The Bogus Social Security 'Crisis' Continues...

[reprehensor]

UNSOCIAL INSECURITY

snip

“This is one of my charges, is to explain to Congress as clearly as I can: the crisis is now,” Bush proclaimed at an “economic summit” a month ago. He does indeed have some ’splaining to do. This year, the Social Security system—the payroll tax, which brings money in, and the pension program, which sends money out—will bring in about $180 billion more than it sends out. It will go on bringing in more than it sends out until 2028, at which point it will begin to draw on the $3.5 trillion surplus it will by then have accumulated. The surplus runs out in 2042, right around the time George W. Bush turns ninety-six. After that, even if nothing has changed, the system’s income will continue to cover seventy-three per cent of its outgo.

That’s using the Social Security Administration’s economic and demographic assumptions, which are habitually pessimistic. Using the assumptions of the nonpartisan Congressional Budget Office, the surplus runs out in 2052. And if one uses the economic growth assumptions that Bush’s own budget office uses when it calculates the effects of his own tax cuts, the surplus runs out in—er, maybe never.

The “crisis,” therefore, is not “now.” It’s as bogus as the Alliance for Worker Retirement Security—which, in reality, is an “astroturf,” or fake-grassroots, front for the National Association of Manufacturers. There is no Social Security crisis, and there is not likely to be one. At some point over the next couple of decades, of course, some adjustments will have to be made. There are many reasonable possibilities: a modest rise in the retirement age, to reflect increases in health and longevity; a rise in the cap on wages subject to the payroll tax, which now cuts out at ninety thousand dollars a year; adding a bit to the progressivity of the benefits. One can even imagine a national decision to devote a larger proportion of national resources to the care of the old, given that a larger proportion of the population will be old—preferably to be paid for by taxing something we’d like to see less of (like fossil-fuel consumption) instead of something we’d like to see more of (like jobs).

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[leftyandproud]

1. I'm afraid the crisis is not bogus

The CBO did a study on social security and medicare a few weeks ago. They produced three outcomes, based on potential economic growth. Under the MOST OPTIMISTIC scenario with a solid 5% growth from now until 2030 and no recessions, social security/medicare will take up a full 75% of the federal budget.

The least optimistic scenario had their cost at 110% of the federal budget.

We are f*cked if something isn't done. Personally I want to OPT OUT of social insecurity now. I will sign a contract demanding nothing off the government in my old age. I will provide for my own retirement, or throw myself on the mercy of family and charity if I choose to be irresponsible with my money. I want out of this ponzi scheme taking 15%+ of my earnings for the next 30-40 years. Maybe then I can have a truly secure retirement.

[liberal N proud]

3. Do you have a link to the CBO study?

I have not seen any report that indicated such claims.

[Warren Stupidity]

7. medicare is not social security

and there is no proposal on the table to address the medicare funding crisis.

[Jazzgirl]

4. I have not heard of this and in fact have heard the CBO

says the same thing that the GAO says and that is SS is solvent and is probably the most (only) solvent fund in the US today. Link?

[papau]

10. CBO says solid to 2052 then 80% payable - but it uses a low GDP growth

assumption - so most likely the Trust Fund is NEVER empty.

[leftyandproud]

11. don't have link

like I said, it was medicare/SS combined, so the numbers may be misleading. It mentioned that entitlements today are only around 25-30% of the budget, but in the years of peak retirement for babyboomers (2030 and beyond), the percentages will go up to 75%-110%, assuming government maintains it's current share of GDP. The editorial was syndicated in my local sunday paper (courier journal, KY). You may be able to find it online.

[spanone]

14. Can't lump medicare and social security together. Different animals.

[Ganja Ninja]

6. How does the percentage of the budget affect the viability of

Social Security? If the payroll tax is paying a surplus right now then what percentage of federal revenues is coming from the payroll tax. What happens if you take Medicare out of the equation? Sorry but I don't trust any numbers coming from a republican run government.

[papau]

9. NOT A SOC SEC CRISIS - numbers you cite are caused by Medicare

FIX HEATH INSURANCE!

[DemBones DemBones]

12. That's big of you to want to "opt out" of Social Security and be

"self-reliant" -- Bush** would approve.

But you're not paying for yourself now, you're paying to help those already retired -- who paid for those before them. Your children's generation will pay for you. Any generation that stops paying will have to take in their parents and pay their expenses. Think you can do that? While raising your own family? In a Bush**whacked economy?

Talk to those of us who have already gone through our parents' old age and death -- we'll tell you that we were scared to death their Social Security PLUS savings, even substantial savings, wouldn't be enough to allow them a decent life until the end.

Talk to those who had to move their aged parents through a series of "homes" of lesser and lesser quality. Talk to those who had to take their parents into their own homes and provide basic care for them themselves. We're talking about bathing and diapering the parents who raised you, learning how to insert a catheter into mom or dad's bladder, etc. Does that appeal to you? Lots of us have had to do these things and that's WITH Social Security. How much worse would it be without this safety net?

Moreover, if you "opted out" now, chances are good that you would end up in old age without enough money, with a backup plan of throwing yourself on someone's mercy. If that had worked well enough for old folks in the past, do you think FDR would have initiated this program?

From your post, I gather you're in your twenties. You need to learn a lot more about Social Security, which is NOT a Ponzi scheme and NOT in crisis. Go read Josh Marshall's continuing story on this at

http://www.talkingpointsmemo.com.

And follow the links he gives, especially to the lengthy NY Times Mag article from this Sunday.

[leftyandproud]

15. how bout this...

Currently, I pay 7.65% and my employer generously "matches" my contribution...meaning he factors it into my salary before I am even hired. In reality, I am paying 15.3%...So are you, and so is every worker in America.

What if I were willing to pay 10% to the current system, and you let me keep just 5% of my social insecurity taxes? Fair compromise? I would still be opting out of the system keeping just 5% of my taxes, while paying a full 10.3% to current retirees to keep the system solvent.

That 5% would go a long way for me. Let's say I earn $30,000 a year starting now, from age 25 to age 65...and I never get a raise...NEVER.

5% of 30k = $1,500

I did the math...and annual $1,500 contribution invested at 10% for 40 years comes out to $798,166.60

The stock market average over the past 70 years is 11.9% so I'm using a conservative growth estimate here. If these contributions actually earned the historical average of 11.9%, the personal account would be worth $1,386,992.60

How's that for some social security?

Just give me a third of my contributions...less than a third actually.
You can keep 2/3+ of the taxes and pay me NADA in return.

Deal?

[leftyandproud]

16. just for fun..

I ran some more numbers.

If a worker had the full 15.3% of his/her earnings to invest ($4590), at 10%, the account would be worth $2,442,389.80 after 40 years.

At the historical index fund average (11.9%), it would be worth a whopping $4,244,197.37.

At 5% interest, they could draw $212,209.87 from the account each year in retirement, WITHOUT EVER TOUCHING THE PRINCIPLE.

You can use your own numbers kids. See how much better your kids would be if they could partially opt out of social insecurity.

http://math.about.com/library/blcompoundinterest.htm

[Justitia]

17. your "investment math" is way whacked

In fact, 1000 ways from Sunday.

There are so many factors involved (and errors in your simplistic formula) I wouldn't know where to begin.

I would be inclined to educate you on the PV of $1, accntng for pension funding, the mathematical basis for gov't actuarial science, BUT you are so adept at parroting RW talking points (i.e., "ponzi scheme"), I suspect it would be a colossal waste of my time. BTW, it's "PRINCIPAL".

I do appreciate you being honest about not having ANY LINK to CBO info that shows Soc Sec is in "crisis".

[leftyandproud]

18. added link above

the math is accurate, and yes I am aware that 700k 40 years from now will not be worth what it does today. It will buy closer to $200k worth of goods...still a pretty damn good nest egg compared to the pittance today's workers are likely to get under social security.

[Justitia]

19. Really? The math is accurate? Using what compounding method?

By what method are you compounding your interest???

Both myself and my friends at Merrill Lynch would LOVE to know!

Whatever method you are using, it doesn't rise above high school math.

So, once again, what compounding method, in what investment vehicle (determines obligation, par / premium / discount multiplier) are you talking about?

Your numbers are bogus, and belong in NO discussion of governmental accounting.

[leftyandproud]

20. you work at Merrill Lynch..

Surely you've heard of index funds.

Dollar cost averaging into the broad indexes is the way it would be done.

This has nothing to do with governmental accounting. It is PERSONAL finance. A personal account invested across broad indexes earning those averages will have the amounts listed after 40 years. Simple as that

[Justitia]

21. You have completely tipped your hand.

Index funds and dollar cost averaging is going to make you a millionaire in lieu of Soc Sec huh? "Simple as that" huh?

As I said before, you are in this discussion way over your head.

Please stop before you embarrass yourself further.

Seriously, do you personally know any CPAs or tax attorneys?
If so, I would ask them for a basic, candid lesson.

I'm through here.
Have a nice day.

[leftyandproud]

22. you talk and talk..

haven't disputed any my figures...just repeated the same condescending fluff over and over.

A Merril advisor who thinks SS is a great investment...

thank God I have a Fidelity account.

[Justitia]

23. Your figures are as valid as pulling them out of the air

I would have to educate you on so many different contributing factors we would be here for years.

Another annoying clarification: Soc Sec IS NOT AN INVESTMENT - arghhhh! Another ignorant RW talking point. Soc Sec. is an INSURANCE TRUST - do you know what that is????

If you want to focus on a seriously limited discussion, let's go back to the original assertion you made (which YOU are required to back up, not me).

What compounding method did you use, and in what vehicle, to come up with such fantastical numbers???

[burythehatchet]

25. Someone's got you snowed lefty

if you want your social security modeled after the current healthcare system, then privatization is the answer.

[liberal N proud]

24. That works in your math but you failed to figure in the cost of

managing that account and a that your employer is most likely NOT going to give you the 5%.

And what about those people who just cant manage money, they are not the brilliant mathematician you are, or those people so strapped financially that when they go bankrupt, the bank says what about this money?
That does not take into account a major crash in the stock market 2-3 years before you retire, whipping out all your profit.

[progressiveright]

2. bush is a crisis

Social security was fixed by Greenspan a long time ago when he slightly increased taxes, yet republicans (probably some democrats too) keep raiding the SS fund for cash. That's why there is a crisis. Congress keeps borrowing money from SS and writing debt notes, its like borrowing money from yourself and then having no money when its time to pay the bill, only a note that says you can collect such amount from yourself. Its idiotic and its one of the first things that have to go, we need to start paying back those 'debts'.

I am wondering about the actual proposal, where the trillion plus dollars will come from to make transition to private accounts from the system of current workers paying for retired ones. Bush will really have to outdo himself this time. There is a lot of talk about benefit cuts due to privatizing, instead we can simply change the way we calculate benefits (currently each generation gets slightly more money when adjusted for inflation), which is not really a benefit cut but rather correcting a mistake, and that alone saves SS virtually forever. If we also raise the tax cap we can save more money and actually lower SS taxes and raise medicare taxes to start saving for THAT crisis.

[newyawker99]

26. Hi progressiveright!!

Welcome to DU!! :toast:

[Warren Stupidity]

5. rethug tactics....

They tend to use a sort of inverted 'bait and switch' tactic when they are trying to get something really hideous through congress. For social security wrecking it goes like this: Privatization is the "bait". Democrats (except of course for the rethuglocrats like lieberman) get their dander up to fight privatization tooth and nail. But the real goal is not privatization at all. The thugs will give in and compromise on privatization. The real goal (the "switch") is far more sinister and is not even being publicly discussed. The proposed SS wreckage will include a provision to shift SS COLA calculation from wage-based to price based. This is the real goal and it is the one that will in fact render SS into a useless reminder of the way things once were.

The details of the 'price indexing scam' are buried in this business week article: http://www.businessweek.com/magazine/content/05_04/b3917001_mz001.htm
and since the details are in fact buried, here are the relevant paragraphs:


The Bush Commission would switch the formula so that benefits keep pace with prices instead of wages. Sounds reasonable. But if wages grow faster, then over the decades the average Social Security check would shrink as a share of future workers' pay. Right now, that $1,184 works out to nearly 42% of the average worker's pay, a ratio that would remain if wage indexing is kept in place. But price indexing would gradually reduce benefits to the vanishing point as wages outpaced prices. Seventy-five years from now, the average retiree would still get roughly $1,184 in today's dollars. But with wages running 1% a year ahead of inflation, it would come to less than a fifth of what the average worker would earn by that time.

If Social Security checks had been adjusted for inflation ever since the program started in 1935, retirees today would take home only $425 a month. "Price indexing may not be sustainable when retirees in the future see that they have the same purchasing power as 50 years ago," says Kent Smetters, a Wharton insurance professor who as a U.S. Treasury official helped the President's Commission crunch all these numbers.

What's more, the result of price indexing is so extreme that it would wildly overshoot the shortfall, transferring more than $1 trillion in surplus taxes to federal coffers, according to Stephen C. Goss, the SSA's chief actuary. Even some commission members concede that this would be unsustainable. "It's true that with price indexing, Social Security benefits would keep falling while the revenue to the government keeps rising, but we said at that point a future Congress can change it," says Olivia S. Mitchell, a public policy professor at Wharton who was a Democratic member of the President's Commission.


Sorry for the long cut'n'paste.

The reason I bring this up is that, unlike piratization, I currently have come up with no easy way to explain why this is an abomination. Any help in constructing sound-bite phrases for the masses that capture the essence of this deceit would be appreciated.

[ayeshahaqqiqa]

8. "Under the Bush plan, your benefits will be cut".

At least that is what I get from all I've read about it. And his plan won't 'solve' the problem-the deficits involved will make it worse.

As I said on a thread I started, senior citizens in Arkansas at least are up in arms with doing anything about SS-100% of all letters to conman Boozman (R) from seniors on SS are against any change, according to the Dem/Gazette, the statewide rw rag here. They are pro Bush, and if there was even one letter supporting this tripe, they would have reported it.

[ArkDem]

13. Look at this from the Clinton administration.........

http://www.ssa.gov/history/reports/adcouncil/report/toc.htm

[rinsd]

27. Great...now I wish Dems hadn't been screaming crisis thru the 90's.

It would make this whole "there's no crisis" meme look alot less silly.