Two Republicans Advocate Entitlement Reform: ‘Because We Have To,’ Christie Says

BTW today I’d take only what I put in, adjusted for inflation, and walk away from the whole bleeping scam.

I can't imagine how the future plays out well. Those of us who have any savings at all, it's because our savings accrued interest. How are younger people, with less stable jobs, periods of unemployment, and no pensions ever going to prepare for the future? Add to that, a lot of the elder generation (70+) is spending down savings and using other assets because interest rates aren't what were anticipated.

The middle class can never recover financially, not unless something really extreme happens.

What the government has done and may be planning to do re: SSI is immoral in so many ways, and we're not supposed to complain?

[I'm pinging a few other people that I think might be interested in the data below]

To be clear: SSI (Supplemental Security Income) is not funded by Social Security. It's administrated by Social Security, but the money comes from the general fund.

But, I think you might be using SSI as a generic term for all of Social Security. If so: yes, you can and should complain.

The point I'm trying to make is what I wrote earlier: we (collectively) missed the chance to reform Social Security into a sustainable program back in the 80's. There would have been some pain, but it would have been manageable. Today, the problem is much worse, and is bordering on catastrophic failure.

The only way out is shared sacrifice by EVERYONE: contributors and beneficiaries. Younger people will have to pay taxes, with no benefits coming. Current and near-future beneficiaries will have to accept lower benefits, or perhaps reduced cost-of-living increases.

Christie's proposal tries to impose the sacrifice on a subset of people that he deems unworthy, with the expectation that everyone else would vote for him. It's nothing more than the "tax the rich" class warfare advocated by progressives.

BTW, I thought to look at the SSA's evaluation of benefit changes to see if there was something close to Christie's proposal. It's not quite the same:

Reduce individual Social Security benefits if modified adjusted gross income, or MAGI (AGI less taxable Social Security benefits plus nontaxable interest income) is above $60,000 for single taxpayers or $120,000 for taxpayers filing jointly. This provision is effective for individuals newly eligible for benefits in 2020 or later. The percentage reduction increases linearly up to 50 percent for single/joint filers with MAGI of $180,000/$360,000 or above. Index the MAGI thresholds for years after 2020, based on changes in the SSA average wage index.

Christie's proposal is to start at $80,000 and eliminate benefits altogether at $200,000, although it's not clear if that is for single or joint filers.

But, if you look at the SSA's evaluation, you can see that it doesn't really help:

How to read this: the broken red line has to drop to be equal or below the broken blue line on the left graph, and it has to do it before the broken blue line reaches zero on the right graph.

BTW today I’d take only what I put in, adjusted for inflation, and walk away from the whole bleeping scam.

Funny, I just wrote a response to a similar posting while you posted this response. :-)

It's here: http://www.freerepublic.com/focus/news/3281103/posts?page=80#80

But, I'll add: there's nothing to give you. Maybe they could give you a US Treasury Bond. But, the unfunded liability of Social Security is around 23 Trillion, which exceeds the current national debt.

Yeah, I know there’s no ‘account’. At this point I would consider myself lucky to get back what I put in. What a hash.

As well, ALL government employees will take a, across the board, 10% pay cut and continue to take a 10% pay cut each until the US economy is running like a high speed locomotive. Plus they must ALL go on Obama care.
Only then will i believe they are serious.

Yeah, I know there’s no ‘account’. At this point I would consider myself lucky to get back what I put in. What a hash.

No, what I meant is even if you could account for your contributions, there are no assets to "cash in".

The US government could issue new US Treasury Bonds, but it would more than double the current US national debt.

Perhaps the US government could sell off some of its real estate holdings in the west. But, there are many other unfunded liabilities that would want a slice of that pie.

As well, ALL government employees will take a, across the board, 10% pay cut. They must continue to take a 10% pay cut each year until the US economy is running like a high speed locomotive.
Plus they must ALL go on Obama care.
Only then will i believe they are serious.

BTW, I had a stray thought that I decided to check out.

In my original posting, I mentioned that I'd have about $2,000,000 by the time I'm 70, and would have to live until I'm 102 to get it back.

I did that by taking my actual contributions, investing them into a long-term US Treasury Bond (20 or 30-year) each year, at the average rate for that year.

But then, I simply calculated the net present value of my currently legislated benefits, using a 4% discount rate. If you are familiar with the NPV function in Excel, that's how I did it.

However, it occurred to me that I would STILL own US Treasury bonds paying high dividend rates -- up to 8%. So, what if I projected those dividend payments and bond redemptions (as they mature), subtracting my legislated benefits from them each year, and only reinvesting the remainder?

I projected that any bond reinvestment would be for 4% dividends, and that inflation would be 3% (increasing my SS benefit each year). But until the older bonds matured, they would continue to pay the dividend rate for the year those bonds were purchased.

What I found: it's worse than I thought. I would be able to fund the equivalent of my Social Security benefit solely out of dividend payments and maturing bonds until I turned 99. And, I'd still have nearly $3,000,000 remaining.

I haven't programmed a redemption strategy thereafter (which would be cashing in the lowest interest rate bonds). It wouldn't really matter, because by that time every bond would be paying my projected 4%.

But, it appears the remaining balance would last until I'm 116.

I'm going through this exercise simply to show how much your Social Security contributions would be worth, if you had simply invested them in US Treasury bonds. But, keep in mind that your situation is probably not the same as mine. I'm at the high end of the average indexed monthly wage scale, and as you get closer to the other end, the value of your benefits will be much closer to the value of your contributions.

I did that by taking my actual contributions, investing them into a long-term US Treasury Bond (20 or 30-year) each year, at the average rate for that year.

The only pushback I would make is that not everyone can invest in government instruments like bonds. If they did, we (as taxpayers) eventually have to pay back the interest on those bonds. I'm not sure we'd be in a better place.

I think an interesting question would be, if a large number of Americans were forced into investing for their retirements (rather than rely on SS), how would the markets react to that influx of capital? The Obamas of the world like to lambaste private companies, but would people take a more pro-capitalist, free-market approach to investing? Would more people favor business over big government?

The only pushback I would make is that not everyone can invest in government instruments like bonds. If they did, we (as taxpayers) eventually have to pay back the interest on those bonds. I'm not sure we'd be in a better place.

I use long-term US Treasury bonds for comparison, because the Social Security Trust fund is invested in the equivalent of US Treasury Bonds. Also, my goal was to use real historical data, rather than some vague estimate. But, if I had actually been able to invest those funds myself, I wouldn't have used that asset allocation.

I think an interesting question would be, if a large number of Americans were forced into investing for their retirements (rather than rely on SS), how would the markets react to that influx of capital? The Obamas of the world like to lambaste private companies, but would people take a more pro-capitalist, free-market approach to investing? Would more people favor business over big government?

I think you would see an explosion of investment in business growth, along with jobs. Of course, there will be a substantial proportion of people that want to invest conservatively in only US Treasury Bonds, and that's fine. They'll actually increase the amount of capital buying bonds, and push down the dividend rates.

Chile went the route of privatization back in the 80's. Australia did it in the 80's. The result hasn't been perfect, and it has its detractors. But, it has created an entire nation of stock holders.

Bkmk