Social Security Benefit Cuts In 2017 May Curb Trump's Plans

Investors Business Daily ^ | Dec. 29, 2016 11:53 AM ET | JED GRAHAM

[expat_panama]

Social Security benefits will be cut at the start of 2017 for everyone who has yet to turn 62.

Those cuts will grow in each year to 2022, reaching 7% for everyone now 56 and under, as the official retirement age rises two months per year to 67.

Those benefit cuts are part of the daunting math for Social Security and the federal budget that could cause speed bumps for, or perhaps even curb, President-elect Donald Trump's big fiscal plans.

1) Once the retirement age rises to 67, Social Security's early retirement penalty will cut annual benefits by 30%...

2) The Congressional Budget Office affirmed last week that Social Security's Trust Fund is on course to run out in 2029...

3) If you take that 29% cut on top of a 30% early retirement penalty, those retiring at 62 would get just 50% of their current full-retirement benefit, essentially abandoning the idea of a Social Security safety net for early retirees.

4) In January, the CBO will... ...show a Social Security cash shortfall of $450 billion in 2027 alone...

...the day of reckoning for Social Security, which has always been comfortably off in the distance, now appears to be just around the corner...

...GOP proposals to reform Social Security would further hike the official retirement age, while raising the earliest retirement age, now 62, in tandem. That approach would avoid further increases in penalties for retiring early...

...Yet a rise in the earliest retirement age would most affect those who have difficulty extending their careers and little savings to fall back on. Social Security Administration data show that about 30% of beneficiaries in their early 60s rely on the program for at least 80% of total income.

[kabar]

Hate to say it but I think what will happen is that they will get rid of the SS tax cap. Right no only the first $118,500 of income is subjected to SS tax.

First, the tax cap is raised almost every year. SS income caps

In 2000 the cap was $76,200. In 2017, it will be $127,200.

Removing the cap entirely would amount to one of the biggest tax hikes in our history. It would have a major impact on business. The cap is already removed on the Healthcare portion of the payroll tax and it has not prevented Medicare from running in the red since 2008.

And by removing the cap, you would also increase retirement benefits.

[OIFVeteran]

There are two problems I see with that solution. One we would have to go even more in debt to set up a 401K system. For example if the government is taking $10 a month from you to pay one retired person $20 a month (and already borrowing another $10 to pay that) and then changes the rules so that only $5 of what you pay goes to the retired person and the other $5 goes into a 401K we now have to borrow $15 a month to pay current benefits.

The second thing is that people don’t trust the stock market, especially after 2008. I mean look at all these state employees pensions that are now in the red. Most of them were estimating a 6%-7% return, which was a reasonable expectation considering the stock market has averaged a 10% return for about 80 years. Now, not so much and all these pensions are in serious trouble.

I’m just tired of seeing both democrats and republicans putting this country into more and more debt. I think it should be a conservative principle to pay for the services and programs we have without going into debt.

[kabar]

It should be noted that those federal employees covered under the original Civil Service Retirement System (CSRS), who did not elect to transfer to the newer Federal Employee Retirement System (FERS), did not contribute to SS after 1983 and do not collect SS upon retirement unless they earned enough SS credits thru some other eligible employment.

I had my choice in 1983 to retain the original system or elect FERs. I opted for the former. All new employees hired after 1983 are required to pay into SS and join FERS. The number of federal employees not paying into SS is small and declining as employees retire.

CSRS employees/retirees also are not eligible to collect their spouse’s SS benefits should their spouse predecease them.

It is a little more complicated than that. There are two sets of circumstances, offset and windfall that apply. Without getting into the weeds, Government Pension Offset and Windfall Elimination Provision.

[Buckeye McFrog]

Yup. They are going to lift the cap on the payroll tax. And they will implement a Tobin Tax on Wall Street transactions.

Both will be wildly popular. The situation defies any other political solution.

I hate to run-up the white flag and say “Conservatism can’t win”. But on this issue we really CAN’T.

[SuperLuminal]

Hmmm...If bathouse barry and his pet ape hadn't spent $85,000,000 for vacations and given his handlers in Iran $50,000,000,000, there would be no SSI problem.

In fact, we would be discussing how much to increase SSI pmts each year.

[patriot08]

That’s right; cut our senior’s SS (who are already suffering and trying to get by on SS) and keep on pouring billions down rat holes of countries who hate us and handing out billions to illegal invaders.

[PLMerite]

You mean that millions of illiterate, unskilled “migrants” aren’t going to save the system?

[OIFVeteran]

The problem is that this program was ruled constitutional by the Supreme Court under the taxation powers of the 16th amendment, so it is constitutional. We would need to either have the superme court overrule their previous decision or pass a constitutional amendment barring the government from running a retirement/disability program. Both scenarios being as likely as Hillary admitting she is a criminal.

Sad to say but I think you would get more support for a constitutional amendment allowing the federal government to run such a program than prohibiting it. Of course that is how it should have been done in the first place.

Thanks to the 16th amendment and the Wickard vs Filburn decision there is little the federal government can't do. What we really need is constitutional amendments limiting the commerce clause back to only interstate commerce and limiting the Feds taxation powers.

[OIFVeteran]

Please don’t misunderstand me. I am not suggesting that I support the removal, I just believe it is the most politically viable move. As far as Medicare goes by law we can only collect 25% of the funds from the Medicare tax the rest comes from the general funds. That’s like saying I want to buy car insurance but I’m only going to pay 25% from my income for it and charge the rest.

Right now 65% of the federal budget goes to three areas; defense 16%, Social Security 24%, and healthcare 25%. Then 6% is interest on the debt, that is a total of 71% of the budget. So if you got rid of the other 29% of spending that would give us a surplus of about 1.2 trillion dollars. If we then kept spending in check and used the surplus to pay off the debt it would take us 20 years. Of course this isn’t going to happen.

In my opinion we are leaving future generations with a huge burden. We are going to have to do one of four things, cut spending, raise revenue (i.e. Taxes, tariffs etc.), a combination of the two, or keep borrowing and hope the whole thing doesn’t collapse.

[kabar]

Please don’t misunderstand me. I am not suggesting that I support the removal, I just believe it is the most politically viable move.

IMO means testing is the most politically viable. They can use a different method of computing benefits putting even more weight on the base earnings and how they are weighted. Regardless, the current system is unsustainable.

As far as Medicare goes by law we can only collect 25% of the funds from the Medicare tax the rest comes from the general funds. That’s like saying I want to buy car insurance but I’m only going to pay 25% from my income for it and charge the rest.

It is the law. Otherwise the premiums would be enormous and the public would never support it. Do you think the average Medicare recipient would want to pay four times what they are paying now for Medicare Part B premiums?

Right now they are effectively means testing Medicare premiums establishing different tiers of premiums based on income. I am now paying over $700 a quarter to Medicare for Part B because I sold a house last year and made significant capital gains.

Right now 65% of the federal budget goes to three areas; defense 16%, Social Security 24%, and healthcare 25%. Then 6% is interest on the debt, that is a total of 71% of the budget. So if you got rid of the other 29% of spending that would give us a surplus of about 1.2 trillion dollars. If we then kept spending in check and used the surplus to pay off the debt it would take us 20 years. Of course this isn’t going to happen.

It is actually worse once you consider the Medicaid costs (80 million people)and other so called mandatories. Defense is actually a discretionary expense.

In my opinion we are leaving future generations with a huge burden. We are going to have to do one of four things, cut spending, raise revenue (i.e. Taxes, tariffs etc.), a combination of the two, or keep borrowing and hope the whole thing doesn’t collapse.

With a $20 trillion national debt and interest rates held artificially low by the Fed, we are in real trouble if interest rates return to normal levels. The Feds hold over $4 trillion of the national debt. They are on a tiger and don't know how to get off.

An aging population is increasing the entitlement costs. Even if you were to reduce benefits and increase taxes, the gap will still be there.

[OIFVeteran]

The problem I see with means testing is that it turns SS into another welfare program, and I don’t think that is politically viable.
I agree we have a tiger by the tail. But we are the richest, most powerful, and in my opinion, the best country in the world. I am sure we can find some solution that takes care of Americans now and in the future.

Also your chart is a little different, and better, than the one I found.

[kabar]

The problem I see with means testing is that it turns SS into another welfare program, and I don’t think that is politically viable.

Medicare is being means tested. The current formula to determine SS benefits is somewhat means tested already. It is just a matter of adjusting the formula, something that Fred Thompson spoke about.

Earnings from a worker's 35 highest-earning years are tallied at age 62 and indexed for inflation, resulting in the AIME. The Social Security Administration determines the primary insurance amount, or PIA, by applying a PIA formula to the AIME.

The AIME is "divided into three segments, called bend points (which are adjusted each year for inflation), giving you the worker's PIA," says Scott.

For example, assume you have a 62-year-old born in 1950 whose total indexed earnings over his 35 highest-earning years were $2 million. The $2 million divided by 420 months gives the worker an AIME of $4,762.

The first bend point, $767 of the AIME, is multiplied by 90 percent. The difference between $767 and the second bend point of $4,624 ($3,857) is multiplied by 32 percent. The amount more than $4,624 ($138) is multiplied by 15 percent. These percentages and limits are set by the SSA.

So let's apply this formula to find out what the Social Security benefit would be at full retirement age.

The first bend point gives you a benefit of $690.30 ($767 x 0.9 = $690.30).

The second bend point gives you a benefit of $1,234.24 ($3,857 x 0.32 = $1,234.24)

The third bend point gives you a benefit of $20.70 ($138 x 0.15 = $20.70).

The sum of all of these amounts is $1,945.24. Because amounts are rounded down to the next-lowest dime, this worker's PIA, which is the amount the worker would receive at full retirement age (66), is $1,945.20.

You could change the percentages and bend points to give low wage earners a bigger benefit and decrease the benefits to higher wage earners.

[Captain Peter Blood]

Then I guess we are screwed either way.

[poinq]

You don’t need much to get SS in the black. Its not that far. If you use more current data you can see that full employment is helping the numbers already. Inflation would be helpful as well. And add to that, a slight push on the retirement age and the one year push back on the early retirement age should get SS to about even. 2009 thru 2012 hurt the SS “fund”. But its better and will be better still with inflation and full employment. Remember SS has a bad 30 years that started when the baby boomers started to retire in 2012. By 2042 the boomers will be dead and the pool of payers will be much larger.

[Ozymandias Ghost]

“I had my choice in 1983 to retain the original system or elect FERs. I opted for the former.”
______________

Looks like we’re both “dinosaurs.” I went to work as a DA Civilian in 72 and retired in 2010 under CSRS.

Thx for the links!

[i_robot73]

>
Thanks to the 16th amendment and the Wickard vs Filburn decision there is little the federal government can’t do. What we really need is constitutional amendments limiting the commerce clause back to only interstate commerce and limiting the Feds taxation powers.
>

Like the Con con: let’s re-state what can/cannot be done w/ MORE verbiage, as Fedzilla has ignored the original text and the writings of the time.

Ummm...no thanks.

My $.02, the 16th should be ruled void outright. It, unlike other Amendments, does nothing to ‘over-turn’ other Amendments: 4th, 5th, 13th.

>
The problem is that this program was ruled constitutional by the Supreme Court under the taxation powers of the 16th amendment, so it is constitutional
>

Yes, we all know how THAT game is played. Watched a re-run during the O’Care show. Power of taxation was NEVER the question/issue; the *AUTHORITY* of which the taxes are to pay FOR, on the other hand...

>
Sad to say but I think you would get more support for a constitutional amendment allowing the federal government to run such a program than prohibiting it. Of course that is how it should have been done in the first place.
>

Still NOTHING in A1S8 or any other A. stating different.

But, s* in one hand and hope in the other (of a return to a Republic) and see which one fills up first. For a site of ‘stalwart Conservatism’, we have a majority in the thread brain-storming how to keep the damn thing going longer!

[OIFVeteran]

There is no provision in the constitution for voiding an amendment. The only thing you can do is pass another amendment to repeal or modify it.

They say that politics is the art of the possible so with 66% of retired Americans depending on social security for at least half or more of their retirement it would be political suicide to try and get rid of social security. Since we just got control of the federal government I would hate for us to lose it because of this.

I want to see a wall built, Muslim immigration stopped, and jobs come back to America. I don’t want to piss away the chance to accomplish these goals to fight a battle we cannot win.

[rb22982]

Very likely - just a question of when and how fast. It’s possible it could stagnate and kind of remain where it is although with an aging population that seems unlikely without death panels (40-50% of healthcare expenses come in the last 3-6 months of ones life). Only real hope is a tech breakthrough that raises GDP significantly or some massive healthcare breakthrough that is cheap.

[i_robot73]

Prohibition was passed, and voided, by A. The 16th *may* have allowed taxation w/out app., but other Rights specified are still in effect (4th, 5th, A1S8, etc.)...

Well, shame on the 66% believing in fairy tales of govt promises. Being older and, hopefully, better educated, they had many a year to realize the fallacy of those from elected lips.

Personally, I don’t care re: ‘parties’ and this supposed ‘political suicide’. How many MORE votes would one get from the younger generation by returning THEIR *FREEDOM*??

The only thing the GOP\(R)NC *have* done is routinely pissed away ever chance the (C) have given ‘em. Just look at the 1st thing they tried to push out of the gate. THAT was the ‘most important’ thing to begin championing??

Anyone thinks looking to GOVT to cure the ills of GOVT is a fool.