It's easy to jump up and scream any time someone like me points out the ugly truth about Social Security. But, unless enough people stand up and be the adults in the room and are willing to make the sacrifice necessary to rectify the mistakes of our parents and grandparent's generation, our children and grandchildren are going to suffer.... greatly.
The farther your average lifetime income departs from the median, the better or worse deal you get.
My problem with most Federal programs designed to help the poor or the temporarily needy is that they're a "one size fits all" solution. It's the nature of the beast, and one big reason Americans should be a lot more wound up about Federal organizations taking power away from state, and State from local. Generally speaking, the more localized, the more individualized, and the more individualized, the more effective.
Effective and efficient solutions just are not possible when they have to be applied to such a huge group of people in such a big variety of situations.
Because Social Security applies to everyone, and costs a lot more than welfare. Because the money they collected from you is long gone. Because the original system was based on the idea that most people wouldn’t collect as much as they’d put in (average age of death was a lot lower). Because Social Security worked best when workers outnumbered recipients 5 to one or more; it’s down to less than three to one and will inevitably drop lower.
Social Security is, was, and always has been a kind of Ponzi Scheme, and like all Ponzi schemes, it will collapse when there are not enough people signing on. And losing the money you’ve paid into Social Security may be just the start of it. Europe is probably ten years ahead of us on that scale, and countries there are already seizing people’s private pension funds to make up their shortfall. The US government has tossed around the idea of seizing people’s 401Ks since 2010 (probably longer, but that’s the earliest public mention of it).
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