Who's taking away you Social Security

e-mail | Robert Dowd

[redangus]

Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised: 1.) That participation in the Program would be completely voluntary,

2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program,

3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,

4.) That the money the participants put into the independent "Trust Fund" rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other Government program, and,

5.) That the annuity payments to the retirees would never be taxed as income.

Since many of us have paid into FICA for years and are now receiving a Social Security check every month -- and then finding that we are getting taxed on 85% of the money we paid to the Federal government to "put away," you may be interested in the following:

Q: Which Political Party took Social Security from the independent "Trust" fund and put it into the General fund so that Congress could spend it?

A: It was Lyndon Johnson and the Democratically-controlled House and Senate.

Q: Which Political Party eliminated the income tax deduction for Social Security (FICA) withholding?

A: The Democratic Party.

Q: Which Political Party started taxing Social Security annuities?

A: The Democratic Party, with Al Gore casting the "tie-breaking" deciding vote as President of the Senate, while he was Vice President of the U.S.

Q: Which Political Party decided to start giving annuity payments to immigrants?

A: That's right! Jimmy Carter and the Democratic Party. Immigrants moved into this country, and at age 65, began to receive SSI Social Security payments! The Democratic Party gave these payments to them, even though they never paid a dime into it!

Then, after doing all this , the Democrats turn around and tell you that the Republicans want to take your Social Security away!

And the worst part about it is, uninformed citizens believe it!

Perhaps we are asking the wrong questions during this 2004 election year!

If enough people receive this, maybe a seed of awareness will be planted and maybe good changes will evolve.

How many people can YOU send this to?

Keep this going clear up through the 2004 election!! We need to be heard

[Wally_Kalbacken]

There are a lot of legitimate issues regarding social security and reasonable alternatives to the present system. What is so frustrating about this as a policy debate is that there is so much misinformation out there. 

There are Social Security Trust Funds - and they take in more in contributions at present than is paid out in a given year. That means there is a surplus of funds in the SSI Trust Accounts. As the demographics of the United States shift (increasing older population, longer spans of retirement income collection) we are reaching a point where the amount paid out in benefits in a given year will exceed the amount collected. At that point there will  be an annual deficit, which will reduce the accumulated surplus until some point (typically estimated at a point in the 2030-2050 range) when the accumulated surplus is erased. That's when the s*** hits the fan.

The trust funds exist, the employer withholdings from wage earners and the employer match are sent to the SSI trust funds and are not spent on general revenue purposes. Since the surpluses are large amounts, the funds are not accumulating as literal cash balances - but are funds invested in government securities.

What seems impossible for many (including Rush Limbaugh - in one of the few errors he repeats regularly) to understand is that in the consolidated budget - the surplus that the SSI accounts run each year is netted out against the budget surplus. In other words a $350B surplus in SSI funds in a given year - as an accounting matter, will mask $350B of general revenue expenditure deficits. That does not mean that the money is spent on dams, missiles, food, buildings, etc. It simply sits in the trust fund accounts until it is disbursed to recipients of SSI. The reduction in the apparent general budget deficit is an accounting artifice.

What seems to feed this myth that there are no trust funds is this accounting maneuver - which is rather dishonest in the sense that it only makes the general budget deficit look smaller than it actually is - since the SSI funds are never spent on general revenue purposes.

If we cannot get past this canard - we cannot get on to serious discussion of alternatives to the present system.

[Torie]

Ya, there is a social security trust fund corpus, which is an accounting entry, because it is all "lent" to Uncle Sam, and earns an interest rate tied to treasury returns. The money lent to Uncle Sam is of course spent. So it is really a cash flow matter, and when the cash flow from the inflow of SS taxes and the outflow of paid out benefits, turns negative as it soon will (long before the actuarial BK point of 2035 or whatever, more like 2010), it will cause the federal deficit to increase steadily, unless spending is cut, or revenues increase to cover it. In short, the drawing down of the SS trust fund surplus will require the drawing up of government revenues. It really is a Ponzi scheme, but all other schemes after having spent much time pondering it, are worse.

And there you have it.

Of course, SS is a relatively minor fiscal problem in the scheme of things. Turn the page to the Medicare books, and then you will really suffer fiscal vertigo.

[Cultural Jihad]

I'll tell you who else: illegal aliens. Unless it gets derailed, we've just made an agreement with Mexico to give SS benefits to people who work here illegally.

Don't let mere facts stand in the way of a good hysterical rant.

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The United States currently has similar so-called totalization agreements with 20 countries -- including most of Western Europe, Canada, Chile, South Korea and Australia. The agreement will let workers and their families qualify for prorated U.S. or Mexican benefits based on combined credits from both countries.

The new credits are likely to have a larger impact on Mexican workers, who must wait longer to receive benefits.

The Social Security Administration estimates that 50,000 U.S. and Mexican workers could receive benefits after five years as a result of the agreement.

Mexican President Vicente Fox hailed the agreement as good news for Mexican workers and for business.

"By avoiding this double taxation, we reduce the cost of investment and support the competitiveness of North America," Fox said.

The agreement does not address Mexicans working illegally in the United States, according to Jim Courtney, a press officer with the Social Security Administration.

"There are provisions of law that prevent us from paying undocumented aliens," Courtney said.

Source

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[Cultural Jihad]

Roosevelt lied! He also deliberately used phony intelligence to trick us into entering world war II.

Let me guess. We should have just surrendered to Japan, and fought alongside Adolf Hitler, eh?

[m18436572]

ping

[c-b 1]

Remarks With President Truman at the Signing in Independence of the Medicare Bill--July 30, 1965

False

Harry Truman left office in 1953, he died later that year.

Lyndon Johnson was president on July 30, 1965.

[qam1]

A better late than ever

Xer Ping

Ping list for the discussion of the politics and social aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.

Freep mail me to be added or dropped. See my home page for details and previous articles.  

[Straight Vermonter]

Look at it this way. Two twins work their entire careers in the same job. Same pay same everything. One puts away money in an IRA, 401K and invests in the financial markets. The other buys a boat, a second home and vacations in Hawaii every year.

At retirement the individual who squandered his money gets SS tax free (he has little income other than SS). The frugal one meanwhile pays tax on his social security benefits.

Is that fair?

[Straight Vermonter]

Um...no.

[Tripleplay]

Don't you think the relatively comfortable geezers should pay tax on their half of their benefits, if they otherwise have more than 35K or so in taxable income?

We should not be taxed when receiving it. We have already paid taxes on it when it taken from our paychecks. I for one do not support being taxed twice on the same income.

As for the "earnings", I have ran the numbers on my 30 years of contributing.......even if I was a moron, I would have beat the so-called governments return on my and my employer's investment.

[Torie]

You just don't like the income tax. If you can tolerate wading through a rather dry but highly informative and balanced treatment of the various revenue raising alternatives out there, pick up Taxing Ourselves. A consumption tas has a lot of merit, but it is hard to avoid giving high income earners and/or those with considerable wealth a windfall, without going through a lot of complex hoops.

[Torie]

Remember you are only taxed on half of SS income. The half that is not taxed serves as a reasonable proxy for basis. Regards. You may think you can earn a higher rate of return than what you get with SS, and you probably can if you pay the max (leaving out the 2.9% medicare tax, which goes on forever), but most think that, and most do not, because they don't know how to invest, or are scammed. It also entails taking more risk of course, from the equity market. But that is another topic.

[Straight Vermonter]

You just don't like the income tax.

Well that may be the understament of the year. That really doesn't address the issue here, however. The issue is should one person's income be taxed while another's is not.

Thanks for the book recommendation.

[Tripleplay]

Remember you are only taxed on half of SS income.

Please explain. I have done projections on my retirement income and it is 100% taxable. Hence I'm am being taxed twice. SS should have the same treatment as a Roth IRA.

You may think you can earn a higher rate of return than what you get with SS

I think the SS earns a little more than 1% (the rate on one government fund borrowing from another) Even insurance companies pay a higher return than this. Treasury bills have averaged 4 to 5 % over the last few decades. No savvy investment acumen is required for these investments.

[Torie]

Well I was wrong about the percent of SS benefits that are taxable. It is 85%, not 50%, if you earn over the threashold of about 35K. Your 1% plus return figure is a real return adjusted for inflation, not the nominal return. So add about 3% to that to get your nominal return, which isn't bad, since it is risk free. And that return ignores the disability insurance aspects of SS, which part of your SS taxes pay for. It is a complex issue, not doubt about it. The dirty little secret is that somebody has to pay for the actuarial deficit. There is no free lunch.

[dread78645]

Harry Truman left office in 1953, he died later that year.

He died in Kansas City, Mo., on Dec. 26, 1972.

[JockoManning]

snopes.com bump


you beat me to the punch!

[Tripleplay]

SS is simply a redistribution of wealth and not an investment vehicle.

Example:

I am single and work 45 years. I put in approx 3K per year and my employer matches it. Invested at treasury bill rates, the pot would be about 500K when I retire. If I die before collecting anything or very little, the Gov. will send my relatives 250 dollars for my funeral and keep the 1/2 mill! If I don't die and do collect for the years I am alive, the government earns 4% on the 1/2 mill (20K) which is about my annual SS. So when I die, they still keep the original 1/2 mill and my relatives get none of the principal.

IMO, that is why both political parties will never change SS. Its a foolproof way to tax people under the guise of a "retirement plan".

[Torie]

Well, as you say, if you assume 1% real return per year, it is a fair game. You end up with $440,000 in real terms in 45 years, and it is exhausted if you get $20,000 a year in real terms for 20 years thereafter. Of course, if you have a non working wife, the deal is somewhat better. At 2% a year real (which is about what treasury inflation indexed bonds earn), you lose about $167,000 in real terms after 45 years. Whether the disability insurance benefit is worth that much actuarily, I don't know.

SS is not as bad a deal as you suggest. The problem of course, is that it is in an actuarial hole, as a hangover from the days when it was a great deal. Someone has to close the gap. You and I have to do our share. We can't just dump it all on children yet unborn.