Letters to the Editor

Safety net

September 18, 2010

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To the editor:

Millions of taxpayers paid billions of dollars for decades into unemployment insurance and Social Security benefits. Many worked for years without collecting a penny from either program because they died at a young age, were never laid off or downsized or had a job shipped overseas. Let no one “refudiate” the facts that both of these safety nets have “hemorrhoidged.” Those monies have disappeared and not a member of Congress will explain why or how.

Have these dollars been morphed into lifelong retirement and health care benefits for former public servants? One does not have to be a rocket surgeon to understand that politicians should not be allowed to pass legislation that does not apply to everyone.

Comments

Richard Heckler 4 years, 10 months ago

Privatizing Social Security Would Place the Nations Economy at Risk "Social Security privatization will raise the size of the government's deficit to nearly $700 billion per year for the next 20 years, almost tripling the size of the national debt.

Put simply, moving to a system of private accounts would not only put retirement income at risk--it would likely put the entire economy at risk." http://www.dollarsandsense.org/archives/2005/0505orr.html

In essence we never know from one day to the next if we will be employed. As we all know Wall Street investing offers no guarantees of safety. The best way to explain Social Security is to say what it is. It’s an insurance system that protects your income when you retire or face disability, and provides income to your children if you die.

Politicians want you to look at Social Security as an investment--but it is a form of insurance that guarantees a constant stream of income in retirement or in case of disability, adjusted to protect against inflation, for as long as you live.

It has repeatedly been said by politicians that those who put their money in private accounts are “guaranteed” a better return than they’ll receive from the current Social Security system.

But every sale of stock on the stock market includes the disclaimer: “the return on this investment is not guaranteed and may be negative”--for good reason.

During the 20th century, there were several periods lasting more than 10 years where the return on stocks was negative. After the Dow Jones stock index went down by over 75% between 1929 and 1933, the Dow did not return to its 1929 level until 1953(24 years).

Richard Heckler 4 years, 10 months ago

Until 1984, the trust fund was “pay-as-you- go,” meaning current benefits were paid using current tax revenues. In 1984, Congress raised payroll taxes to prepare for the retirement of the baby boom generation. As a result, the Social Security trust fund, which holds government bonds as assets, has been growing. When the baby boomers retire, these bonds will be sold to help pay their retirement benefits.

If the trust fund went to zero, Social Security would simply revert to pay-as-you-go. It would continue to pay benefits using (then-current) tax revenues, and in doing so, it would be able to cover about 70% of promised benefit levels

The system won’t be bankrupt in any sense. On this point politicians are consciously misrepresenting the truth with the intent to deceive. That is what the dictionary defines as lying.

notajayhawk 4 years, 10 months ago

"merrill, what you are doing is lying"

As opposed to his posts on any other day here at the award-winning LJW message boards?

Richard Heckler 4 years, 10 months ago

Top 5 Social Security Myths

Myth #1: Social Security is going broke. Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.6 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.1 After 2037, it'll still be able to pay out 75% of scheduled benefits—and again, that's without any changes. The program started preparing for the Baby Boomers' retirement decades ago.2 Anyone who insists Social Security is broke probably wants to break it themselves.

Myth #2: We have to raise the retirement age because people are living longer. Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than they did 70 years ago.3 What's more, what gains there have been are distributed very unevenly—since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

Myth #3: Benefit cuts are the only way to fix Social Security. Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come.5 Right now, high earners only pay Social Security taxes on the first $106,000 of their income.6 But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.

Myth #4: The Social Security Trust Fund has been raided and is full of IOUs Reality: Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.7 The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market—which would have been disastrous—but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.

Myth #5: Social Security adds to the deficit Reality: It's not just wrong—it's impossible! By law, Social Security's funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.8

devobrun 4 years, 10 months ago

I couldn't get past myth #2, so I'll just comment on it. "Retirees are living about the same amount of time as they were in the 1930s" I don't think that I have to consult actuarial tables to cry bologna.

This suggests that people who attain retirement age are not benefited by cancer treatments, heart and stroke treatments, antibiotics, or many, many more.....

So, there you go oldsters, by inference, merrill says stop taking your meds. Statistically, you are no better off than the folks of the 1930s. All those fancy machines and pharmaceuticals haven't changed your life expectancy.

Yep, chicken soup and hot poultices is all I'll be taking from here on out.

mr_right_wing 4 years, 10 months ago

"Top 5 Social Security Myths"...according to whom?

You usually do a decent job of attribution.

"Top 5 Social Security Myths" according to merrill, perhaps??

Would the original source perhaps discredit the list?

Richard Heckler 4 years, 10 months ago

Where is the hard evidence that Social Security is going broke or will go broke?

There is no hard evidence.

It's all speculation coming from speculators who can provide no hard evidence. This message is also coming from politicians.

Why are we hearing this nonsense? Because Wall Street brokers will be the group that would begin receiving these tax dollars from our politicians. This is very very risky. Owners of these tax dollars aka taxpayers will have zero control.

Leave the safe insurance money alone. WE KNOW that Wall Street cannot be trusted with your tax dollars or your life and is subject manipulation.

Then our tax dollars would also be spent on commissions etc etc etc. This is wasted tax dollars that need to stay where they are.

How many people trust that no white collar Wall Street criminals will steal their retirement funds?

jafs 4 years, 10 months ago

It is currently structured as a ponzi scheme, partly, at least, due to the fact that politicians have been "borrowing" from the fund for years.

There are a couple of fixes:

  1. Instead of collecting separately with income limits, simply collect as taxes.
  2. Instead of basing benefits on contributions, structure it as an insurance program, which it essentially is, and base benefits on need.

So, for example, we set a certain monthly amount as a baseline - anybody who has enough on their own doesn't need social security, and anybody under that amount gets subsidized up to that amount.

That should fix it.

notajayhawk 4 years, 10 months ago

Whether politicians had been taking the money and using it for other purposes or not, it was a ponzi scheme doomed to eventual collapse - the only way it can succeed is if you keep increasing the number of people paying in in relation to the people collecting, and as an ever-growing number of people are collecting for an ever-growing number of years after retirement, it will eventually collapse.

"1. Instead of collecting separately with income limits, simply collect as taxes. 2. Instead of basing benefits on contributions, structure it as an insurance program, which it essentially is, and base benefits on need."

Fine. But when you do this restructuring, at least have the courtesy to change the name and call it what it would then become: Another welfare program, and another attempt at redistributing wealth.

jafs 4 years, 10 months ago

If they actually collected the money, and invested it without taking from it, it is perhaps possible that it would have functioned as a pension plan rather than a ponzi scheme.

It would be an insurance plan, and function as one, not simply a welfare plan.

Rich people who gambled and lost, for example, would be entitled to benefits if needed.

If extended to everybody, even those who never contributed at all, there would be an element of welfare to it.

But if that makes the system sustainable, it might be the better way to go.

notajayhawk 4 years, 10 months ago

"If they actually collected the money, and invested it without taking from it, it is perhaps possible that it would have functioned as a pension plan rather than a ponzi scheme."

Invest it in what? The stock market? Real estate? Oil futures?

If the government is going to get in the business of investing our tax dollars in private business, why don't we just let private business do it in the first place?

"It would be an insurance plan, and function as one, not simply a welfare plan."

No, it wouldn't, no matter how you try to spin it. If you're setting it up in such a way that a person at the low end "gets subsidized up to that amount" even if they haven't paid much in, and a person at the high end gets taxed on every dollar of their income when he can't collect because he "doesn't need social security", then it's a welfare plan.

And let me see - what you're describing is a system where everyone contributes according to their ability to pay, and everyone takes out based only on their needs. Now where have I heard that before, wait, it's on the tip of my tongue, sounds so familiar ...

jafs 4 years, 10 months ago

That's a good question about where the government should invest the money - even my father-in-law admits that.

If private businesses provided defined benefit pension plans, there'd be less of a need for Social Security.

Again, I already said if we include those who haven't paid into the system, it has a welfare-type element.

However, in other respects it operates as insurance - if the high end folks (or others) lose everything, they can get benefits as needed.

It's not perfect, but I'd say overall it would work much better than the system we've got now. We wouldn't have this stupid collect separately but use the money for other things nonsense, expenditures would be lower, and the system would be solvent.

jafs 4 years, 10 months ago

Because that's brutal to those who depend on it.

jafs 4 years, 10 months ago

I never advocated that.

I simply answered your question.

jafs 4 years, 10 months ago

That's just wrong.

There are undoubtedly several ways that we could improve Social Security that wouldn't "destroy the country".

I've already mentioned my ideas - stop collecting separately, since the money isn't held or invested anyway. And structure the program on an "as-needed" basis, which should lower the expenditures quite a bit.

In addition, there are lots of ways in which we could improve our government's functioning and cut down on spending, including cutting down on waste/fraud, improving efficiency, reducing the military budget, cutting pork out, etc.

The goal of a balanced budget is a good one, in my opinion, and could be accomplished without reverting to a brutal, "let them starve" mentality.

jafs 4 years, 10 months ago

You seem to not understand my point.

Is the whole system of taxation a "ponzi scheme", in your view?

We pay taxes, and we spend money - if we collect enough revenue to pay expenditures, we're ok. If not, we're not.

My change would change the way it's collected, and the way it's disbursed - if we lower the expenditures, then it's much more likely to be solvent.

jafs 4 years, 10 months ago

So, taxation is a ponzi scheme then?

I reject the notion of "investment" - I would structure it more like "insurance".

And, of course, I don't think there's fraud, if structured that way.

There is, of course, an ongoing need to ensure that expenses don't exceed income, if the budget is to be balanced.

jafs 4 years, 10 months ago

Ok.

After many responses to the insurance idea, I think the better analogy would be with government services, like fire, police, etc.

We all pay taxes, in differing amounts, and use the systems in differing amounts, as needed. Most of us wouldn't complain that we haven't used the systems - we'd instead be glad we weren't the victims of a crime, or that our house didn't catch fire.

I haven't ever called the fire department, but I know they're there if I need them, so the situation is fine with me.

In my version, expenditures would probably go down, since we're not paying out benefits to all the people who don't actually need them. So I don't think we'd all be paying more - perhaps even less.

jafs 4 years, 10 months ago

If the benefits are low (but enough to live on quite modestly), then many people will still want to make more than that, so that they can have more to retire on.

The working poor, who can't afford to save for retirement, are not "unproductive" - they work hard and contribute.

There might be some who game the system, and get something for nothing. But that's true in all systems - there are always those that find ways to scam it.

Overall, I think it would be better than what we've got now, and better than your ongoing suggestions to simply remove government involvement and let the market run itself.

notajayhawk 4 years, 10 months ago

We do what we can do.

You seem like a nice socially responsible guy. When cash flow is drying up, maybe the car needed major repairs, the kids needed braces, you were temporarily out of work - do you take out a loan so you can keep up the same level of charitable donations? Sell one of your cars? Raid the kids' college funds?

This is the part I think a lot of those who chastise conservatives for not 'caring' seem to miss - when the money isn't there, the money isn't there.

notajayhawk 4 years, 10 months ago

"If private businesses provided defined benefit pension plans, there'd be less of a need for Social Security."

The problem is with the very nature of a "defined benefit" plan. If you're guaranteeing the amount of money you're going to pay out when there is no such guarantee on the money coming in, pretty much you have an insolvent system.

"I already said if we include those who haven't paid into the system"

And I didn't say anything about those who don't pay in. I said those who haven't paid in enough to cover what they take out. You said something about a guaranteed minimum. If someone has paid in $3/wk, they get benefits up to your minimum threshold? That's welfare, not insurance.

"We wouldn't have this stupid collect separately but use the money for other things nonsense, expenditures would be lower, and the system would be solvent."

The only thing that removing the 'collect separately' aspect would do is remove even the illusion, the lip-service paid to the 'lock-box' concept. It would then all be general revenues and spent for other purposes even faster. And as long as we keep trying to guarantee the amount we're paying out without finding a way to guarantee what's coming in, it will never be solvent.

jafs 4 years, 10 months ago

But that's how insurance works as well, at least in a group plan - people pay premiums, and then they receive benefits - some in the group will pay more than they get, and others will pay less.

If the federal government had to have a balanced budget, that would be a good thing, in my opinion. And, would guarantee that our income/expenses were ok.

notajayhawk 4 years, 10 months ago

For Medicare, that's kind of how it works, or how it's supposed to (except, of course, that's also going broke). Retirement benefits are not, and never should be, treated as insurance. Are you going to decline to take the money back out of your 401K because you don't "need" it when you retire, jafs?

All of which is moot, anyway, because insurance does NOT work that way. Would it be okay with you if, after your demise, the life insurance company told your surviving spouse they weren't going to pay off because you'd already left her enough? How about in the car insurance, homeowner's insurance, health insurance, or whatever kind of insurance you are talking about, when you submitted a claim, they said 'We're sorry, but you have enough money in the bank to cover this yourself, so we're not going to pay the claim'?

"If the federal government had to have a balanced budget, that would be a good thing, in my opinion. And, would guarantee that our income/expenses were ok."

Based on what kind of twisted logic? The reason there's nothing but IOU's in the 'lock-box' is precisely because they've used those revenues for other purposes to balance the budget.

jafs 4 years, 10 months ago

If I pay taxes my whole life, and have enough to retire on without needing Social Security, I have no problem not getting it.

Especially if that means that the system is more solvent (because it's not paying out as much), and people who don't have enough get benefits.

For me, the only really personal question is "Do I have enough money to live the way I want to?" If the answer is yes, then I'm ok. If not, then I need to change something - make more money, spend less or some combination of the two.

If I made $2 million/yr and paid 50% in taxes, I'd have way more money than I needed to live quite well, and provide for my retirement. I wouldn't have any problem not receiving Social Security benefits.

Your point that I was responding to was your claim that if some pay in more and others less, that's not right somehow, if both receive the same benefits. That's exactly how much insurance works - we've been paying insurance premiums (let's use homeowners) for many years, and have made no claims at all. Other people have undoubtedly paid in less and made claims/received benefits.

So we've paid in more for nothing (so far) and others have paid in less and received more benefits.

The reason it's ok with me (and I imagine most people who think about it) is that the benefits would be available if we needed them. If we don't need them, it's a non-issue and just a peculiarity of insurance systems.

You're right that retirement benefits structured as insurance would be a little different. But it would also be similar, in that benefits would be available if needed.

And, except for 4 years, we haven't had a balanced budget at the federal level in 40 years - so whatever they're doing with that money, it's not balancing the budget.

What it generally does is allow them to spend more without raising taxes, since that's politically undesirable.

notajayhawk 4 years, 10 months ago

"That's exactly how much insurance works - we've been paying insurance premiums (let's use homeowners) for many years, and have made no claims at all. Other people have undoubtedly paid in less and made claims/received benefits."

No, that is most definitely NOT how insurance works.It absolutely, positively, is NOT how insurance works.

Insurance companies do not pay claims because you "need" the money. "Need" is a concept that enters the equation when you are making the decision on whether or not to carry insurance at all. Once you have enrolled in a plan and submitted a claim, the insurance company pays that claim (or denies it) based on their contractual agreement - it has nothing to do with whether you "need" them to pay the claim, as some people do not "need" them to pay at all.

If you have a life insurance policy with a $100K face value, yes, you "need" to die to collect that. But once that claim has been submitted, the insurance company does not have the option of reducing that benefit to $90K, $50K, or $25K because, in their opinion (or even by consensus of the other policy holders), you've already left 'enough' of an estate to your beneficiary.

If you pay health insurance premiums, one way of looking at it is that you do not get anything back unless there is a "need" created by a medical expense. But do you "need" them to pay? When you submit a medical claim to your insurance company, if you have a 20% co-pay, they have contracted with you to pay that other 80%. They do not get to reduce that to 75%, 40%, 10% based solely on you having enough money in the bank to pay for it yourself. And if two parties have the same surgery at the same hospital on the same day with the same insurance plan, they don't get to pay person 1's claim at 80% and person 2's claim at 30% because person 2 has less of a financial need.

It also works in the opposite direction: If you have a car worth $500 and sustain damage that will cost $5000 to repair, it does not matter in the slightest how much you "need" that car fixed - they're only going to give you the $500 they - and you - contracted for.

BTW - how much of the Clinton budget was balanced by taking money from the 'lock box'?

jafs 4 years, 10 months ago

It depends on semantics, in part.

I was using need to mean, with homes, that you have some significant damage to your home - it is true that they don't determine whether we have enough in the bank.

But, if we were rich, we might not carry homeowner's insurance, if we didn't have to, and simply pay for any damage ourselves.

So the fact of carrying the insurance is partly based, at least, on the sense that one will not have enough to cover significant damages and thus, do "need" (in the other sense) the insurance proceeds.

Similarly with health insurance - and yes, need in my mind referred to the need for health care procedures, etc.

And, similarly, as far as the rest goes.

I have acknowledged that the retirement issue would be a little different. But I still think it would be better than what we've got now.

That's a good question - do you have an answer? And, if it was part of how he did it, I would criticize him for it, and give him less credit for his policies.

notajayhawk 4 years, 10 months ago

"I was using need to mean, with homes, that you have some significant damage to your home"

Insurance, by definition, is a financial risk management tool. It is contractualized gambling. The relationship of how much (over time) you paid in to how much (over time) you claimed is irrelevant. The contract says the policy holder will pay "X" dollars in premiums every month, and if they do so, then the insurance company will pay off "Y" dollars on the occurrence of death or "Z" percent of their medical bills.

"So the fact of carrying the insurance is partly based, at least, on the sense that one will not have enough to cover significant damages and thus, do "need" (in the other sense) the insurance proceeds."

Now you're getting it. So those people who do not expect to "need" the Social Security benefits when they retire shouldn't have to pay into the plan at all?

If you check the figures, when you include both internal and public debt, the total national debt rose during the Clinton years, too.

jafs 4 years, 10 months ago

That's an interesting question, but again, in my proposal, we don't actually collect "premiums" in any separate way.

My proposal is sort of a hybrid of "social program" and "insurance program".

notajayhawk 4 years, 10 months ago

I mentioned earlier that insurance is contractual gambling. In gambling, you may not win, you may not get any pay off at all. But the whole reason you gamble is because there are certain odds, there's an expected level of payoff. How many people would play Powerball if, after they'd paid their dollar, the Lottery decided to make it 8 numbers instead of 6, and after you'd won, they decided that the $200 million on the billboards was too much and they were only going to give you $10 million?

How many people would choose (at least when they had the choice) to pay health insurance premiums based on the possibility that the insurance company might pay their claims when the expenses were incurred, depending on how much they had on hand at the time? Without knowing if, or how much, the policy was going to cover, how could a person possibly determine whether it was worth paying the premiums?

It's not insurance at all in the absence of a contractual obligation to pay a specific level of benefits. If you're going to tax everyone, especially as general revenues, to pay into this fund, and they have the option of giving you some of, or all of (or more than), your money back, or not, based on your financial "need" when it's time to collect, then it's a social program, period. If that's what you think should be done, fine, you're entitled to that opinion. Just call it what it is and don't try to sell it as something it's not.

jafs 4 years, 10 months ago

The contractual obligation would be to cover up to and including a certain amount of income per year, if needed.

The reason people would be interested in such a situation is that it's very uncertain what's going to happen in the stock market, the employment market. etc.

So a guarantee that you will have at least "x" dollars/month when you retire, regardless of what's happened might be an attractive sort of "safety net".

I really think it's a combination.

And, your observations about insurance are correct, from the individuals' standpoint - but the company operates like I'm suggesting - they collect premiums and pay claims - they're not setting aside my premiums to cover my claims - the money goes into a shared pool.

That's how it's similar to collecting taxes and paying benefits.

notajayhawk 4 years, 10 months ago

"The contractual obligation would be to cover up to and including a certain amount of income per year, if needed."

Seriously, that's more than a little bit of a stretch. Especially since, as I said, insurance only works if there's an agreement "to pay a specific level of benefits".

Let's go back to the gambling analogy, since both are based on the same principle. A poker player knows he's got a one-in-three chance of his hand holding up. If the pot is 4 times what the bet is, he calls. If the pot is only twice what the bet is, he passes. How does he make that decision if he has no idea what the pot will pay off (if at all)?

Or let's look at a Roulette wheel, since that addresses your point about the perspective of the insurance company. You place a bet on red or black because you know there's almost a 50-50 chance of winning, and the payoff will be doubling your money if it hits. You're a little behind the odds, but not much. If you bet a single number, the odds are much higher against you - but so is the payoff (37:1 and 35:1 respectively). Why would you even place a bet if you had no idea what the payoff was going to be, or if they could change it depending on how much you'd already won? Now - does the casino know whether you're going to bet on the right number or not? No. But they DO know that, over the course of the night, the week, the year, that "X" number of people are going to win on every one of those different bets, and they set the payoff odds accordingly.

[continued]

notajayhawk 4 years, 10 months ago

[continued]

Insurance works exactly the same way. Most companies offer multiple plans, and the major difference is the amount of co-pays and deductibles. The odds are very good that you're going to visit a doctor in the next year for a minor issue or checkup. If you choose a policy that has lower premiums but higher deductibles, it likely won't cover that visit. You're betting the odds - maybe there's a one-in-ten chance you are going to have a major medical expense (like say $40-50 thousand). If your insurance premium costs are $5,000 or less per year, the odds are in your favor. If your premiums are closer to $20,000/year, over the course of ten years you're likely to have that expense but you'll be paying $200,000 in premiums. Does the insurance company know if you're going to get sick? No. But they DO know that, of the thousands of policy holders, "X" number are going to incur that $40-50 thousand dollar expense, and they set the premiums accordingly. They have armies of actuaries who do nothing else but that, and they're much better at figuring the precise risk than any Las Vegas oddsmaker.

Now, seriously - how do you make a decision like that based on the possibility that the insurance company might pay off something? Seriously? Would you do that? If your homeowner's insurance rates went to $10,000 month and they said they might pay you if your house burns down, but only up to a certain level subtracting what you already have on hand, would you really pay the premium?

So, if your next door neighbor, whose house is worth an identical amount of money, and he pays the same amount for coverage, if he blows all his money on drugs and hookers, and you do the responsible thing and keep a large cash reserve on hand, he gets his house paid for after the fire and you have to pay for it yourself?

One more time: Insurance is risk management. You can not make a decision on risk management without knowing the risk factor (or odds) AND the amount of loss or payout. Insurance just - does - not - work that way.

jafs 4 years, 10 months ago

Ok.

I give on the analogy.

Perhaps a better one would be government services, like police, fire, etc.

We all pay in in differing amounts, and we all use the systems in differing amounts. I've never called the fire department, but I'm glad of that - I don't think I should get back my money that went to provide those services - they're there if I need them, which is how it's supposed to be.

And, it works exactly the way your example does - the police department is available to those who make stupid decisions, like walking around downtown Lawrence at 2am drunk. In fact, in many cases, people who make stupid decisions may use the services more. But the fact that they're there if needed seems to make that ok with most of us.

How about that?

Oh, and, of course, people don't call those systems "welfare" or "social programs" - they call them government services.

notajayhawk 4 years, 10 months ago

Unfortunately, that's really no different than your insurance example. When the police show up, they don't say "Sorry, but you have enough money in the bank to pay for private services - here's the number for Brinks."

jafs 4 years, 10 months ago

:-).

The problem is the differing uses of the word "need".

If police come because they're needed, they don't check to make sure you've paid enough in taxes either. Or that you only get services commensurate with what you've paid. The services are available to all citizens, regardless of amount of taxes paid.

If the "service" were retirement supplementation, and were available to those that needed it, it would work the same way.

Those that don't need it wouldn't use it - the same way, perhaps, that those who can afford a private security firm use that instead of calling the police.

jafs 4 years, 10 months ago

And, I actually used your previous argument on Saturday with my father-in-law to advocate that we should get our budget balanced and our own financial house in order before trying to help other countries.

jafs 4 years, 10 months ago

A balanced budget, by definition, means that our income meets or exceeds our spending.

You could still argue, of course, that we should reduce both.

devobrun 4 years, 10 months ago

Here's the evidence, merrill. For decades now, the money that is contributed by workers to social security goes into the general fund....the treasury of the U.S. Those funds were made available to the government as a whole and it has been used.

The Social security "lockbox" is a concept where the money was to be set aside and kept away from other programs. But the lockbox was opened and the money was withdrawn and IOUs were put into the fund.

The only thing in the social security fund is promises. As the government continues to add to its debt, the veracity of the promise diminishes. Apparently you still believe that the government of the U.S. is solvent and the social security trust fund is to be trusted.

Lemme ask you this, merrill: Does the increase in government debt effect the stability of the government? And if the government is acquiring debt that it might not be able to pay, does this not influence the notion that the trust fund is going broke?

I'm not saying that it will go broke......I'm saying that we are heading toward it. Revenue to the treasury is going down. Payouts from the government keep increasing. It doesn't add up. If a creditor calls for more capital to back these treasury notes, the government might go bankrupt. If a bond sale goes out and the interest rate becomes huge, it is because the risk of lending to the U.S. government is too high. The cards will start falling. The social security fund will go with it.

Notice that I haven't laid blame on anybody for the debt. It doesn't matter. We're going broke. And that includes social security. So, I take it from your myth #2 that you don't think the U.S. government is headed toward bankruptcy. You been buying Treasuries lately, merrill?

Richard Heckler 4 years, 10 months ago

Social Security is Safe Insurance not a risky investment program.

Millions of Americans have lost their retirement funds due to: • Unexpected job losses to outsourcing • The savings and loan scandal during the Reagan/Bush years • ENRON • Dot com fraud • Bernie Maddoff • Home loan fraud during the Bush/Cheney admin which put an estimated 11 million out of work

To list only a few of the schemes that have penetrated the retirement funds of honest citizens.

In essence we never know from one day to the next if we will be employed.

As we all know Wall Street investing offers no guarantees of security.

Flap Doodle 4 years, 10 months ago

Reagan/Bush, Reagan/Bush, Reagan/Bush. You reached ad nauseam ages ago, bub

devobrun 4 years, 10 months ago

And because revenue to the government is a result of taxation of ENRON, Bernie Madoff, Loans of all kinds, and millions of folks who really don't do anything but shuffle money around (legally or illegally), here we are, merrill.

Broke because nobody does anything anymore.

It all went to Macau.

So we service each other, and we trim costs with computer programs, and we don't do anything anymore.

And we hire people who can't speak the lingo, and we shift resources to Taiwan, and we don't do anything anymore.

Except manage the managers who manage the accounts that indicated the money transfers to the managers who watch the trade balance and the exchange rate and DON'T DO ANYTHING.

So the economy fails, and the government fails and social security fails.

QED.

Richard Heckler 4 years, 10 months ago

Myth #5: Social Security adds to the deficit Reality: It's not just wrong—it's impossible! By law, Social Security's funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.

There simply is no hard evidence that Social Security will fail. There is a tremendous amount of money in this pot that generates a tremendous amount of interest dollars annually.

mr_right_wing 4 years, 10 months ago

Is there a 'hard' source for this information?

Simply merrill expert speculation?

I'm not going to bad-mouth you if you are the source....just say so.

Flap Doodle 4 years, 10 months ago

For new readers of this forum, merrill has several sets of posts that he throws in whenever he gets a chance. The ones on this thread are part of his "magical thinking about social security" set.

anneht 4 years, 10 months ago

Is it not true that the taxpayer (worker) does NOT pay into unemployment funds? Rather, that the employer bears this burden alone, as a cost of doing business? I can't recall ever seeing a deduction from a pay check for "unemployment insurance".... am I correct?

notajayhawk 4 years, 10 months ago

Based on the assumption that the employer would actually give that money to the employee rather than increase their profits, that is.

notajayhawk 4 years, 10 months ago

I understand that, and agree in principle. If you've read any of my posts, you might have noticed I'm pretty firmly in the market-force camp. The part that concerns me is twofold:

Of course, employers are going to try to keep the wage as low as they can and the prospective employees are going to try to get as much as they can. Let's say we've reached an equilibrium where the prevailing wage we're talking about is $10/hr and the cost to the employer for unemployment insurance is $1/hr, just for simplicity. If you eliminate the unemployment insurance, your contention is that the employer will give that extra buck to the employees. But they'll only do so if the employees demand it. You called this "a hidden tax that you don't even know you're paying", and anneht's question supports that. So while the employers now have room to pay the extra buck and even possibly the will to do so, would the employees even know to ask for it?

The second problem I have is that the equilibrium point is reached because if the employers offer less than the employees will work for, they can't get employees willing to take it. But the employees have already demonstrated a willingness to work for $10/hr in this example, so where does the pressure to increase that to $11 come from?

Of course, as soon as one of your competitors decides to offer the extra buck to his employees, you have to do the same to compete for prospects. So eventually, yes, the equilibrium point would likely shift. I just don't think it's so automatic that the effect would be immediate, or even certain. It's also possible that the competitor will see that you're getting away with paying $10/hr and say "Why should I pay eleven?"

jafs 4 years, 10 months ago

The employer "can" hire more employees, or they could simply pocket the extra profit.

Which wouldn't have the positive effects you mention.

jafs 4 years, 10 months ago

It depends somewhat on the nature of the business.

For example, a small coffee shop would probably not find it in their best interests to hire more people, since doing so is unlikely to increase their income.

So, at least much of the "service" sector would be better off just pocketing the extra money.

jafs 4 years, 10 months ago

They'd have to have significantly more money to open another shop - an extra $1/hr per employee probably wouldn't do it. So they'd just take more money in profit.

They could buy more stuff, send their kids (if any) to better schools, etc. perhaps.

Only if they really wanted to open another business, and thought there'd be enough demand to support it, and didn't have other things they wanted to spend money on immediately would they open another shop.

Personally, if I had a small business, which was manageable, I wouldn't be that interested in expanding in that fashion.

This all started with the notion that unemployment insurance is a cost that comes from employee salaries, and that if not paid, the business would just pay employees more.

I say that's very unlikely, and, of course, wouldn't provide any more income for the business if implemented.

And, that if there were no unemployment benefits at all, then people who were laid off would be in even more trouble.

We'd need some real numbers, of course, but given the hypothetical of $1/$10 hr above, it wouldn't provide businesses with that much extra income.

notajayhawk 4 years, 10 months ago

No, he's right. The incentive is there to hire more employees, because that will allow greater production (at a reduced labor cost) and even more profits.

Also, even if the business owners and shareholders just pocket the extra profits, somebody's purchasing power went up.

notajayhawk 4 years, 10 months ago

That's true, I wasn't thinking about purchasing power. And, also, you're right that I was talking about an example where the unemployment tax was there and then removed - if it hadn't been there the equilibrium would have been reached at a higher point.

notajayhawk 4 years, 10 months ago

merrill (anonymous) says…

"Privatizing Social Security Would Place the Nations Economy at Risk"

Of course it would. That's because politicians have stolen the money for other purposes. What kind of ridiculous logic is using that very fact as an excuse to let them keep doing it?

Suppose you found out - years ago - that someone at your bank has been embezzling your money. They're in way over their heads, and if you stop making your deposits there, let alone demand your money back, the bank will fail. merrill might be the only person in the universe who would keep giving them his money.

Jimo 4 years, 10 months ago

Weird letter. Not quite sure where to start. I guess I won't.

Richard Heckler 4 years, 10 months ago

Let's remind ourselves that Social Security, which cut poverty rates among the elderly from 35% in 1960 to 9.4% in 2006, is no Robin Hood plan that robs the rich to pay for the retirement of the working class. Rather, it is a mildly redistributive public retirement program financed by contributions from the wages of working people.

In fact, Social Security taxes fall far more heavily on the poor and working class than on the well-to-do. Payroll taxes are a fixed 12.4% (actually 6.2% on employees and 6.2% on employers); they are levied only on wage income, not on property income; and the cap on wages subject to the tax (the subject of the debate between Clinton and Obama) means that while most workers pay the tax on every dollar of their income, the highest earners pay it only on a part.

notajayhawk 4 years, 10 months ago

"Let's remind ourselves that Social Security, which cut poverty rates among the elderly from 35% in 1960 to 9.4% in 2006"

Well, if you're just going to lie about it, why post?

It was Social Security that was responsible for the entire reduction in int elderly poverty rate, merrill? None of them managed to, oh, I don't know, maybe save up a little money of their own?

"the cap on wages subject to the tax (the subject of the debate between Clinton and Obama) means that while most workers pay the tax on every dollar of their income, the highest earners pay it only on a part."

And the "part" they pay it on is higher than most people earn altogether, so they're still paying more in than the vasy majority of people, mertle. And they don't get to collect any more than anyone else that paid in the same amount. Oh - and they get taxed on it again when they start collecting. Yep, those darned freeloaders, not paying their fair share into Social Security.

You're usually full of it, merrill, but tonight it's overflowing.

Richard Heckler 4 years, 10 months ago

What impact will privatization have on the national debt?

Unless taxes are raised, the government will have to borrow up to $4 trillion over the next 20 years to make up the money that is drained out of the system by private accounts. Bush and Congress already racked up a $475 billion deficit in Bush's first term.

Social Security privatization will raise the size of the government's deficit to nearly $700 billion per year for the next 20 years, almost tripling the size of the national debt.

================

How will the rest of the U.S. economy be affected if the privatization plan is enacted?

Put simply, moving to a system of private accounts would not only put retirement income at risk--it would likely put the entire economy at risk.

The current Social Security system generates powerful, economy-stimulating multiplier effects. This was part of its original intent. In the early 1930s, the vast majority of the elderly were poor. While they were working, they could not afford to both save for retirement and put food on the table, and most had no employer pension.

When Social Security began, elders spent every penny of that income. In turn, each dollar they spent was spent again by the people and businesses from whom they had bought things. In much the same way, every dollar that goes out in pensions today creates about 2.5 times as much total income.

If the move to private accounts reduces elders' spending levels, as almost all analysts predict, that reduction in spending will have an even larger impact on slowing economic growth.

The current Social Security system also reduces the income disparity between the rich and the poor. Private accounts would increase inequality--and increased inequality hinders economic growth.

For example, a 1994 World Bank study of 25 countries demonstrated that as income inequality rises, productivity growth is reduced. Market economies can fall apart completely if the level of inequality becomes too extreme. The rapid increase in income inequality that occurred in the 1920s was one of the causes of the Great Depression.

Flap Doodle 4 years, 10 months ago

Nice way to drum up traffic for your website. How did you find LJW? Do you also do quotes on car insurance and storm windows?

HaRDNoK9 4 years, 10 months ago

Can anyone tell me how to become a "Rocket Surgeon"?

SnakeFist 4 years, 10 months ago

merrill: I don't understand: On the one hand, you imply that money paid into Social Security is safely sitting there for the day we'll need it; but on the other hand, you say that if Social Security were privatized, i.e., if government couldn't immediately spend the money paid into it, then the deficit would grow.

I think the synthesis is that government spends the money immediately and then puts "IOUs" in the form of bonds in its place. The question a lot of people have is whether those IOUs will be worth anything when the time comes.

I do agree, however, that it would be incredibly foolish to gamble away retirement money in the stock market.

QuinnSutore 4 years, 10 months ago

That's why I have a private savings and a private 401(k), I don't need the government managing my money.

jafs 4 years, 10 months ago

If you were currently planning to retire, you'd probably find that your 401K wasn't doing so well right now.

Let's hope it's doing better when you retire.

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