Posted on 05/25/2005 8:42:08 AM PDT by qam1
The debate over whether to reform Social Security is full of idiosyncrasies.
Here's a big one: No matter what fix we're talking about - partial privatization, raising the retirement age, means testing so millionaires forfeit benefits, tying benefits to inflation rather than wages, etc. - the most ferocious opposition comes from the demographic that won't be affected either way by any proposal being discussed at either end of Pennsylvania Avenue: Americans already 55 and over.
If you can imagine that, you're already two steps ahead of the Bush administration. White House officials seem baffled that their biggest fight has turned out to be with a group with whom the administration went out of the way to avoid picking a fight. The polls on this issue back that up. Most show the same trend: The older the polling sample, the less support you find for tinkering with Social Security. The younger the sample, the greater the support.
The more the administration tries to reassure seniors that they'll squeak by before any rule change takes effect, and so this debate doesn't concern them, the more concerned seniors get. Here's what the White House missed: This isn't just about self-interest. It's also about sentimentality. No other generation is as passionate - and therefore as protective - about Social Security as the World War II generation, those Americans now in their 70s and 80s. For that demographic, this debate is about preserving a program that served their generation well and which they hope will be around several decades from now to serve their grandchildren.
That's interesting. If they really wanted to protect their grandchildren, they'd do everything they could to ensure some generational fair play. Unless something is done, the current system will - 10 or 20 years from now - soak taxpayers with tax rates that experts say could easily top 50 percent when you combine income taxes with the payroll taxes necessary to fund Social Security and Medicare.
But there's no reasoning with the elderly on this issue. I know. I tried.
Recently, I agreed to sit on a panel here in Coronado and discuss Social Security reform. Home to a lot of retired naval officers, the well-to-do community has a reputation for being conservative. But you wouldn't know it from the way the audience - made up almost exclusively of senior citizens - seized every opportunity to tear into President Bush and his proposal to allow young people to invest part of the money they contribute to the current system into private accounts.
The way these seniors see it, this isn't about demographics and the undeniable fact that, with every year that goes by, we have fewer workers supporting more retirees. This isn't about the fact that Americans are living longer, and so it only makes sense to push back the retirement age.
For this crowd, the whole issue of reforming Social Security comes down to trusting George Bush. For those who don't, it's tempting to buy the argument that the administration is manufacturing a crisis to gin up public support for a scheme that will make a fortune for ''Bush's friends on Wall Street.''
Judging from their questions and comments, that's what many in the Coronado audience believed. And they couldn't get past it. They insisted on making the issue political, when it's really generational.
That disappointed me. So did the fact that these seniors had convinced themselves that there was no ''crisis'' in Social Security because the best estimates are that benefits will continue to be paid out for the foreseeable future. They didn't seem to care a whit about the financial strain that future taxpayers will be put under to make that happen. This is the real crisis.
You know what else was disappointing? That many of the seniors were so openly contemptuous of the idea of letting poor and working people invest their own money in private retirement accounts. To listen to these seniors, the less well-off aren't smart enough to know what to invest where, and so need the government to provide them with a guaranteed benefit.
Putting aside the rank condescension, such comments were horribly naive. Given the demographic changes ahead - beginning with the retirement of 70 million baby boomers - don't expect the Social Security system to give out any guarantees or to honor them if it does.
That's something that older generations need to understand - and which younger generations figured out a long time ago.
And of course it doesn't bother you in the least that you're peddling probably the most leftist and most lampooned statement he's ever made. You can celebrate his rhetorical surrender to left-wing "values" if you want. I won't.
Unlike Indians, Americans wouldn't let Chicago (to pick a city at random) turn into Calcuta.
Calcutta is the way it is because of socialism, not because of lack of socialism. You really don't get it at all.
Anyway, I'm glad that Americans won't let their cities go to hell. That's because they don't need the government to make them help each other.
"When the financial catastrophe of social security really begins, the government will confiscate your money anyway. After all, you, with your private savings, will be the "ants" in the minority, and the "majority" of grasshoppers will vote themselves to your money."
That's why you should convert some of your assets into copper-jacketed lead and brass. And a home in the country.
Actually, been paying SS since I was 14, but didn't start getting high pay until 1980, so I guess I understated the time period paid. It's been 6.2% for FICA and 1.45% for Medicare for quite a while with no limit on the medicare part. I was going by what the yearly summary showed in my last SS statement estimate. I included the Medicare in my $200K estimate also because I consider that the same stealing as SS.
Private accounts will belong to the individual wage earner. Have you not been studying this. Of do you just not believe that the government will structure it so that you own your own account. We can't even talk about something without some basis for discussion. Private accounts means the people's accounts. Currently social security means that it is your governments money all along.
But not because any silver hairs voted for him. Bush can hammer all he wants, maybe it will get through, but he will not change the political leaning of the AARP and they will send out a mailing to counter everything Bush says. And one mailing from someone they trust will outdo all the media Bush can buy.
And of course any money Bush pulls from the system and puts in the retirees personal accounts will require back up funding or program cutting. Both ideas are tough calls. If the programs are cut, then old timers can well believe that they will lose somewhere even if their SS check comes on time. Maybe what will be cut will be seniors bus passes for example. As far as back up funding, the best idea I have heard is to take out a loan to cover the lost funds. And retire the loan over the same length of time that the retirees are saving in their own accounts. At some time the government can stop mailing SS checks and let retirees withdraw from their own savings. (The ultimate plan anyway.) An at this time the government can switch SS check payouts to retire the notes that funded the program in the first place.
It shouldn't come as a surprise. AARP is going all out to stop reform on SS. I have received AARP generated petitions to my reps and all kinds of materials in this well-orchestrated campaign. It is unbelievable.
More than 45 million Americans receive SS checks now and that number will rise dramatically to 70 million with the coming retirement of the baby boomer cohort.
It has been 6.2% and 1.45% (employee shares) since 1990. Social Security & Medicare Tax Rates That's a far cry from the 1% SS in 1949. The Medicare tax was .350 in 1966
The SS cap has been rising every year from 1950 ($3,000) to the present $90,000. Contribution and Benefit Base
When SS started in 1937, the FICA tax (employee and employer combined) was 1% on $3000. There was no Medicare tax. Today, the total FICA and HI tax is 15.3% (12.4% SS on $90,000 and 2.9% HI with no cap). The cap will go up again in 2006 and Medicare is in far worse shape than SS. The train wreck for entitlement programs is coming regardless.
Both parties will be forced to do something. What we are seeing now is a game of chicken with the Dems using the issue for their political advantage as long as possible. Personally, I think we will see another 1983 solution that will not solve the problem, but just kick the can down the road for future generations to deal with.
She isn't. She is just telling me.
Arghhh! They paid into social security, too! Everyone who works does. Quit labeling me a liberal! I have voted Republican all of my life! I would rather slash my wrists and hang myself than vote for a Democrat! I am talking about people in past generations. If President Bush can get his reforms for Social Security passed, then this will not come up again. People will be able to invest at least part of their money that would otherwise be taxed for Social Security. Maybe one day there will be no more Social Security tax and everyone can invest their money as they see fit. I wish my late husband and I could have done that! I would be so much better off now than I am.
What it sounds like you're saying is that the seniors aren't all that far off-base in perceiving a risk to their payments. Regardless of how true that perception is, they can not deny that the risk to them will not be greater if younger people are allowed to do with their own money as they wish, instead of being required to invest it in a government-approved index. Its effect, or non-effect, on the seniors is exactly the same either way, so there's no greater political liability in letting the younger set keep the 4% themselves and do whatever they judge best with it.
If you are going to use the USG's SS theology, you have to get it right. According to the USG, no money was taken from SS. All the SS revenue taken in is used either to pay benefits or put into the SSTF in the form of (non-marketable) T-bills, which accrue interest. Thus, the SS surplus remains with SS.
The SSTF actually represents an unfunded liability, which is why it is listed as part of the national debt under intragovernmental holdings as distinct from publicly held debt. The Debt to the Penny and Who Holds It The SSTF was setup so the USG could use SS as a cash cow, i.e., they could borrow the money (SS surplus) and use non-marketable T-bills in the form of IOUs, which would avoid incurring publicly held debt. Currently, 17 cents of every dollar in the Federal budget is used to service the national debt (publicly held). If the SS surplus were actually used to buy real T-bills, the debt servicing costs would increase.
SS is unsustainable in its current form. Something will have to be done prior to 2018, the date the SS surplus evaporates and we start paying out more than we are taking in. Congress than must borrow or find money elsewhere to honor the phony T-bills in the SSTF.
The pinch will be felt even sooner than that. In 2008, three years from now, the SS surplus starts declining, which means Congress has to start finding the revenue to cover the difference or cut spending. This happened in 1983, which forced Congress to raise the retirement age to 67, raise the fica tax, include all new federal workers in the system, increase taxes on SS earnings, and link the cap to the COLA.
The easiest solution (for Congress) is to increase taxes, raise or lift the cap, and raise the retirement age, all phased in. This will just postpone the problem for another 30 years or so. Personal accounts can solve the problem permanently if they are linked to a reduction in the defined benefits portion of the program. Over 30 countries have privatized their government pension programs inclding the UK, Chile, and Sweden. We are talking about partial privatization--at least initially.
That's not really as much of a distinction as you may think. If 10 people approach you on the street and "democratically" decide to relieve you of whatever you have in your wallet, I don't think you'd consider that a valid transaction.
Of course, but only if they don't trust that the Bush plan could be carried out with an absolute guarantee that the seniors SS will continue unchanged. (Note that this is all Bush ever said.) He did not say that medicare would stay the same, or that senior lunch discounts would not be taken away.) The fact is that seniors have been told that Bush will not keep his promise (about SS) not that there are other benefits that may be affected. The fact is that if the government reaches the point of paying out more for SS than the payroll tax brings in then other programs will automatically be affected or taxes will rise which is another impact to the individual and the economy. All things are related once you accept that SS funds go into the general fund anyway. Seniors don't accept this either, because they believe a pack of liers who only care about how seniors vote. Republicans have been painted as villians and enemies of the elderly for so long that its a matter of faith to them. My thesis remains unchanged no matter how you posit the question. The seniors are in the AARP grasp and Bush can make speeches till he is blue in the face. (He can even trot our Barbara and say thay he would never do anything that would hurt his mom, but it won't work. As for the world changing and seniors having to live with the changes. That is a truism whether SS is fixed or not. (And is true regardless of how it may be fixed.)
If they did that, then Congress would have had to borrow money or reduce expenditures in the General Fund. Our national debt would have increased much more and the funds required to service the debt would have taken more of the federal tax dollar. It is a little late now to change things. SS will stop running a surplus in 2018.
How Does the National Debt Affect Me?
SS is a Ponzi Scheme. There were over 40 workers for every retiree in 1937, 16 in 1950, 3.3 today, and 2 in 2030. Unless something is done about our entitlement programs, our children and grandchildren will be taxed to death to pay for our retirement. Those on SS now or soon to retire will collect much more than they ever contributed. That won't be the case for those who follow.
Well, I don't think that is likely to happen. Now that I have said that, I will probably be robbed. If I am, it is all your fault! :(
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