Social Security will continue to be in good shape if...

[kentuck]

the workers of this country continue to put in 6.2% of their income and their employers put in the same amount. This year, workers will only contribute 4.2% because of the President's FICA tax cut.

Workers could contribute up to 7.5% of incomes and the top rate could be taken up to $250,000. Those making more than $250K per year should pay at least as much as those under $250K. The Social Security system is easy to fix and is not a huge hardship on anyone that wishes to have that security when they are over 65 years old. This is something the American people want and need.

Those making over $250K per year should be required to pay at least the same amount as those making less. The FICA taxes should be figured into the percentage equation.

People like the Governor of Texas and others that attempt to tear down our Social Security system are doing great harm to our people and the future of our nation. The measly amount of 6.2% is not asking employers to pay too much for their employees security when they get old. I would argue that 6.2% is slightly low for the amount employers should be paying. Workers should unite on this.

But, we should be clear. Social Security is not a scam. It is not going broke. It is a security program for the workers of this country, for you and I. This is for the people and it needs to be protected. Morons from Texas should not be permitted to tear it down.

[akvo]

1. Not that easy

The SS cap is 6.2% of $106,800 from the employee (this 6.2% comes out of the paycheck), plus another 6.2% from the employer (this is on top of the paycheck). About 6% of incomes exceed the $106,800 limit.
If there was no limit on the SS tax, an additional $280 Billion would be brought into the SS system. Thats about a 21% increase in SS income and should make the SS program solvent.

But its not that simple.

People will change their behavour when the SS cap is removed. Many of those making over $106800 are self-employed and will not sit idle under what is basically a new 12.4% tax on their income, driving their federal income tax to near 50%. They will take their compensation in other forms rather than taxable income. The cap removable will not bring in anything close to $280B a year.

And as Obama's new economic advisor Alan Krueger has said, and as everyone that understands economics should know anyway, taxes are a drag on the economy. Removing the SS cap will slow the economy, how much I don't know. Its a damned if you do, damned if you don't situation. Remove the cap, cause a double dip or at best slow GDP growth. Leave the cap, the economy recovers but SS eventually goes under.

And SS is a scam because the lockbox is full of IOU's that require the nation to borrow money to repay. The day of borrowing is almost over.

[brentspeak]

3. I didn't know that members of the Investor's Business Daily (IBD) editorial staff posted here

[Lugnut]

7. +100 n/t

[jeff47]

5. Lots of wrong there.

"People will change their behavour when the SS cap is removed. Many of those making over $106800 are self-employed and will not sit idle under what is basically a new 12.4% tax on their income"

If they're making $250k in taxable income while self-employed, they need to fire their accountant.

"Remove the cap, cause a double dip or at best slow GDP growth."

The economy is suffering a lack of aggregate demand. So few people make more than $106,800 that taxing the hell out of them isn't going to change the overall economy much. The demand they generate is minuscule compared to the other 95% of the country. And we're not talking about taxing the hell out of them.

"And SS is a scam because the lockbox is full of IOU's that require the nation to borrow money to repay."

Just like we have to borrow to repay the debt that was run up under all previous presidents. It's only an issue if there's a massive surge of debt that the market is not willing to cover. That doesn't happen with the SS trust fund, because the money is paid out in a relatively slow trickle.

"The day of borrowing is almost over."

This is pure bullshit. There are countries with far worse debt situations (ex: Japan) which can still borrow at 2-3%. We are borrowing at 2-3%. Inflation-protected bonds are actually paying a _NEGATIVE_ interest rate. The invisible bond vigilantes will not appear any more than Jesus or Santa.

[kentuck]

6. Thanks for clarifying that Jeff.

Appreciated.

[akvo]

15. Do some more research

"Remove the cap, cause a double dip or at best slow GDP growth."

The economy is suffering a lack of aggregate demand. So few people make more than $106,800 that taxing the hell out of them isn't going to change the overall economy much. The demand they generate is minuscule compared to the other 95% of the country. And we're not talking about taxing the hell out of them.

Govt spending has a multiplier effect, you should be familar with that concept since its repeated so often.

Private spending also has a multiplier effect, but private spending does not have the cost associated with govt taxation, borrowing, and printing. People don't like to hear about that side of the arguement.

While there are few people that are in the above $106k a year income bracket (about 6% of the income earners), they represent an economic impact that far exceeds their numbers. Many of those people are business owners, and one of the best investments for a business owner is their own business. Better than the stock market or bonds because they understand their own company, and are in control. There is an emotional attachment as well.

"And SS is a scam because the lockbox is full of IOU's that require the nation to borrow money to repay."

Just like we have to borrow to repay the debt that was run up under all previous presidents. It's only an issue if there's a massive surge of debt that the market is not willing to cover. That doesn't happen with the SS trust fund, because the money is paid out in a relatively slow trickle.

"The day of borrowing is almost over."

This is pure bullshit. There are countries with far worse debt situations (ex: Japan) which can still borrow at 2-3%. We are borrowing at 2-3%. Inflation-protected bonds are actually paying a _NEGATIVE_ interest rate. The invisible bond vigilantes will not appear any more than Jesus or Santa..

See post #14

And FYI, the inflation numbers as calculated by the govt are unreliable. The govt has a strong incentive to keep the inflation number (CPI calculation) low in order to keep COLA low which reduces social security payments, military paychecks, and yes even your inflation protected bonds. CPI is also in many union agreements, so it keeps union payrolls down a bit.

There has been no COLA for social security for the past 2 years because the govt claims inflation is so low that COLA was not triggered. Do you really believe the cost of living has not increased over the past 2 years? What does your trip to the grocery store or to the gas station tell you?

Don't you think its odd that one of the Simpson-Boles proposals to reduce the debt is to implement a new "more accurate" inflation calculation? The govt has fiddled with the inflation calculation since Reagen. The new calculations always seem to come up with lower inflation numbers then the previous calculation. Interesting, don't you think?

The entire idea of "improving" the CPI calculations came up during Reagen, then gained support during Bush 41 through Michael Boskin (Bush 41 economic advisor) and Alan Greenspan (then Chairman of the Federal Reserve System). Bush could not implement the plan because it leaked. Clinton implemented the Boskin/Greenspan plan. Greed is non-partisan.

[jeff47]

16. And there's yet more wrong.

"but private spending does not have the cost associated with govt taxation, borrowing, and printing."

This is utterly laughable. You are seriously arguing that the government can't spend money without printing dollar bills first?

"While there are few people that are in the above $106k a year income bracket (about 6% of the income earners), they represent an economic impact that far exceeds their numbers."

And the other 94% vastly eclipse the impact, because there's a hell of a lot more of them.

"Many of those people are business owners, and one of the best investments for a business owner is their own business."

Ah yes, the claim that the wealthy are small business owners.

The average small business owner has income about $50k/year. Small business owners are overwhelmingly "middle class". But Republicans and Randians have been claiming for years it's not to cover their give-aways to the investor class. Unfortunately, you listened to the hype and not the data.

"See post #14"

If an argument isn't even good enough to cut-n-paste, why exactly should I go find it for you?

ETA: well, #14 was so entertainingly wrong that I responded over there.

"There has been no COLA for social security for the past 2 years because the govt claims inflation is so low that COLA was not triggered. Do you really believe the cost of living has not increased over the past 2 years? What does your trip to the grocery store or to the gas station tell you?"

That there's too many people who don't understand why commodities are not in core inflation. You're one of them.

Yes, commodities shot up a while go. They've since crashed. The reason they're not in the CPI is because they tend to shoot up and then crash. But average out those ups and downs over the long haul and you get the same result as "core" inflation.

If you'd like to include commodities in Social Security COLAs, then that will indeed trigger higher COLA when commodity prices shoot up. And it will also necessarily include a cut in benefits when commodities crash.

[akvo]

19. Do some more research

"but private spending does not have the cost associated with govt taxation, borrowing, and printing."

This is utterly laughable. You are seriously arguing that the government can't spend money without printing dollar bills first?

Read with more care. Govt can tax, which carries an immediate cost of lost opportunity. Govt can borrow, which carries a future cost of interest payments and repayment (or more borrowing, or printing). Govt can print, which carries the cost of inflation.

"While there are few people that are in the above $106k a year income bracket (about 6% of the income earners), they represent an economic impact that far exceeds their numbers."

And the other 94% vastly eclipse the impact, because there's a hell of a lot more of them.

"Many of those people are business owners, and one of the best investments for a business owner is their own business."

Ah yes, the claim that the wealthy are small business owners.

The average small business owner has income about $50k/year. Small business owners are overwhelmingly "middle class". But Republicans and Randians have been claiming for years it's not to cover their give-aways to the investor class. Unfortunately, you listened to the hype and not the data.?

If the govt can spend around $800B in stimulus and claim it created 3 million jobs, then what impact does roughly $10 Trillion in private business spending do?

Median income in the US is about $51k. The average income of the small business owner varies. In the first year of business, it is around $50k. As the business expands and suceeds, the owners income increases. For a business in operation for 10 years, the owners income exceeds $105k (which puts them in the top 6%).

In other words, successful businesses which hire more people make more money.

"See post #14"

If an argument isn't even good enough to cut-n-paste, why exactly should I go find it for you?

ETA: well, #14 was so entertainingly wrong that I responded over there.

As did I to your response.

"There has been no COLA for social security for the past 2 years because the govt claims inflation is so low that COLA was not triggered. Do you really believe the cost of living has not increased over the past 2 years? What does your trip to the grocery store or to the gas station tell you?"

That there's too many people who don't understand why commodities are not in core inflation. You're one of them.

Yes, commodities shot up a while go. They've since crashed. The reason they're not in the CPI is because they tend to shoot up and then crash. But average out those ups and downs over the long haul and you get the same result as "core" inflation.

If you'd like to include commodities in Social Security COLAs, then that will indeed trigger higher COLA when commodity prices shoot up. And it will also necessarily include a cut in benefits when commodities crash.

You are wrong. The purpose of the COLA is to keep the purchasing power of the payments constant so the standard of living of the recipient does not decrease. As the cost of living changes due to inflation or commodities price changes, the COLA adjusts payments (up or down, but down is unpopular - and rare due to inflation - and is never implemented) accordingly.

The arguement you give regarding commodities is the govt arguement. The CPI used to be calculated based on a fixed basket of common items (milk, gas, eggs, bread, etc.). Then under Reagan it was modified to deweight housing related costs. Then under Clinton the commodities were replaced with a weighted average of the commodities. This was supposed to even out the short cycle fluctuations yet still account for the costs incurred by citizens.

But this approach also allowed the govt to "tune" the weights of the various commodities. Its no longer a simple weighting but under-represents the cost of living.

Now all we hear about is the "core" CPI which ignores fuel and food completely. How convenient for the govt. Have people stopped eating and using gas and oil?

[Selatius]

10. Raising taxes on the rich won't drag down the economy. Raising taxes on poor people, do, however.

Something like 75% of the US economy is built on aggregate demand for products and services. We're basically talking about consumer demand for things. Consumers are also workers. What is happening in the US economy right now is that rich people (the producers) are not hiring because there is not enough demand for their products and services to justify adding more people to the payroll or extending working hours, and giving the rich people another tax cut won't magically make them hire more workers if they still do not see a rise in aggregate demand.

If, on the other hand, extra tax revenue is raised by taxing the rich to pay for a jobs program to put unemployed people back to work, all of a sudden those people, who were once unemployed, now have money in their pocket. A large jobs program could put back to work millions of Americans. And what do they do with that money? They go out and spend it in the economy, on things like food and clothes and whatever luxuries they have enough money for, and producers will begin to see a rise in aggregate demand for their products and services. Once those producers see that rise, what do they do as well? They begin adding hours and putting more people on payroll in order to meet this new demand, and their profit margins will get bigger as the total number of product sold goes up. Everybody wins, rich people and the people who now have jobs. Once the economy is running at full tilt, you can begin taking the economy off life support by retiring the jobs program and use the revenue instead to pay off the national debt.

This is based on historical observation of the US economy. People who say that taxing the rich will ruin the economy are forgetting the entire span of history between the end of World War 2 in 1945 until 1970, where one saw one of the largest economic booms in American history despite tax rates for every dollar earned above $1,000,000 being at least 70%. The reason why the economy boomed was because the tax revenue raised by taxing the rich was used to put people back to work and to build American infrastructure up. The interstate highway system built under Eisenhower is a great example of a public works project during that time that not only employed untold numbers of construction workers to build it but to this day continues to employ construction workers to maintain that infrastructure and also continues to be a vital asset for interstate trade and commerce that many businesses need to operate.

Social Security isn't anymore of a scam than it was for the US government to borrow money to fight the Second World War and then pays off nearly the entire war debt by 1980. It's good if the US government pays up and lives up to its promises, but if you don't want it to be a good government program, elect people who want the US to default.

[akvo]

14. Only if we had followed Keynes for the past 50 years....

Something like 75% of the US economy is built on aggregate demand for products and services. We're basically talking about consumer demand for things. Consumers are also workers. What is happening in the US economy right now is that rich people (the producers) are not hiring because there is not enough demand for their products and services to justify adding more people to the payroll or extending working hours, and giving the rich people another tax cut won't magically make them hire more workers if they still do not see a rise in aggregate demand.

If, on the other hand, extra tax revenue is raised by taxing the rich to pay for a jobs program to put unemployed people back to work, all of a sudden those people, who were once unemployed, now have money in their pocket. A large jobs program could put back to work millions of Americans. And what do they do with that money? They go out and spend it in the economy, on things like food and clothes and whatever luxuries they have enough money for, and producers will begin to see a rise in aggregate demand for their products and services. Once those producers see that rise, what do they do as well? They begin adding hours and putting more people on payroll in order to meet this new demand, and their profit margins will get bigger as the total number of product sold goes up. Everybody wins, rich people and the people who now have jobs. Once the economy is running at full tilt, you can begin taking the economy off life support by retiring the jobs program and use the revenue instead to pay off the national debt.

What you describe is the classic Keynes approach - during economic slowdowns, the govt pumps money into the system to replace lost private sector spending, and during good economic times the govt repays the debt and retracts printed money. It also requires the govt to be a good fiscal steward and not make committments it cannot keep.

During the economic slowdown, the govt borrows money and accumulates a debt. The govt does not prime the pump through increased taxes because increasing taxes slows the economy. During the down times, the economy is sensitive to downward pressure and increased taxes is the last thing we want to do. Obama and his economic advisors have explicitely said the same. Thats just basic economics.

During the economic boom, GDP increases govt revenue. Taxes can be increased as well further increasing govt revenue. The increased revenue is used to pay down the debt so that the govt has a high borrowing capacity to deal with future economic problems.

The US didn't follow the plan. The US took on unsustainable programs and particularly since 2000 spent uncontrollably. Our politicians relied on artificial demand for the US$ to keep the US borrowing ability high. That artificial demand is ending, countries are begining to move away from the US$.

Other nations are emerging as economic powers - China, India, Brazil, Germany, Asia - who can exert their own will on the world independent of the US. As part of their national will, they don't want to be tied to the US$ and are actively working to remove the US$ as the world economic reserve curency. Nations are forming economic consortiums without the US, and some nations now trade oil in non-US$.

The US is already borrowing to pay its existing debt. And we are monetizing the debt, which translated means we are cheating the lender by devaluing the US$. Lenders don't like being cheated.

When the day comes that people will not support the US debt - and the day is coming, you can see it on the global scene right now - then the system will collapse.

[jeff47]

17. Look! There's wrong here too!!

"As part of their national will, they don't want to be tied to the US$ and are actively working to remove the US$ as the world economic reserve curency"

So what?

Debt is only large problem when the interest on that debt is high.

Japan issues it's debt in Yen. Japan's Dept:GDP ratio is a hell of a lot worse than the US. Japan's economic doldrums are entering their 3rd decade. The Yen is not a "Reserve Currency". Yet Japan is borrowing at about 3%.

"Reserve Currency" and sovereign debt don't have much to do with each other. The only "benefit" of being the "reserve currency" is other nations are disinclined to devalue your currency. At this time, this benefit hurts us. A weak dollar would be fantastic for our economy because it would reduce imports and boost exports.

Lastly, on the "reserve currency" front. What do you propose to replace the dollar with?

Euros? That's laughable. It's not clear the Euro will exist in 10 years, since they are utterly unable to deal with Ireland, Spain and Greece's problems. With the problems spreading into the 'core', it's not entirely clear that the ECB will be able to keep the experiment going. The Euro might have been a threat 10 years ago. It isn't today.

Renminbi? China would have to let their currency float first. Their entire economy is based on keeping the Renminbi low so that they have enough growth to keep their people happy. A surging Renminbi with the corresponding loss of export jobs would cause huge problems for China.

For the time being and the foreseeable future, it's US Dollars because there's nothing else.

Also, sovereign debt does not have to be purchased by other countries. In fact, most US debt is bought by private individuals and corporations. So China not wanting to buy US debt really doesn't matter. Because we don't have to sell it to China. And I can be sure this is true, because China stopped buying massive amounts of US debt by 2008. They gave up on using US debt to try and keep their currency low. Yet US is issuing debt at 2-3%.

"and the day is coming, you can see it on the global scene right now"

Then point out the evidence. So far, all you've supplied is a misunderstanding about who buys debt, a misunderstanding of "reserve currency" vs. sovereign debt, a claim that "something else" will take over as a reserve currency (as irrelevant as that is), and a lot of hand waving.

[akvo]

18. That is the short sighted outlook

Debt is a problem when the payments cannot be made. Interest is only one component. The US is currently financing its debt with new debt instead of making payments on the principle. ROlling old debt into new debt is unsustainable at the national or individual level.

Cost of entitlements increases over time as well. Thats due to demographics and poor fiscal management by the govt, but the result is that federal expenditures will increase substantially.

As a result the debt is growing annually and consumes a greater portion of revenue every year. Projected into the future, debt payments will exceed total revenue. Add an increase in the interest rate and the problem gets worse.

And don't claim that a simple tax increase will solve the problem. Tax the top 1% at 100% - take every penny they make - and it won't even balance the current annual budget. No level of sustainable taxation will even balance the current budget much less future budgets. You can verify this yourself by downloading the raw tax and income data from irs.gov tax stats and doing some simple calculating (throw in data from the US census and it gets even more exciting).


As to the US$ being the world reserve, I do not propose a replacement, but other nations do. It will not be replaced by a single nations currency (because that gives one nation too much power) but a basket of currencies. Several proposals oer the past 5 years include various mixes of the currencies of Russian, Chinese, Japanese, India, and Brazil. Another serious proposal is by the Arab oil states.

At the Nov 12 2010 G-20 meeting, the major topic was replacing the US$. The participants were motivated by the US QE2. QE2 is monetizing the debt, which the US pledged to the world that it would not do. Monetizing the debt devalues the US$, which reduces the purchasing value of the debt payments, which is stealing from the lender (and from US citizens in general). Brazil's finance minister said: "We are in the midst of a currency war, a general weakening of currency.......Now is the moment to think about a transition where there would be new currencies that would be the parameters for international trade".

The US as the de facto world reserve increases demand for the US$. This makes the US$ the medium of exchange in international trade. For example, oil trades have until recently been handled exclusively in US$, countries that buy and sell oil must convert their national currencies to US$. The conversion also involves a transaction fee at each end, which may be small at times, but gives the US a slight advantage since the US doesn't need to convert. The high demand for the US$ translates to lower interest rates for the US, as well as barganing power in trade negotiations.

The end result is that the US$ is losing its world reserve status. It may take 10 years for the transition to complete, but once it is, demand for the US$ will drop, the US will lose trade advantages, the interest rate the US pays will increase. All bad for the US.

You can find all of this information and much more on the internet.

[akvo]

20. more world currency explanation

I think perhaps an additional explanation on the world reserve curency status is in order.

Pretend Nation X wants to buy US$10B in oil, it needs to pay for it in US$ but it doesn't have any US$. The US needs to refinance its debt, so the US puts a Treasury note out for US$10B at 2% interest. Nation X doesn't want to invest in the US but it needs US$ to buy oil, so X buys the Treasury note. X pays for the oil by transferring the US note to the seller of the oil - the note itself is used as cash. X gets its US$ for the oil it wants, the US gets funding to finance more spending. The quality of the US bond is not a factor, the transaction is strictly motivated by the fact that the US$ is the world currency.

Nation X can buy the US$10B+2% from the US with an equivalent amount of its own currency, or some other nations currency it owns, or an equivalent value of goods and services. This gives the US an advantage in trade and negotiations.

Do a favor for the US (such as letting US military aircraft on a raid overfly your national airspace) and you get a special deal on the next US note you need. Or maybe the US wants you to buy grain from the US instead of Argentina, vote against a particular UN resolution regarding Israel, cooperate in intelligence gathering, open your internal (Japanese, for example) automobile market to US manufacturers. The list is limited only by imagination. Scratch the US back and you get preferential treatment, don't and life within the global community becomes a little - or a lot - more difficult.

Other nations don't like being manipulated, but nothing could be done in the past. Until the 1980's the choice was the USA or the USSR. In the late 1980's, it became the USA alone. Now with so many rising economic powers, the declining US$ and declining US absolute and relative economic power, there are options.

[JVS]

2. Something needs to be done to make sure that wages are kept up enough for this.

If young people are unable to find jobs after college and crushed by debt they will cooperate with plans to scrap SS.

[Booster]

4. We need for unions to become strong again.

[exelwood]

8. Obama should have never reduced the FICA contribution...

...the Republicans will try to extend and increase the FICA reduction until there is no more worker contribution which is a backdoor way of making SS an actual welfare program and subject to annual federal budget cuts. You think COLA cuts are a bitch? Wait until SS funding has to be fought over every single year.

[Fuddnik]

9. You expect Congress to raise taxes on themselves?

The poor dears can barely make ends meet as it is!

[Sirveri]

11. Technically, the same funding is still being received.

The payroll tax cut is being paid for out of the general fund, so the proper amount of money is still going into the program. However this is bad because it ties OASDI to the general fund.

Other than the retirement age raise, the fiscal commission had quite a few good ideas on how to fix any potential Social Security shortfall, as well as some real improvements to the system.

[indurancevile]

12. they're just cashing in ss debt. it doesn't tie it to the general fund anymore than it already was.

the financial commission had no good ideas & the problem it purported to fix is fake.

[Sirveri]

13. nothing at all huh, I take it you never actually READ the report.

And yes, it IS tied to the general fund, the short fall in funding is coming from the general fund, they're not cashing out the fed notes that they have.

Try actually reading the report though, since it advised creating a glass floor (aka a minimum benefit amount) for beneficiaries, and a way to get full benefits at 62 instead of a 50% cut. But apparently those and raising the Social Security income cap are all bad ideas according to you.