Posted on 12/03/2012 5:08:25 PM PST by Olog-hai
Rep. Sheila Jackson-Lee (D.-Texas) said last week that Republicans are being “frivolous” when they talking about reforming Social Security as a means toward fixing the federal government’s fiscal problems because Social Security is “solvent.”
According to Social Security’s trustees, the program has operated in the red each of the last two years.
“Who wants to make a fuss about Social Security when it's solvent?” she asked on Friday. “And then who wants to make a fuss about Medicare when it's solvent until 2024?” …
(Excerpt) Read more at cnsnews.com ...
Yup.
What that meant was that folks were setting aside $1.00 in Social Security to get back $0.10.
This also meant that folks were 'investing' in Social Security with hard currency at the time of their lives when they were earning the least, and then retiring to receive soft currency at the time of their lives when they were moving out of the productive sector.
Of course they imagine they paid more in than they get out ~ because it's true ~ inflation makes it true.
Today, without inflation ~ in fact, with massive deflation, we get an opposite effect. People paid in soft dollars over the last 30 years, and now they're getting back hard dollars.
Any normal society would have re-issued it's currency somewhere in the middle of all that ~ with new values, and some sense that over time currency probably ought to reflect essentially the same value ~ that is, a dollar today should be able to buy much the same as a dollar then, or a dollar tomorrow.
Alas, we do not have normal societies these days, and the Democrats were in charge so long nobody really knows what Social Security has cost them.
Okay...
When it's 'solvent' we'll stop fussing.
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Eesh! What a clueless twit!
Exactly. and Obamacare will do that and more.
” GOP’s failure or fear of making the fact that SS and medicare are both being paid for with borrowed money is the reason why Dems get away with this.”
The GOP operates on 100% fear.
And the answer is a resounding "NO"; the negative answer is contained in the obama "tax-cut" which he and touted (and the press allowed him to tout) throughout his term and the recent campaign: "everyone got a tax cut". What he meant was, there was a holiday, by executive decree, on a percentage of the FICA, Social Security contribution, so that people's paychecks contained a little more.
By that exact amount, the Social Security trust fund was diminished over that four year period.
He wasn't cutting taxes at all (you and I both already knew this). He was defunding Social Security. Hey -- that would've been a very effective campaign tool for Romney, had he been willing to use it.
The only difference between your 401k and a retired person SS account is that the federal government has not taken over your 401k, yet. But the clock is ticking and there is a lot of noise.
daniel—There are a lot of people who make no claim that they paid more in than they go out. Spouses and children who get benefits often paid nothing in. Those who get disability payments are more likely not to have paid as much in.
That said, considering payments from workers of 6+% and a like amount on their behalf from the employer, with a reasonable interest component over an average working life, I imagine most people DO pay more in than they receive in benefits. If the funds had in fact been set aside and conservatively invested (even in money market accounts) solvency would not be an issue.
I find it interesting, as well as a bit cynical, to note that the amount of the cut was roughly equal to the amount Republicans were proposing for privatization back under W.
If Social Security mere merely provided the taxes levied on amounts paid to annuitants (yup, it gets taxed eh, for folks with income above a certain amount) ~ it would last an awful long time.
SJ-L couldn't win an election, so Whitmire finally appointed her to a position in Houston. It wasn't long until SJ-L was in WDC sharing her 'truths' with us, such as the 2010 statement about how North and South Vietnam were living alongside each other in peace, as separate countries.
[Notice that, when the tax code was amended to mandate tax brackets increase along with inflation, that something was done about inflation?]
You're right in that it's a confusing world, financially speaking. There's an odd symbiosis between the banking circuit, the regulatory apparatus and the academy. Bankers and investment dealers come up with shiny new products which promise to mitigate market turbulence. The more complex they are, the more expertise is needed to run them. And where do you get the expertise? In the academy. Having a Ph.D. in statistics can get you a six-figure Wall Street job right off the bat.
And the regulators? Their expertise comes from the same source, and they depend upon professors to a far greater extent than Wall Street. Look at how many economists the Federal Reserve sponsors, whether directly or indirectly.
The 2008 crisis, although triggered by the pop of the housing bubble, was accentuated by a design flaw buried in the complex statistical models used in the Collateralized Debt Obligations products and whatnot. Put simply, it underestimated the correlation between local real estate markets in a bubble. Since the same design flaw was part of the standard model, all of those fancy risk-mitigating products contained the same flaw: in panic time, they blow apart because they underestimate the correlation between different investment classes in a crisis.
With that background in mind, here's the point. None of the experts spotted the design flaw until the entire system blew up! Not the Wall Street experts, not the regulators, not the ratings agencies, not the professors. All these groups were caught with their pants down when the wall fell away. The only ones who spotted it were non-experts, who were largely swept aside as too unsophisticated to know what they were talking about.
A lifetime from now, when everyone hurt has gone to their final rest, people will see the '08 crisis as yet another example of the comedy of specialization. The people who spotted the flaw didn't know enough about the field to avoid being brushed off. The people who knew enough about the system to track down the flaw were too emotionally invested in it to even see the flaw.
As a sideline: have you heard of the Minsky Effect? It says that greater stability leads to greater instability. Whether risk mitigation is provided by government (i.e., tighter regulations) or by the private sector (those risk-mitigating doodads), people become used to the idea that risk is being actively whittled away. Thus, they get lulled into the notion that risk is disappearing entirely. With that false sense of security, they take bigger risks because they assume they're safe. And then, the system becomes more unstable until the inevitable end.
If you know any athletes at the college level, you should tell them about the Minsky Effect. Adjusted, it explains why there's so many concussions in pro football and ice hockey today. Better equipment leads to that false sense of security, leading to...
So what you're saying is that there's a leak somewhere that led to the shortfall. All I'll add is that the system could have been protected by forbidding any increase in benefits unless there was a sufficient surplus to pay for it, actuarially speaking. It wouldn't have worked perfectly, as a perfect shield would require predicting what life expectancy would be in the future, but it would have helped.
The trouble is, the Supreme Court okayed Social Security as a combination tax and general-welfare program. In doing so, they gave Congress a free hand to do what they like to benefits and tax rates. The political marketplace being what it is, the benefits rose faster than the taxes.
And as muawiyah pointed out in post 42, inflation bollixed things up. By the time inflation crested, Henry Kaufman was calling bonds "certificates of guaranteed confiscation." Since the admittedly theoretical trust fund holds non-marketable government bonds, it too was gutted by holding "certificates of guaranteed confiscation." Inflation does confuse things.
A side note. The reason why everyone assumes that the employee pays the full assessment of FICA taxes is not just out of courtesy to the employees. There's sound economics behind it. Employers, because they have to pay "their share" out of profits, will adjust wages downwards to the point where the employees end up paying for all of it. It's a process that's largely unplanned, takes a long stretch of time and tends to be exhibited by shaving raises, or by greater measures when the company's in real trouble, but that's what employers collectively end up doing to restore normal profit rates. The system re-equilibrates, with the full brunt falling on the employees.
Ever notice that the inequality mongers always use after-tax data without disclosing that fact?
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