Graham: Reduce benefits for wealthy seniors

Charleston City Paper ^ | 2011-01-02 | Greg Hambrick

[rabscuttle385]

Seniors should be older before the receive Social Security and wealthy Americans should receive less benefits across the board, says Sen. Lindsey Graham, R-S.C.

He made the argument in an interview on Sunday's Meet the Press, but it's a position Graham has advocated for on the stump in South Carolina, including a 2009 stop at The Citadel with Sen. John McCain, R-Ariz.

"What I'm going to do is challenge this country to make some hard decisions," Graham said at the time, telling the crowd of cadets, Tea Partiers, and Graham supporters that they shouldn't give Congress a pass on the tough stuff.

[drbuzzard]

>Before they start cutting benefits they had better start cutting special exemptions and foreign aid.

You haven’t read all the posts have you?

As has been mentioned before (many times), sure you can cut all that stuff you mention. It won’t even come close to making a dent, and we’re back to dealing with the real problem which is the entitlements.

[ex 98C MI Dude]

I do see what you are getting at, but unfortunately the interest on the bonds are paid to the fund, not you. Should it go to you? Of course, it is your money that went into those bonds. But it isn't set up that way.

This completely excludes the fact that the dollar in ‘64 had vastly greater purchasing power than it does today. That $174 then is worth $1228.14 now, according to the governments own numbers. The COLA and benefit increases since supposedly take that into account, but I don't buy it.

So it is less a matter of ‘are you going to get all you put into it back out?’ (objective answer: no) but a matter of who is going to pay for it down the road.

Means testing isn't going to do it, and it will punish those who put the most into the system. The idea is a nonstarter. The question now has to be asked “Who in the future won't be getting SS when they retire”.

[Opinionated Blowhard]

I was speaking metaphorically. The younger generation is providing for you, not the other way around. The taxes you paid for Social Security were not invested. You don’t have an account. The taxes paid some senior’s benefits in the 60s or 70s or 80s or 90s. That money is gone. You may want to believe there is some account somewhere but there isn’t. That is the nature of a Ponzi scheme. You paid in, it was paid out to someone else. Now someone has to pay in to support you. The system is not sustainable. There is no money to pay benefits to you at the currently stated rates. Either taxes are raised on young people or we borrow someone more, which will be paid by young people. That is what I meant.

[SeeSac]

I think you hit the wrong post.

[justlurking]

The Social Security "trust fund" is literally a stack of special US Treasury bonds in someone's file cabinet in a government office. I wanted to link an article that I read about it recently, but haven't been able to find it.

I found it! It was just a matter of using the right search terms:

$2.5 trillion in Social Security bonds stored in filing cabinet in downtown Parkersburg, W.Va.

Remember Al Gore's "lockbox," the one he was going to use to protect Social Security? The former vice president talked about it so much during the 2000 presidential campaign that he was parodied on "Saturday Night Live." Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.

They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War.

One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on the open market.

[...]

The national debt - the amount of money the government owes its creditors - is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country. About $8 trillion has been borrowed in public debt markets, much of it from foreign creditors. The rest came from various government trust funds, including retirement funds for civil servants and the military. About $2.5 trillion is owed to Social Security.

Good luck to the politician who reneges on that debt, said Barbara Kennelly, a former Democratic congresswoman from Connecticut who is now president of the National Committee to Preserve Social Security and Medicare. "Those bonds are protected by the full faith and credit of the United States of America," Kennelly said. "They're as solid as what we owe China and Japan."

---

I thought the last paragraph was interesting. It's not true, of course. But I have to ask: why not? If the government is going to default on US Treasury bonds, they shouldn't be starting with the ones that were purchased involuntarily.

[drbuzzard]

>It was your personal choice to have kids. YOU provide for them — my tax dollars have already been propping up others for over 35 years. Enough already.

Funny, without those kids you deigned not to have, nobody would be there to pay for your Social Security benefits.

[justlurking]

I do see what you are getting at, but unfortunately the interest on the bonds are paid to the fund, not you. Should it go to you? Of course, it is your money that went into those bonds. But it isn't set up that way.

OK, let's try again. We can talk all day about how Social Security works and the mistakes that have been made. I could bore you to death with all the details that I've accumulated over the past 30 years.

I was simply correcting your assertion that the future value of Social Security benefits exceeds the present value of your contributions (for most people). That's not true, and it hasn't been so for quite a while. The early recipients did quite well, and some of the beneficiaries that retired in the 60's, 70's, and 80's did well because the legislated increases in benefits (both overt and COLA) pushed their benefits beyond an actuarilly-insustainable level -- which is what got us in this mess.

It's not as simple as adding up your contributions (real or hypothetical). You have to account for the time value of money, using historical data and/or an accepted future discount rate. I'm not an actuary, nor do I play one on TV. But, if you really want all the details, you should consult one.

[Opinionated Blowhard]

I was simply correcting your assertion that the future value of Social Security benefits exceeds the present value of your contributions (for most people). That's not true, and it hasn't been so for quite a while.

And yet, the amount that will be paid in by people in their 20s and 30s will be much less than the benefits they receive. The older you are, the more you get out of the system. People at or near retirement age look at what they paid in and legitimately say its not fair that they should get their benefits cut since they are simply getting out what they paid in. That is understandable but ignores the point that there is no good outcome here where everyone gets their "investment" back. If today's retirees or those close to retirement get benefits at current levels, the younger generation will be completely screwed.

So the issue is how to we make the system sustainable and share the sacrifice that will be necessary? The money that was paid in is gone. There is no vault with cash in it that can be opened to pay benefits whether its a share of a Treasury bond or some other promise to pay. The cash will come from taxes. So the question still is, is it fair to ask young people to pay for the current level of benefits for old people or should the pain be spread around? My answer is that the burden should fall more heavily on older people because young people did not create this mess.

[abb]

I’m wondering if those on this thread who are squawking that “we have to do something right now” are underwater on a bunch of puts for June 2011 ten-year treasuries.

Here’s a one year chart on that particular note.

http://finance.yahoo.com/echarts?s=^TNX+Interactive#chart1:symbol=^tnx;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

[RasterMaster]

Do away with all or most social programs and cut the Fed down to military funding only. Social programs are nothing more than political footballs used for perpetual re-election of ticks on the system like Goober Grahamnesty.

[al_again2010]

Interesting read. It does not change the following:
1) Social Security is just another federal government expenditure - although one of it’s largest.
2) Current federal expenditures are a whopping 145% of revenue (45% deficit)

Even if there are a stack of T-Bills in a drawer it does not change those two points!

[gruffwolf]

But before they start cutting into social security we need to take care of the USA and ALL giveaways to other nations and start charging countries for our worldwide defense.

Excellent points. I think a lot of the outrage on this thread is due to SS benefits being discussed as the first step in reducing the deficit.

Why not start with all the "drops in the bucket" that could well total over $100 billion per year?

Go after illegals, cull the welfare rolls, quit subsidizing pet projects, no more foreign aid, no more foreign bases, etc...

Does anyone really think that Graham (or any other politician) will make the rest of the cuts necessary to get spending under control after they lower SS costs? HECK NO! They'll call the money saved a "surplus" and spend it on something else. Anyone who believes different hasn't been paying attention to how our government works.

[al_again2010]

I will try this again.
1) When do you think we need to do something about the unsustainable spending?
2) What percentage of government spending
3) Based on 2010 numbers, should be cut from now to 2015?
4) Do you think we should keep increasing social security spending? (I’m talking real dollars, not per individual)

I will answer any question you have factually. Could you please answer the questions above?

Thanks

[sand lake bar]

Ha! You’re funny. But not really in a good way.

[justlurking]

And yet, the amount that will be paid in by people in their 20s and 30s will be much less than the benefits they receive.

Yes the situation is getting worse. But, it can't get much worse -- we passed the point of no return a while ago.

People at or near retirement age look at what they paid in and legitimately say its not fair that they should get their benefits cut since they are simply getting out what they paid in.

To be clear, I'm not suggesting that. Someone up-thread suggested it, and I responded that would be even more expensive than just paying the benefits as currently legislated.

If today's retirees or those close to retirement get benefits at current levels, the younger generation will be completely screwed.

Actually, it's more than just the "younger generation". Everyone gets screwed.

So the issue is how to we make the system sustainable and share the sacrifice that will be necessary?

The only way that we can make Social Security sustainable is to either reduce benefits or raise taxes so that the income covers expenses. There is no middle ground.

Raising taxes would be economic suicide. And, it was tried 30 years ago and it only postponed the inevitable.

he money that was paid in is gone. There is no vault with cash in it that can be opened to pay benefits whether its a share of a Treasury bond or some other promise to pay. The cash will come from taxes.

So is every other dollar in government bonds. And I ask again: why should Social Security contributors be the ones to forgive their share of government debt? What about the civil service pensioners, or investors holding bonds?

So the question still is, is it fair to ask young people to pay for the current level of benefits for old people or should the pain be spread around? My answer is that the burden should fall more heavily on older people because young people did not create this mess.

No, they didn't create this mess. But, neither did I. I wasn't even voting age the last time Social Security was "rescued", and I've been paying for it ever since. The only viable solution is to reduce benefits to a sustainable amount.... gradually, while we still have those Social Security bonds to fund it. We have to get benefits down to a point that can be funded by payroll taxes on a year-to-year basis, and adjust benefits to handle income. In other words, run it like a real pension plan.

Current forecast is that the "trust fund" will be exhausted in 2040. After that, taxes can only fund about 75% of legislated benefits. So, that gives us 30 years to reduce it by 25%. The date would slide out to a bit later as benefits are reduced. Less than 1% per year could be met by simply subtracting that amount off the COLA.

Frankly, I'd like to see Social Security completely replaced with a private system. But, I don't think it is politically possible.

However, the kind of reductions I've suggested above would require a hard look at beneficiaries, and how benefits are calculated. Making disability a separately-funded program would be a good start, as would reducing benefits when survivorship is included.

[An aside: this is how traditional defined benefit plans work. When you retire, you can opt for a monthly benefit of $X, or a monthly benefit of $X-Y if you wish survivor benefits for a spouse. The calculation takes the age of retiree and spouse into account. A single recipient gets a larger benefit. A married two-income couple might choose two single benefits, etc.]

These adjustments would put the system back on an actuarially sound basis. It wouldn't be "dead", but at least it wouldn't be a giant sucking wound anymore.

[Mifflin]

Look Mr. al-again2010,

Advocating any kind of “Means Testing” for Social Security Payments, is just flat out “Communism”

Any conservative on this board, is against any kind of Socialism/Cummunism and redistribution of wealth, which is what “Means Testing” is, for any program.

You say “As painful as it is, the spending to prolong and improve the quality life of the elderly needs to be reduced.”

So, you are for “Death Panels” You really don’t know anything about how to reduce healthcare costs. All that has to happen is for a system where people pay their own way for healcare treatments. They carry a cadastrophic insurance policy for large amounts. It needs to be run, just like your home insurance or car insurance. You only get coverage for emergencies and large $$ amounts.

That will bring down healthcare costs.

“Death Panels”, is exaclty what the liberals and socialists want, and you cannot see that.

[WayneS]

They take your money and they promise to give it back to you.

Then they don't give it back.

If an 'operation' like that is run from a Walmart parking lot it's called "scamming the elderly" and the perpetrator(s) can go to prison...

... if it's run out of the Capitol building in Washington, DC, then the perpetrators can vote themselves pay raises from the proceeds -- and then take even MORE money, from the SAME people, the following year.

[al_again2010]

Where to begin...
Communism - look up the definition
Social Security - This is the essence of socialism
Death Panels - again, Medicare is the essence of socialism. I am not for death panels, I am for seniors being responsible for their own health care costs and having individuals decide the cost/benefit of quality of life health issues. The government simply cannot afford to keep paying these costs (socialism).

As you can see, your arguments are contradictory. Do you want socialism or do you think programs like social security, medicare, and medicaid to be eliminated?

[Mifflin]

First,

I was commenting on your acceptance of “Means Testing” That is REDISTRIBUTION OF WEALTH, or moving toward Socialistic/Marxist Principles.

I don’t believe in Social Security being a forced retirement system. People should have the “Freedom” to choose whether they want 12-13% with employers contribution, given to the government for this retirement program or opting out, and not getting a dime of social security when you get older.

To me, Social Security is outright theft. I can manage my own retirement for my family and I. I will take the risks if I am wrong. I don’t need the Nanny State to try and manage my retirement.

Social Security is Socialism and a Ponzi Scheme, and should be eventually cut off completely and terminated. It is also not Constitutional for the Federal Gov. to impose this social program on all citizens.

They should then have an optional retirement system.

You also said “I am for seniors being responsible for their own health care costs and having individuals decide the cost/benefit of quality of life health issues. The government simply cannot afford to keep paying these costs (socialism).”

Under the current gov. run medicare medicaid system, if people continue to make their own decisions, the country will go bankrupt.

We need an entire new Healtcare System, based on Free Market Principles.

I believe that eventually Social Security, Medicare and Medicaid should be eliminated and replaced by Free Market Principles and Programs.

[TenthAmendmentChampion]

As long as it is admitted that the law may be diverted from its true purpose — that it may violate property instead of protecting it — then everyone will want to participate in making the law, either to protect himself against plunder or to use it for plunder. Political questions will always be prejudicial, dominant, and all-absorbing...

Is there any need to offer proof that this odious perversion of the law is a perpetual source of hatred and discord; that it tends to destroy society itself? If such proof is needed, look at the United States [in 1850]. There is no country in the world where the law is kept more within its proper domain: the protection of every person’s liberty and property. As a consequence of this, there appears to be no country in the world where the social order rests on a firmer foundation.

—Frederic Bastiat, “The Law” 1850
http://bastiat.org/en/the_law.html#SECTION_G016