Social Security 2.0: Coming in 2007?

US News & World Report ^ | Oct. 24, 2006 | James Pethokoukis

[DredTennis]

In a television interview last weekend, President Bush said Social Security reform was "still alive" and again declared that it would be one of his top goals when the next Congress convenes. Of course, that's what Bush said right after the 2004 election. And despite pushing the issue hard and personally campaigning for it around the country–60 cities in 60 days in early 2005–the idea's beta version never really took off with the American people, and no legislation was ever submitted. So, what are the chances of reform happening in a Congress that will almost certainly be less hospitable to Bush than the current one?

Ask any veteran Washington hand, and you'll certainly get a skeptical response. "Bush has fought the good fight on this issue," says Charles Gabriel, political analyst for Prudential Securities, "but he wasn't able to get it done when he had enhanced political capital after the 2004 election." Gabriel thinks that the White House will have a tough enough time just getting Congress to reauthorize fast-track trade authority next year, much less starting a revamp of perhaps the most politically sensitive federal program in existence.

... In Treasury Secretary Henry Paulson's first speech after being confirmed in the post, he spent a good chunk of his time advocating entitlement reform. "I have always tried to live by the philosophy that when there is a big problem that needs fixing, you should run toward it, rather than away from it," Paulson said in an August 1 address at Columbia University. "That is one of the reasons I decided to come to Washington, and that is the reason I admire the president's political courage and willingness to address entitlement reform."

[sgtbono2002]

I am sure we would get some type of reform if the Congress stopped fighting george Bush and speant some time working on a better solution.

IMO one of the Problems today is that demovcrats dont want a solution while George Bush is in the Presidency, and the republicans havent the courage to stop playing around and push their agenda. Stop this super-majority BS.

You can bet your butt if the Democrats regain the Congress the Super majority is a dead issue.

[3AngelaD]

This article omits some relevant information:

In June, 2004, President Bush's Social Security Administration negotiated a deal with Mexico named "Totalization", to allow Mexicans who work for a period of time (legally or illegally) in the United States to collect money from the U.S. Social Security system when they retire in Mexico.

Thanks to the efforts of members of The Conservative Caucus, this deal has not gone into effect yet. The President must send it to Congress, which has 60 legislative days for either house to reject it by majority vote to kill it. If Congress does nothing for those 60 days, it will automatically go into effect. Because the Mexican raid deal is not a treaty, the Senate does not have to ratify it by a 2/3 majority. It was negotiated by authority of a law passed by Congress in 1977 giving the government the ability to negotiate such agreements, subject to Congressional review.

The Conservative Caucus has led the fight to block this irresponsible deal which would drain our Social Security budget. Due to our efforts, President Bush has not sent the agreement to Congress for fear it would be rejected. We have alerted by special mailings over a half million Americans, made tens of thousands of legislative alert phone calls, and delivered to date more than 136,000 signed petitions to Congress and the President opposing the deal with Mexico. With your help, we can keep President from ever sending the deal to Congress, we can get Congress to pass H.R. 858 to permanently ban it, and then our Social Security system will be forever safe from being raided by Mexicans.
http://www.conservativeusa.org/mexico-socsec.htm

[nascarnation]

I've always figured the long term govt plan was to get everyone to save up a lot of 401k money in accounts. Then put a new "gotcha" surtax on withdrawals by "the rich" as baby boomers start to retire.

[kinghorse]

oh please. Mexico will be the 51st through 58th states some day soon. Sooner the better I say. We need the low wage worker base to keep social security solvent.

[Miss Marple]

Won't they have to have PAID INTO Social Security first? And won't the infusion of Social Security money paid by workers now help the current system? And won't those who worked here illegally have to offer some proof that they worked here? And should they have proof that they worked here, won't that give the government evidence against those who employed them illegally?

[3AngelaD]

I smell Ponzi. How are "low wage" workers going to be able to support all of us "high wage" retirees?

[Just another Joe]

Do you realize WHY Social Security is a third rail of politics?

It's because the government is taking my money, saying they are investing it, so they can give it back to me IF I make it to the age of retirement (whatever age that may be by that time).

If I had that money I could invest it myself, win - lose - or draw, but if the government takes that money, I expect back at least what they took, even if it's without the interest.

If I don't get it back there will be holy hell to pay and other people think just like me.

[quikdrw]

I hadn't thought of that, but I believe you are right.

[ClaireSolt]

Well, you may be thinking, but you don't have enough facts to think intelligently. First, people ar collecting many multiples of what they actually paid in. Because of inflation, actual contributions look puny compared to benefits. In fact, my first check from Social Securty, which made me wait 2 years, was more than the sum of my contributions. I will draw benefits for about 30 years based on the contributions of others.

One way out of this mess would be to means test and then refund contributions of those who do not need support. However, that is just pandering. If SS is insurance then all who do not become dissabled or impoverished shoud be grateful for that and thankful for the coverage. They don't get their accumulated car insurance payments back wieh they quit driving. Likewise, they ar not entitled to a rfund of social insurance payments, either.

Bush, as a lame duck, should be able to lead some bipartisan efforts like this.

[USS Alaska]

Well, you may be thinking, but you don't have enough facts to think intelligently. First, people ar collecting many multiples of what they actually paid in. Because of inflation, actual contributions look puny compared to benefits.

1) Your "facts" are only your experience and do not represent all reality

2) I've been paying SS tax since 1959 and on a present value basis, at 5% apr, the value of my "contributions" would have been $3.3 million at age 65. Compare that to the roughly 2K per month I now receive, that is puny.

3) Do not state that contributions are puny compared to benefits. Nothing is farther from the facts.

[KarlInOhio]

I think you're overestimating what you would have if you kept your SS tax yourself. Even if you made the maximum taxible amount from 1959 to 2006 and kept both the employees and employers tax you would only have $430,000 at the end of 2006 at 5% interest (before paying taxes on the earnings).

[Just another Joe]

First, people ar collecting many multiples of what they actually paid in.

Make that people and I'm with you.
Others will never collect a dime, and others will collect less than what they put in.

In fact, my first check from Social Securty, which made me wait 2 years, was more than the sum of my contributions.

Then you are one of the lucky ones in this regard. Count your blessings.

One way out of this mess would be to means test

They already do this. If you make over a certain amount per year, and it's not a large amount by any means, you can't collect SS.

As far as insurance goes, I pay my car insurance out of my own after tax money.
The government TAKES my SS, I have no choice to participate or not unless I choose not to work and starve.

It comes down to the government telling me that it knows better than me what to do with MY money.

[Just another Joe]

That should have been, "Make that some people".
I must have goofed on the HTML.

[nascarnation]

If you make over a certain amount per year, and it's not a large amount by any means, you can't collect SS.

incorrect

from ssa.gov:

We use a formula to determine how much your benefit must be reduced: If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2006, that limit is $12,480. For 2007 that limit will be $12,960.

In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.

If you reach full retirement age in 2006, the limit on your earnings for the months before full retirement age is $33,240. (If you were born in 1940, your full retirement age is 65 years and 6 months.)

If you will reach full retirement age in 2007, the limit on your earnings for the months before full retirement age is $34,440. (If you were born in 1941, your full retirement age is 65 years and 8 months.)

Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

[USS Alaska]

I think you're overestimating what you would have if you kept your SS tax yourself. Even if you made the maximum taxible amount from 1959 to 2006 and kept both the employees and employers tax you would only have $430,000 at the end of 2006 at 5% interest (before paying taxes on the earnings).

I have run the numbers on multiple occasions and can prove that my calculations are correct. However, for me it is an excercise in futility. When I reach the end, I just become fustrated with my current "benefit" compared with my "contribution".

Fortunately, I never planned to depend on SS as a means to secure my retirement and the "SS benefit" that I receive on a monthly basis is just a part of my monthly income. If it went away, I'd still be OK from a financial perspective {this is not an offer to give up my SS benefit}.

[justanotherfreeper]

Won't they have to have PAID INTO Social Security first?
For as little as 18 months in the US. The point of a "totalization" agreement is to count all monies paid into both countries' retirement systems as one account, paid into the country you are going to take the money out of. That works for countries like Sweden and Japan, but Mexico's system is radically different than ours.

And won't the infusion of Social Security money paid by workers now help the current system?
Short term it will prolong the Ponzi scheme and lessen the pressure for SS reform. But don't forget, anybody covered by SS also gets disability and family benefits. And the Mexican system is so unstable, being able to come into the US and use our system will be a huge draw for more illegals to come here. That means millions of people and billions in liability for SS that isn't even taken into account in the current deficit projections.

And won't those who worked here illegally have to offer some proof that they worked here? That is the most contentious part of this, as most illegals use fake or someone else's SS numbers. So if several folks claim they worked under 000-00-0000 (and there are several thousand workers currently putting money into the system under that number according to a GAO report) how do you figure out who's legit? Particularly when fraudlent documents is a huge money maker for several of the drug cartels, faking pay stubs won't be a problem (one cartel alone was earning $300 million a year in fake documents according to an informant. That was mostly driver's license and SS cards, but I'm sure they'll be happy to expand.)

And should they have proof that they worked here, won't that give the government evidence against those who employed them illegally?You'd think. But we have employers in a lose-lose situation: if employers challenge documents for being fake (like having 000-00-0000 as a SS#) employers are then open to EEOC prosecution. Read up on the Tyson prosecution, the judge and jury both found the immigration law was too complex for Tyson to be held accountable for breaking it -- and this was a company whose middle management actually hired coyotes to get illegals across the border. The only real solution to this is both to mandate use of the Basic Pilot Verification System by employers (to verifiy a persons SS#) and tamper proof, biometric SS cards. But that's going forward, you still have the problem of 50 people claiming they were paid under 000-00-0000 by the Burfle Corporation, Burfle only paid 20 people under that number, so how to you figure our who the 30 fakers are?

For a really good, non-emotional look at the problems with a Mexican totalization agreement, go look at this report. The Mexican system only covers about 40% of the population (US is 97%), does not give back more money than you pay in (arguably not a bad thing to start here, but is a huge incentive to get to the US to get into our system), and vests after 24 years (ours is 10).

[wtc911]

oh please. Mexico will be the 51st through 58th states some day soon. Sooner the better I say. We need the low wage worker base to keep social security solvent.

----------------------------------------------------

I suggest that, considering your tagline, you get thee to an eye doctor.

[Hostage]

It seems obvious that the President and the Speaker are at odds with one another. And it seems therefore that the President will not be sad if the Republican House Majority is lost.

[Zack Nguyen]

I will always admire the President for his failed push for Social Security reform. It was a foray into visionary politics for the sake of the next generation. It was also the only time I have seen Bush suggest something really unpopular, back it up, and follow it through to the bitter end.

It didn't work, but when the bottom falls out of Social Security, no one can say we weren't warned.