Warren: Increase Social Security Benefits,And Make It Solvent

Breitbart.com ^ | April 1,2015 | Ian Hanchett

[Biggirl]

Senator Elizabeth Warren (D-MA) said that Social Security should be be made “secure” while increasing benefits in an interview broadcast on Tuesday’s “Rachel Maddow Show” on MSNBC.

[MeshugeMikey]

COMMON CORE..New Math...and of course PANTHER WHIZZ Ale!!

[ridesthemiles]

How come Warren isn’t blasting Barack & Michelle for using Air Force One & Air Force Two ——individually—— to fly from Washington to Los Angeles for heir individual appearances on Kimmel & Ellen last Monday?????

How wasteful was that in American Tax Dollars?????

The arrogance of those 2 is staggering.

[AppyPappy]

“Sure..we can get the extra money from unicorn’s tears..they are magical you know.. “

Phoenix tears have healing powers. Unicorn blood will give you a half-life

[AppyPappy]

Raise taxes on the “wealthy” of course.
Then again, anyone paying income taxes is wealthy in her world.

[Terabitten]

Stop making sense.
SS won't ever be fixed until people realize what it IS, not what they think it is.
SS is an intergenerational wealth transfer program. Look it up on ssa.gov.
It is not, nor has it ever been, any sort of savings account. Despite being called a trust fund, SS taxes have always gone into a govt account whose first responsibility is to pay current benefits due. After that, the money has ALWAYS been available for general government use. Al Gore invented the phrase "lock box."
The actual dollars paid into SS in any given month are used to pay current benefits. Your lifetime wages are then used to determine how much you're due when you file. The dollars an individual paid in are gone the month after they are collected.

[DoughtyOne]

You can’t really say they dipped into it. It’s funds are the general fund. Social Security deductions simply go into the general fund. They are in a constant state of tapping that.

If they would simply invest Social Security funds, they’d fund Social Security easily.

Still, those funds should be owned by the citizen outright, invested and always theirs. They wouldn’t be able to tap them until a date to be specified, but the funds should be placed somewhere and individual accounts be able to be watched by the citizen.

[Zuben Elgenubi]

Few have noticed that her old Indian family recipe for crab cakes as submitted to that highly successful Native American cookbook “Pow Wow Chow” has decimated the Oklahoma crab population

[justlurking]

Extend the FICA tax to all levels of income, above the current $113K (i.e. soak those EEEEEEVIL rich)

It would have very little effect. The Social Security Administration has evaluated many variations of this proposal:

http://www.ssa.gov/OACT/solvency/provisions/payrolltax.html

These are the two relatively simple ones:

Eliminate the taxable maximum in years 2015 and later, and apply full 12.4 percent payroll tax rate to all earnings. Do not provide benefit credit for earnings above the current-law taxable maximum.

Eliminate the taxable maximum in years 2015 and later, and apply full 12.4 percent payroll tax rate to all earnings. Provide benefit credit for earnings above the current-law taxable maximum.

The difference: since benefits are derived from taxed wage income, simply eliminating the cap would also increase the benefit for those affected. It won't increase much (due to the way benefits are calculated), but it will increase.

The first one eliminates the cap for the tax, but retains the cap for benefits. The second one eliminates the cap for both. Short version: all either proposal does is kick the can down the road a little further. It doesn't fix the underlying problem.

[justlurking]

it would be solvent... if the democrats hadn’t looted the fund and pushed it into the general fund.

No, it wouldn't. Please stop repeating this meme, because it's not true.

Every dollar that was borrowed from the Social Security Trust Fund is accounted for, in the form of the equivalent of long-term Treasury Bonds.

In the past couple of years, the benefits paid have exceeded the payroll taxes collected. So, those bonds are starting to be redeemed. Bond redemption is paid out of the general fund, so current-year income tax revenues are being used to do so. Or if you prefer, since we have a deficit, the Social Security Trust Fund bonds are being redeemed by selling US Treasury Bonds on the open market.

According to current projections, the Trust Fund bonds are expected to be exhausted in 2033. After that, they expect there to be only enough taxes to pay 77% of benefits. By law, the benefits must be reduced to match the revenue: Social Security can't borrow money.

The reasons are complex, but it all boils down to demographics: the ratio of taxpayers to beneficiaries are getting lower and lower. Unless people start dying sooner, or couples start having 2.5+ kids apiece (and those kids go on to be productive taxpayers), the problem is just going to get worse.

The real problem was when Congress increased benefits so much back in the 70's that Social Security became actuarially unsound, which is a fancy way of saying they have been paying more than can be sustained ever since.

The government didn't "steal" Social Security. They gave it to your parents and grandparents, to buy their votes.

The payroll tax has been raised repeatedly, but it never solves the real problem: you can't just transfer money from one generation to the previous one. Demographics will always come back to bite you. Every western country has learned that, but few have been willing to switch to an asset-based system.

[justlurking]

. . which means that if the Social Security administrator runs out of $$ and tries to cash one of the “safe government bonds," the money to redeem those bonds has to come directly from the U.S. Treasury - which would then have to borrow the money — exactly as if the “trust fund” did not exist at all.

You are writing about this in future tense, but it's been happening for the past few years, thanks to a wave of early retirements in the Democrat's Great Recession. But, something to consider: where else would you have had the SSA invest it? Until recently, US Treasury Bonds were considered the safest investment in the world. Can you imagine the political football game that would have occurred if they had invested in private assets?

As Vaduz has suggested, the only way to reform Social Security is to switch to an asset-based system. But, it has to be individually-directed, not government-directed. If someone wants to invest in just Treasury Bonds, that's their choice. For people that want better returns but don't want to actively manage it, a lifecycle fund (that gradually becomes more conservative as you approach retirement) would be appropriate.

[justlurking]

You can’t really say they dipped into it. It’s funds are the general fund. Social Security deductions simply go into the general fund. They are in a constant state of tapping that.

While the unified accounting instituted during the 80's effectively co-mingles all the funds, there is an accounting that tracks the difference between the revenue collected by the payroll tax, and the benefits paid. When it was positive, the surplus went into the Social Security Trust Fund. It's in the equivalent of long-term US Treasury Bonds.

But, in the past few years, the surplus disappeared, thanks to the Great Recession and a wave of early retirements. So, now the difference is being made up by withdrawing from the Trust Fund. Those bonds are being redeemed, and the funds come from general revenue (which means they are effectively converted into US Treasury bonds and sold on the open market).

The problem: the Trust Fund is expected to be exhausted in 2033, and there will be only enough taxes to pay 77% of benefits. The "deadline" has been getting earlier every year, I remember when it was 2041 not so long ago. And frankly, since I think their assumptions are too optimistic, I think the real date will be in the late 2020's, if not even earlier.

[MaxMax]

Single issue contestant? Is that all she has?

[nascarnation]

Good post.
The Death Panels may have some effect, but difficult to predict. Each year sliced off the lifespan is huge for the SocSec financials.
OTOH the technical folks are making pretty amazing strides in medicine which tends to drive things in the other direction.

[RFEngineer]

“And they are spending the money they are supposed to be saving for you.”

You’re kidding, right?

[sten]

let’s say you actually wanted such a system to work. it could, but only for those that actually worked. also, the money collected would have to be placed in actual investment portfolios that have a chance of making something for a return. also, anything paid in should be treated as portion of a private portfolio, meaning it would be part of the person’s estate upon death. this would also allow it to roll over as any investment should (if death taxes didn’t exist).

if families were encouraged to form groups (like the old fashion concept of ‘a house’ with relatives and close friends) then a portion of those accounts from people that died early (or died before it was gone) could be donated and invested. over time, those group accounts would grow and become financially stable, allowing families the ability to cover their own financial issues

[RFEngineer]

“While it’s a pretty safe bet the debt will be repaid”

Since when is government debt a “safe bet”?

Not only will Social Security NOT be paid as expected, neither will any government retirement or every sort.

There simply isn’t enough money to pay everybody what they think they were promised.

Many on this very forum refuse to believe this fundamental truth.

[RFEngineer]

“just have the Fed create more money out of thin air.”

That is exactly what they will do.

[RFEngineer]

“Warren is saying that SS is insolvent.”

Can it be she is the only honest Senator on this matter?

[justlurking]

I think you have a great idea. It's the only way for it to be sustainable, and it's being used in places like Chile and Australia.

The problem is the transition. There are a lot of people collecting benefits, or will be collecting benefits soon. You can't expect them to accept nothing after paying taxes all this time.

So, you'll have to collect taxes for a while from people that will never get any benefits, and they will have to do that on top of contributing to their own investment portfolio.

As you noted -- albeit for the wrong reasons -- almost all the money previously contributed is gone, paid to our parents and grandparents. We can't just print that money.. we are already dangerously close to the edge. So, there has to be a shared sacrifice.

I'm close to retirement. I figure I would have about $1M right now if I had just invested the contributions on my behalf into long-term Treasury bonds (that's not an estimate -- I've actually done the calculations). But, I'm willing to give up some of my benefits, in exchange for a transition to a privatized system. I'll do so, because it would mean my daughter won't have to pay punitive payroll taxes so I'd get my full check every month.

But, I'm not holding out hope. So, I'm planning for a 23% reduction in my Social Security benefits in 2034, and will adjust accordingly if that date comes earlier or the reduction is higher. The Social Security warns of this every year, but it falls on deaf ears. I'm heeding their warning.

[DPMD]

Guessing that once her verbal faux pas is pointed out to her, it will become a forgotten “misstatement,” buried for all time in a yada-yada-blah-blah filled press conference.