SCRAP THE CAP and Call Your Congressman

[rsmith6621]

We would not have to be worrying about social security if we would JUST SCRAP THE CAP

http://thehill.com/special-reports/state-of-the-union-february-2013/282395-chained-cpi-an-economic-moral-disaster#ixzz2N5ExEX1u

justscrapthecap.com


We all need to call our Congressional REPS and tell them to stop the false conception that Social Security is part of the discretionary/non discretionary budget. It Is Not.

Social Security is its own fund

[customerserviceguy]

1. I'm going to ask you the same thing I ask everybody else who has this idea

Show me the figures where you have a certain number of people already above the present cap, give me a ballpark figure of their wages, and I'll do the math as to how much money you can expect to actually collect from whatever cap level you think is proper. Also, I'll calculate for you how much their maximum Social Security benefit is going to go up per year, and we'll subtract that, OK?

We need a lot of things to change to keep Social Security in place. Subjecting wages that are disguised as capital gains, dividends or interest would be a good start. Putting no cap on the employer's share of taxable FICA wages (thus not giving a raise in the maximum monthly benefit) is another. Yes, a modest raise in the cap is good, and we should index it to inflation, as we've done with the tax brackets.

But we're going to need to do some other structural changes. It might take having the FICA rate (which hasn't changed in 23 years) going up one or one and a half percent. It might mean moving the disability program to the general budget, so that taking care of disabled people is not just the burden of those who work and those who pay people to work, but is shared by all forms of taxable income, such as interest, capital gains, dividends, royalties, etc.

And it might need some structural change in the CPI calculation. I stand with people who oppose giving that as a bone to the Rethugs in order to get a few more percentage points of tax rate increases on the well-to-do, but I do see it as part of what should be a separate "grand bargain" on getting a hold on entitlement programs.

If we do nothing, the costs of those programs is eventually going to crowd everything out of the Federal budget. We'll have only one choice, stop paying Social Security benefits in excess of FICA taxes received (current law, by the way) or run the printing presses and inflate the currency. Then, we become Zimbabwe.

[brentspeak]

2. "And it might need some structural change in the CPI calculation"

As per your own challenge, show us the figures which demonstrate how many more years Social Security will be made solvent due to forcing Grandma and Grandpa to dine on pink slime rather than real meat.

BTW, your question re. how many people there are above the cap has already been answered.

[customerserviceguy]

3. Thanks for providing that link

Honestly, no one has ever given me an answer on that question. I appreciate your willingness to supply one.

As for what the exact effects of the chained CPI are, it all depends on what one supposes to be the rate of inflation and what the difference in the chained CPI will be, exactly. Those would be pretty tough to predict, but it's logical to see that if inflation stays either very low, or practically nonexistent (as it was for those two years where there were no COLA's at all) then the difference is low. If inflation is high, then the difference over time will be high.

I see people flinging about nice round numbers, like $1,000 for an elderly person after 20 years of chained CPI. There's an assumed inflation rate somewhere in there, I'd like to know what they think it is going to be when they make those statements.

[customerserviceguy]

5. Again, thanks

That link led me to the website for the Center for Economic and Policy Research, which led me to another study of theirs, where they analyze the effects of the chained CPI. According to their calculations, the difference is about three-tenths of a percent per year, on average, as they assume that there will be a 3 percent difference after ten years, 6 percent after twenty years, etc.

A link in that report led me to the Social Security Trustees page where they predict the annual "regular" inflation rate to be 2.8 percent per year. Thus, chained CPI gives a COLA rate of 2.5 per year, using both the CEPR and the SSA figures. If there is indeed a thousand dollars of difference twenty years from now between the annual benefit under CPI-W and chained CPI, then I built a spreadsheet to test what monthly benefit level would give a thousand dollars of difference twenty years out, starting with a CPI calculation change in 2014, which is a practical impossibility. It turns out the figure is a present monthly benefit of $845.00. Not an unreasonable assumption.

That said, remember, we're talking about a thousand dollars a year, after twenty years of 2.8% inflation. The present value of that grand with that rate of inflation is $575.62, or $47.97 a month. That represents 5.643% of our hypothetical retiree's current monthly check.

Perhaps a better thing to focus on is the cumulative loss to a retiree, according to my spreadsheet, that is $8,967.10. Again, present value needs to be applied, but it's a better figure to argue with. On the other hand, you don't cross the $1,000 figure until 2021, eight years out.

In any case, the effect of this is way less than the effect of raising the retirement age from 65 to 67. That was part of the "fix" for Social Security on the last time major reform was enacted, back in 1983. If we delay the implementation of chained CPI for a few years, like we did with the age change, it will not have a pronounced effect on most of today's retirees.

It would have an effect on the disabled military veterans, we need to find other ways to compensate for that.

[brentspeak]

6. The watchdog group Social Security Works has much different figures

Cumulative loss of $15,000: http://www.huffingtonpost.com/2012/12/18/chained-cpi-social-security_n_2324907.html

[ProfessionalLeftist]

4. Most folks wouldn't mind paying a percentage point or two more into FICA

Can't remember were but a poll or two showed that people would rather raise/remove the cap and/or pay more in - as opposed to raising retirement age or using "chained CPI"