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Guest Post: How To Fix Social Security: A 4-Point Plan That Faces The Brutal Realities
Submitted by Charles Hugh Smith from Of Two Minds
How To Fix Social Security: A 4-Point Plan That Faces the Brutal Realities
Social Security is unraveling, and aligning its outlays to its income requires a new understanding of tough truths.
Social Security is imploding before our very eyes. As I laid out in The Fraud at the Heart of Social Security (January 17, 2011) and To Fix Social Security, First Ask Why It Is Deep in the Red (January 18, 2011), the system is already running massive deficits in 2010 that weren't supposed to occur until 2018, and the deficit in 2011 is transpiring 15 years earlier than the seers at the Social Security Administration (SSA) anticipated.
There is no mystery why the system's revenues are collapsing: 9 million jobs have vanished, and millions more have slipped from full-time to part-time or temporary. The Social Security payroll tax (including the Medicare sliver) is 15.3% of payroll. So as total payroll plummets, so does Social Security's revenue.
Roughly 8% of all private-sector jobs have vanished for good, despite what various cheerleaders project. Another 8% have slipped to "part-time for economic reasons," and another 15% are self-employed/free-lance/contract workers who have seen their incomes decline by 5%.
All of these factors have reduced taxable wages and income, cutting Social Security's tax receipts by $66 billion just from 2009 to 2010. As noted yesterday, The End of (Paying) Work (January 21, 2009) is not cyclical, it is structural, and the decline is far from playing out. SSA payroll tax receipts will not recover to 2009 levels, they will continue to decline.
Meanwhile, an aging populace is flooding into the system at an unprecedented rate. As noted yesterday, millions of financially crimped Boomers are applying for Social Security benefits the moment they qualify at 62 years of age rather than wait another 5 years for their full benefits. Many can't afford the luxury of waiting 5 years, while others anticipate the system's insolvency and are prudently extracting something before it runs aground.
Recall that the "bulge" of the Baby Boom will be entering the system within the next eight years: over 3 million new beneficiaries a year. Live births were 3.4 million in 1946 and quickly ramped up to over 4 million; the last year of the Boom generation (not an exact science--the Baby Boom is generally divided into two cohorts) in 1964 saw over 4 million births.
The first Boomers qualified for Social Security in 2008, so roughly 75 million beneficiaries will enter Social Security between 2008 and 2026. (Of course current beneficiaries leave the system when they die, but the absolute number will rise as new additions exceed departures.)
As noted in the two previous entries, the Social Security "Trust Fund" is an accounting illusion. The "safe, guaranteed" non-marketable bonds are merely markers for actual Treasury bonds which must be sold, and interest must be paid on. Social Security is as totally dependent on Federal borrowing as the Pentagon or any other program.
The brutal truth is the system is facing flat or declining revenues while its vast army of beneficiaries will rise from an already monumental 53 million. That's significantly larger than the entire population of Spain (46.5 million) and will soon equal that of Italy (60 million) or Great Britain (62 million).
Social Security is entirely dependent on the Treasury's sale of new bonds for its own solvency. If interest rates spike and/or global buyers become wary of Treasury bonds, costs for borrowing will skyrocket, crowding out all other Federal spending.
Being dependent on Treasury borrowing, Social Security will be as impacted as any other program.
Somebody who's been "promised" benefits won't receive them. That much is obvious, so the question boils down to triaging who gets benefits and who doesn't.
Income disparity has been rising in the U.S. for decades. This reality has been sliced and diced here and elsewhere, and the basic truth is that it has some structural causes (globalization, etc.) but much of the disparity is the direct result of tax and legislative policies which favor the super-wealthy (who coincidentally also happen to be politically powerful). For example, Income Inequality on Course to Hit Record Levels Thanks to Tax Compromise.
Why Growth May Still Leave 95% of Americans Behind
Middle class squeeze: The deep roots of an economic and social transformation
Without getting distracted by endless and pointless debates over income disparity, let's stipulate that Social Security is the foundation of income security for working America. People qualify for Social Security by working and paying into the system. It provides a modest pension for all qualified workers and their dependents or survivors, and the disabled.
The surest way to minimize income disparity is to put Social Security at the top of the priority heap, and the people within the system who have no other pension at the top of the priority heap within Social Security.
I would hope that much is self-evident.
The counter-arguments against changing anything are plentiful: the system only has political support, we're told, because everyone gets their check, regardless of need. OK, go ahead and leave the system untouched. Then when the whole thing implodes, the neediest recipients will suffer more than those with other pension income.
Is that fair? Or just? Does that serve the nation better than recognizing income and wealth disparity are realities?
The notion of noblesse oblige needs to be restored to American culture. The cultural drift to self-absorption and limitless greed has poisoned the society to the point that we are told millionaires will stop investing in productive businesses and will move to Tortuga if they have to forego some consumption to pay additional taxes.
Noblesse Oblige is the sense that those who have gained or earned great wealth have an obligation to those below them on the financial ladder.
Here is my short prescription of how to adapt Social Security to reality, with the single goal of protecting the pension income of those who have no other retirement resources. Are any of these politically possible? No. But just because they cannot be done in the present doesn't mean that they shouldn't be done.
I am not including slowly raising the retirement age for two reasons: 1) it's basically a given and 2) it won't solve the revenue/outlay misalignment by itself. We need to make much more fundamental realignments:
1. Jettison the illusory "Trust Fund" and remove the SSA from the unified Federal budget. Social Security is a "pay as you go" system in which current workers' payroll taxes are distributed to current beneficiaries, with a surplus that accumlates to fund future shortfalls. Unfortunately, the surpluses accumulated over the past 27 years have already been squandered, and the Treasury will have to fund any shortfalls between Social Security outlays and income with 1) tax increases or 2) additional borrowing.
Will politicos ever let go of the fat income stream from Social Security? No--but they should.
2. Replenish the squandered surplus in two ways: eliminate the $106,000 cap on wages and impose a 5% Noblesse Oblige tax on all households with incomes (from any source) above $1 million. If you're pulling down $1 million annually, you're already paying a lot of taxes--but then your tax burden was lowered tremendously by the Bush-era cuts. You can afford a $50,000 Noblesse Oblige payment to Social Security, with the explicit understanding that the money is for those in the bottom tier who have no other pension.
Why should earnings above $106,000 be except from the 7.65% FICA tax? If you're making $156,000, please don't claim you can't afford to pay 7.65% on the last $50,000. Anyone claiming that means they don't want to forego some consumption they desire. Come on, the 7.65% on the $50,000 is a modest $3,825.
3. Reduce the benefits for everyone with another fixed-benefit pension. According to the SSA, the average benefit is about $1,100 per month. All beneficiaries with other fixed-benefit pensions will forfeit their Social Security above a total monthly gross pension/retirement income of $3,000 a month.
Again, the idea here is to recognize income disparity as a reality and to protect the most vulnerable citizens who have worked and paid into the system. The idea that "everyone who paid in should get their share" is gone, triaged out of existence.
The reality is that double-dippers and triple-dippers (those with military and/or civil-service pensions, for example) drawing $3,000 or more a month can survive without their Social Security check; the same cannot be said of those who have no pension other than Social Security. The whole idea here to protect those workers first. There simply won't be enough money to pay everyone, so those with pensions of $3,000 or more a month will not draw anything from the system; they will survive without it.
Those with private non-fixed pensions will be subject to the same limitation (above $3,000 a month, no Social Security), but with the caveat that should their private pension fall below $3,000/month, then they would be eligible for a modest SSA benefit.
This recongizes that IRAs and 401Ks are not guaranteed; annual income in such plans will vary with interest yields and investment returns. Again, the idea here is that Social Security is a backstop for those with no other pension resources.
4. Encourage people to work past 62 years of age, and encourage disabled citizens to earn whatever money they can. The key disparity in Social Security is demographic: the number of workers paying into the system is stagnant while the number of beneficiaries is rising.
The easist way to forestall collapse is to maintain the working populace. Yes, I am aware that enabling the over-62 populace to keep working means fewer jobs for younger people, but anything which keeps people as contributors rather than just as beneficiaries is a net positive.
Demographics are against a retirement system designed in the 1930s. People live longer and retire earlier now. No system that leans on two workers to pay for one retiree is sustainable. These trends have been described in depth in numerous books, for example:
Fewer: How the New Demography of Depopulation Will Shape Our Future
The Coming Generational Storm: What You Need to Know about America's Economic Future
As for the disabled, many disabled people could earn some money (doing computer work, for example) if the system didn't preclude them from earning any income.
The idea here is simple: stop punishing productivity and work. Encourage people to contribute to their own livelihood until they can no longer do so.
The heavily promoted idea that the Social Security system is "sound until 2037" is false. We can stand by and let the system implode, hitting the most vulnerable the hardest, or we can do some adult-level triage and recognize that those who will do OK without tapping Social Security will have to relinquish their claim on the system for the good of those workers beneath them on the financial ladder.
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@ All In a fiat currency system, social security (etc.) can never "go broke" (bear with me here. don't jump down my throat just yet) The Ben Bernank COULD, from a purely operational and accounting perspective, add a trillion quatloos---errr, dollars---to the social security reserve account at the Fed. All he would have to do is type those numbers into computers. That's it. NOW...what we are quickly discovering is that the disconnect for people like The Bernank is from REALITY. And when I say reality, I mean the ramifications and repercussions of such actions. YES, operationally speaking, Bernanke could add a quadrillion dollars to the coffers of the ANY reserve account he wanted to. But the CONSEQUENCES of this are slowly emerging...and the world is in a whole heap of trouble because of it: http://www.youtube.com/watch?v=fbMq1WWUXc8
Yes. And on our current course the most likely direction is more and more bailouts via monetization... right into a currency crisis. Even it were marginally effective in the short term, the hot money would continue to blow out the cost of living via commodity pricing. So, while the Fed could argue that there is no inflation or too little inflation we could witness those who depend on the system getting colder and hungrier by the day. The squeeze is already on... until something breaks. By then, the financial side of this crisis will have been shifted squarely onto the politicians. That process is already under way.
@ Centerline Totally agree. I would even go a step further. Once the "herd" starts stampeding---in this particular case, the herd of global citizens who are hungry and homeless---chaos increases exponentially. This is not a linear deal. It is logarithmic.
Oh, almost forgot:
5. Pay the fucking money you "borrowed" back, WITHOUT RAISING TAXES OR ELIGIBILITY REQUIREMENTS. That's right ... if it means jettisoning 90% of the defense budget, 100% of Homeland Security, and 100% of Medicare part D, so be it. We can talk about toughening eligibility once the stolen funds have been restored.
"The notion of noblesse oblige needs to be restored to American culture."
Amen to that. I'd say to a large chunk of the Western culture generally. Lead by example, integrity and honour.
DavidC
The notion of noblesse oblige was one of personal responsibility. Any twit can champion it when they rely on the government to take from one and give to another. Nothing prevents any person in this country from reaching into their own pockets. Don't try to justify reaching into someone else's in the name of altruism.
Michelle,
I'm not sure of your point. Was it a pop at me? I certainly don't advocate reaching into someone else's pockets in the name of altruism!
DavidC
More toward the author of the post. He takes the concepts of noblesse oblige and forced "charity" and uses the former to justify the latter.
Issues like SS are pretty high on the list of what has my attention. Forget about all the mircoeconomic smokescreen bullshit (unless trading it of course!). The big picture questions say it all. There is no way that in the current scheme the obligations of systems like SS can be met. In the wake of central bank driven currency devaluation, life is going to get harder and harder for anyone who is reliant the system.
centerline
There is no way that in the current scheme the obligations of systems like SS can be met.
100% agreed.
Now for the answer, its MANDATORY that the Gvt (you know the ones who stole it), make it right.
Not off the backs of the ZH members, or any one else that put in that 35-40yrs, by the book.
I SWEAR to you, I will be dead on the Capitol steps before this theft is allowed to stand.
Along with several milion others.
(>;*
I am absolutely not in favor of eliminating the $106,500 cap or any other policy or change that fundamentally alters the purpose of SS, which was billed as a way for everyone to save for their retirement. Everyone is treated (roughly) equally. It's the last social program like that. Eliminate that fundamental element of SS and you completely 100% lose all of my support and the support of a lot of people. Raise taxes on that initial cap if you must, raise the retirement age if you must, but under no circumstance change the concept of SS as a way for YOU to save for YOUR retirement. Otherwise, it's just another fucking welfare program. The idea of eliminating it for people who "don't need it" is insane and ridiculous. Why? Just because DC politicians have plundered the SS "trust fund" for decades? Absolutely not.
How about we stop debasing our currency and raise interest rates so the cash people put aside for savings is actually worth something when they pull it out to use 50 years down the road?
Absolutely.
Would lead to immediate implosion of the current system. Not that we are going to avoid the implosion anyhow... just saying that you would be hard pressed to find anyone in politics or who is dependant on the system that is going to ask to crash it right here and now. The real tragedy of all of this aside from some grand unforeseen event, our course is plotted, laid-in and locked.
need to start paying attention, miss.
Money only makes more money in a ponzi.
Your notion that higher rates will just magically solve the problem and everyone can become wealthy by the brilliance of interest compounding is absurd. Who will PAY all this interest?
You can't get something from nothing.
Who will PAY all this interest?
Dont want any interest, just what I PAID IN.
Lump sum, cash, and I walk.(that is the only fair way to do it.)
THe reason they dole it out mponthly is because if you die, and only get 10yrs worth befpore passing, the other 20-30yrs, is stolen.
and I want a pony...looks like both of us are gonna be disappointed
Phase it out. Pay out the elderly, cut benefits to those between 40 and 50, cut benefits greatly to those 35 to 40, and then cut a check to all 18-35's for half of what they put in thus far. Call it a day.
Sounds good to me.
Then, we can follow it all up, with the mass executions of all those in future years unfortunate enough to reach 60 years of age.
An annual round-up & slaughter of the 'elderly' - the 'useless eaters' - would be quite the remedy to our economic problems.
Most importantly, TDoS, the banker-gangsters can keep more of their money this way!!
down,
WHY?
People would know the rules, and the palying field.
This is Square, your resposible for your own welfare/care till you die.
If people blow it, do not save, screw them.
Not necessarily "screw them." What it means is that they have to earn their charity. Were they contributing members of their community who were devastated by some tragedy? Or were they shiftless and careless and expectant that someone else would always provide?
I think any of us can point to people in our communities who exemplify both ends of the spectrum. Our welfare state has brought us to the point where the person who works hard just to get by and the person who expects a handout are seen as equally deserving of assistance. You don't even have to try anymore, at least in the eyes of the government.
Around Christmas, many communities have fundraising drives that spotlight locals who could use a hand. The paper around here does write-ups on different families or individuals. Donations are accepted and distributed, but the interesting part of the program is that donors are able to specify who they want their donations to go to.
I think this is why statists have such an issue with reliance on private charity. If people are making the choice to help others, they get to choose who to help. Inevitably, this leads to the familiar cry of 'it's not fair.' In the private sphere, even charity is earned. The entitlement society says this is unacceptable.
Shut social security down. NOW.
Refund everyone. If you paid in X pieces of green toilet paper, and withdrew Y pieces of paper, then you deserve X-Y pieces of paper.
If the money needs to be printed, this will of course cause inflation.
Damn right: and public immolation of all people who drain from the real innovators -- you know, those who create triple-leveraged ETFs.
Yep. I'll take mine back and buy something real. Won't happen though--end game is they'll inflate away the real value.
Dr Acula,'Oh no it wont.
It just adds ZEROS, and Burnin Bernak can just stop that ANY ole time he wants, remember?.
If he can do it for OTHER SHITE, certainly the SS system is AY least as important.
They should know it for a fact, I cannot think of a quicker way to turn the USA into TUNISIA X 1T.
Okay, so you fix SS. What about Medicare, Prescription drugs, and the Debt?
Shut them all down.
Ditch the debt. Contracts are not legitimate when they enter third party Americans and even the unborn into slavery.
Nor are they legit when the other party - some bailed out piece of shit - has traded a pile of diarrhea to the Fed in exchange.
Time to take away the Fed's discount window from those banker-gangsters who are subjecting all of us to servitude.
At least until their CEOs all kill themselves on cable.
Rodent,
One at a time.
Scrip drugs are easy, buy them from Canada.
I stay pissed (have for 25yrs), that the US Pharmas screw the US citizens royally.
The EXACT same Drug in Canada, in the US is 10x or more the cost there.
Big Pharma has been going apeshit over Americans going to Mexico, and Canada, every 6mos for refills( same meds, 10-15% of the price here, and all they need is a Scrip).
WHY??,We (you and me) pay for all the R & D costs.And the rest of the world gets it for near free.
Back in the late 80's I went to Cancun,as usual visitors sometimes get stomach probs.
Having been prone to them before, I had several times got a scrip for Tagamet(prescrip only then)from my Dr.,cost me approx $35.00, plus Dr visit.
I go into a local pharmacia, and ask them for something to help my stomach issues...........
They showed me what they had.
You guessed it, Tagamet(same box,dose, etc), NO Scrip needed, and my cost was $2.50 American.
You do the Math.
"Why should earnings above $106,000 be except from the 7.65% FICA tax? If you're making $156,000, please don't claim you can't afford to pay 7.65% on the last $50,000. Anyone claiming that means they don't want to forego some consumption they desire. Come on, the 7.65% on the $50,000 is a modest $3,825."
This is an oversimplification that has no basis in reality. After accounting for payroll taxes, 401k contributions, mortgage, real estate taxes, and car payments, etc etc, $3,825 could be quite material for someone earning $156,000 or even $256,000.
If I paid into the system with a promise to get something out when I retired, why should I be penalized for being successful and/or smart by saving for retirement?
While some of Mr. Smith's plan may help to fix the SS problem, so would confiscating 100% of Warren Buffett's, Bill Gate's, and Carlos Slim's wealth.
By the way, that's my plan for fixing the Soc Sec problem.
First off, fuck you. Second off, fuck you too. Third, let's start with an honest discussion about what pols have been treating it like for the past 50 years (an entitlement) versus what the law states that it is (a paygo fund). How about scratching it and starting over? Your suggestions are at best thoughtful but would be more convoluted in their implementation than trying to figure out accountability at the USPS. What's the matter with simply running out of money? Why isn't "we don't have the money" an option? Finally, fuck you and your nobless oblige.
First off, fuck you. Second off, fuck you too. Third, let's start with an honest discussion about what pols have been treating it like for the past 50 years (an entitlement) versus what the law states that it is (a paygo fund). How about scratching it and starting over? Your suggestions are at best thoughtful but would be more convoluted in their implementation than trying to figure out accountability at the USPS. What's the matter with simply running out of money? Why isn't "we don't have the money" an option? Finally, fuck you and your nobless oblige.
Actually, since the middle and lower classes get the most benefit from SS, shouldn't they be the ones funding it?
I think SS should be optional. Perhaps they'll have to lower the benefits if the fiscally prudent people opt out (which they undoubtably would) but so be it. Unless you want socialism...in that case where's my national health care, 6 weeks vacation a year and 30 hour work week, eh?
Since the banker-gangsters REAP ALL of the BENEFITS from Uncle Sam's annual allowance of $800b in 'worthless' paper spent on killing black and brown people, how about they go and fight?
Means testing, bitchez.
Listen to the latest Rob Arnott interview on King World News, he argues that the US needs to default on the obligations that will create the least geopolitical instability. He says SocSec needs full-on means testing, (I paraphrase) "my generation [boomers] made big promises to ourselves and we neglected to pre-fund it. Our kids and grandkids should refuse to pay for that. They should say, if you have savings, you get no Social Security, if you have stocks and bonds, use those first, then we'll talk."
This is really the only way, unless of course you think that not paying the Chinese their 2 trillion dollars if/when they cash in their treasuries is less dangerous than pissing off a bunch of rich old Americans.
It's hard to 'pre-fund' anything when criminal enterprises and banker-gangsters are looting everyone, all the time.
Such a suggestion is silly, and it ignores the reality of the past 40 years.
If the retirees have assets then it stands to reason they weren't "looted". They should retire on the strength of those assets and not be sucking on the gov't teet. Australia does it, top 1/3 wealthy get no national pension. Means test it, great idea.
So you are saying that it is OK for me to break into your house and steal your stuff, so long as I leave you with at least some assets?
Awesome! I'll be right over.
Dope.
No, you missed the point. Ideally SocSec shouldn't exist, I agree, but in lieu of that, we could turn it into a bare-bones safety net instead of a behemoth entitlement that sucks trillions from our pockets.
.
First off, fuck you. Second off, fuck you too. Third, let's start with an honest discussion about what pols have been treating it like for the past 50 years (an entitlement) versus what the law states that it is (a paygo fund). How about scratching it and starting over? Your suggestions are at best thoughtful but would be more convoluted in their implementation than trying to figure out accountability at the USPS. What's the matter with simply running out of money? Why isn't "we don't have the money" an option? Finally, fuck you and your nobless oblige.
yeah, LOL@ the notion that the aristocracy has any broader obligation than their own self-aggrandizement. I mean, the nerve of the proles and serfs actually expecting anything
OH YEAH!
They're gonna screw people out of their social security but we're gonna have hyperinflation bitchez!
HAHAHAHAHAHAHAHAHA!!
You can't have it both ways. Pick one or the other.
The notion that "noblesse oblige needs to be restored" is laughable as long as government has a monopoly on charity, and confiscates private money to provide charity.
Once once one takes money with a gun, like a robber, you sure don't feel like offering the robber an extra dollar. Out of charity.
Hyperinflation should be a nice solution to the social security problem. Everyone will still get their checks of course, it just won't buy anything in 5-7 years.
Mission Accomplished!
I can see it now:
$15 cans of Coca-Cola
$35 dozen eggs
$18 bag of Dorito's
$30 beef jerkey
If only these Federal Reserve Notes were edible!
Hungry billionaires we will be!
#3 needs to happen in a bad way. Lot of little old ladies out their sitting on huge stacks of cash, pulling down part of their late husband's pension, and also pulling in SS checks, paying $10k a month on rent.... and they retired in the 70's.
#2 will directly obliterate quite a few jobs in small businesses - I know those who are pulling in just over a million a year who need and want to hire everyone they can get their hands on, but cannot - an extra 50k in taxes means fewer workers and/or lower pay.
#4 is not going to happen. Not in a million years... The boomers are too fixated on the "retire, live on pension/SS check for 40 years" model. They see it as a God given right, and they're not going to let go of that for anything.
It doesn't matter if the "SS is fine until 2037" meme is correct or not - it's been released to the wild. That they picked 2037 was not a coincidence; that number gave the upcoming crop of retirees hope that they could ride the gravy train as long as needed. Those who are retired, and especially those about to retire, are going to latch on to whatever number fits what they want to hear. You will not be able to convince them that the money isn't there. Self-delusion is powerful, and retirement is the event their entire world-view is based around.
It's funny, people like to call my own (recent) generation lazy... it's not that we're lazy, it's that we've always realized there will be no SS gravy train, and for most of us, no retirement. No reason to do the rat race if there isn't a finish line to cross.
Lots of small businesses are paying their minimum-wage workers at wage levels above the current cap, so that makes sense.
Good work.
Hard to convince people the money isn't there when we spend trillions to bail out our bankers, foreign bankers, GM, etc. etc.
Oh yeah, lets cut granny's $631 soc sec check, she eating fancy cat food anyway.
In other words, granny might have been thrilled to have been able to foist her parents and grandparents off on the state, but now that plan seems to have hit a snag...
This is what you get for trusting the government.
Isn't that the bargain reached in the 1930s: "you continue being wage slaves, serving the crorrupt capitalist class, and we'll let you live out your live with a modicum of security".
Now, ZeroHedge and the banker-gangsters want people to kill themselves once they become useless to their masters.
The capitalists get a free pass here, even though they've impoverished the population with their schemes and brigandage.
THEN FEED YOUR FUCKING GRANDMOTHER
So WHAT if each individual check is only $631, the system scaled up in its entirety DOES NOT WORK
The flourishing beneficence of capitalism feeds your grandmother, I thought. Otherwise, what's the point of an economic system built upon competition and struggle - to make us hate each other? (hmm...)
If I'm a capitalist, I'm out for me. Why should I worry about granny?
No time for sentiment - I have to get that paper...
then your children won't worry about you and you will die a horrible, twitching death.
Sounds good to me
Fourteen trillion twenty-eight billion three million five-hundred and sixty-one thousand four hundred and fifty-six dollars with sixty-nine cents.
That's how big our fucking problem is.
Reserve Notes bitchezzzz!
http://www.brillig.com/debt_clock/
Dine and dash
paid for by our children and grandchildren
http://en.wikipedia.org/wiki/Dine_and_dash
It's not difficult to create an actuarilly-sound retirement system, Many nations have them, and Chile and Singapore come to mind. Of course these systems require sound management and time to fulfill their obligations. All we have in the USA are Ponzi promises and pols counting on their ability to run faster than a mob of pissed-off elders with a rope.
It's not difficult to create an actuarilly-sound retirement system
It's hard to make it work when you keep stealing all the money, though.
Uh that would be more accurately characterized as borrowing with intent to force someone else to repay.
I can't pay nuthin' mister: http://thumbs.dreamstime.com/thumblarge_254/1207139967WYCUL3.jpg
WR Grace 2017 deficit trials -- Ridley Scott 1986
http://www.youtube.com/watch?v=AiBCRQL58_k&feature=related
It was important to roosevelt that this be an insurance and retirement plan and not a welfare program. If we drop the last pretenses that ss is not just another welfare program then the majority will eventually vote to do away with it. Why should the majority pay 15 percent of their income so that a minority of cheats and losers get something for nothing. It wont.work.to means test social security anyway because me and others are way ahead of the government. I will make sure i qualify for.old age welfare even with a five year lookback like with medicaid. Please dont turn social security into the playground for losers and cheats (like me and 30 million other smart people!) by means testing and turning it into welfare. Cut everyone 30 percent if you must....but we must maintain some semblance of an insurance and vested pension program or it will be dissolved by the majority who pay and get nothing while losers and smart estate planners like me cash in.
Well then, you answered your own question. Roosevelt started the benefit payments 3.5 years after the average life expectancy of a working male in 1933. Let's just scale that up to today. Payments kick in 3.5 years beyond average life expectancy. Problem solved. Thanks FDR!
Another leftist income equality for all / redistribution of wealth post -- shocking.
Same theme - successful/responsible folks owe the less productive/irresponsible folks.
Skip the relatively few sad personal tragedy cases, the vast majority of people saved nothing for retirement because they did not push themselves to the limits in school and/or in the workforce and then they consumed far beyond their means -- largely because they thought they were entitled to a house larger than 1,000 sq ft, going to restaurants and movies, having a cell phone, cable tv, two cars, a vacation, owning more than 3 pairs of shoes, etc etc. And now these folks are unhappy that the other taxpayers are not going to take care of them?? Reality is you have to save 10-20% of what you make so that you might not be a burden on others.
Turning SS into welfare for the elderly (= means tested benefits) is not the answer needed to get people out of the government dependency rut (understanding that is apparently the objective of many based on their policies and incentives).
Simple solution -- cut SS benefits 5% now across the board (sorry), no increases in SS benefits for the next 10 years and increase retirement age to 70-72 for those who are now under 55.
Those who feel they are under-taxed are always welcome to lead by example and send in more (and taking the tax deduction for such would be a little hypocritical and counter-productive).
Bob's comments, in sum:
Would be better if you responded to the specifics instead inane babble.
In your case I would respond --
1) corporations really do not "pay" taxes, they are just an intermediary who collects them from you and me and then sends them on to the government - ultimately you and I pay all corporate taxes.
2) Unclear about banker / welfare comment, but to the extent bankers are getting welfare from the government, you should change the people in government who allow such -- then the problem would be solved.
3) Many (most?) "grandmas" are already getting "sympathy" by virtue of getting SS benefits far beyond what they contributed into SS. Hopefully you (and your siblings) are willing to help your grandma and then she would not need to depend on government (strangers) for her subsistence. We all should be responsible for those in our own family (I know - foreign concept!).
Yup. I don't see the essentially socialist approach of the article being a worthy nor credible solution to the social security problem. As somebody said above, just pay the goddam money back into the system (redeem the bonds) and let 'er rip. Bad outcomes but at least it would be back at square one so some reasonable solutions could start.
Wait, that won't work. The politicians will be blinded by that HUGE reservoir of money just sitting there going to non-productive members of society.
I guess the whole discussion amounts to the proverbial rearranging of the deck chairs. What actually would work won't be done, and what could work won't be done.
I recommend that you read this (from today's Whiskey & Gunpowder):
Why Theft Is Never Right,
Even When the Government Does It
Yesterday was the morning of my 35th anniversary on the planet.
The well-wishing phone calls started early. I missed the first — from my younger sister, who is always the first to call on my birthday — and made a note to call her back later. I was awake enough to take the second call from my dad.
“I realized this morning that if it’s been 35 years since you were born,” he said, “then I must be a little older than 35. I’m really just calling to remind you that you’re getting old too. I need the company.”
Thirty-five is one of those milestone birthdays…the neat halfway point between the big three-oh and the bigger four-oh. In my case I got to look around and panic: I hadn’t gotten started on all those grown-up things you were supposed to start by 30 and have nearly completed by 40.
Grown-ups are usually on their second or third spawn by this age. They have cars and mortgages. I’d only recently got as far as making my own meals.
But at least I’d gotten exposed to enough good reading to understand that no one owed me anything, that I had to earn everything that I wanted. I feel more grown-up than most when it comes to lacking a sense of entitlement.
Not only am I not entitled to goods and services; I also have to earn the goodwill of those whose help I’d count on in case disaster struck and I hadn’t prepared sufficiently. I had to be a good son and a good brother…a good friend and a good neighbor.
Even if I had no loving relatives or concerned friends to rely on, however, I still wouldn’t demand the tax-born kindness of strangers. Any charity I would receive would have to be voluntarily given. And there should be enough shame involved to keep me from growing to rely on it forever.
This is not a popular sentiment these days. Every effort is made by the intelligentsia and the media to convince people of the opposite…
We are all children, they tell us. We need to be taken care of. And we are all owed something by someone else. That’s what governments are really for. They guide. They prohibit. They shuffle earned income to grasping hands. And they’re proud of it…
Paul Krugman, cheerleader of the state writes:
“One side of American politics considers the modern welfare state — a private-enterprise economy, but one in which society’s winners are taxed to pay for a social safety net — morally superior to the capitalism red in tooth and claw we had before the New Deal. It’s only right, this side believes, for the affluent to help the less fortunate.
“The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft. That’s what lies behind the modern right’s fondness for violent rhetoric: many activists on the right really do see taxes and regulation as tyrannical impositions on their liberty.
“There’s no middle ground between these views.”
Mr. Krugman probably doesn’t grasp the depth and irony of what he wrote. He’s completely right about that last part. There is no middle ground.
We are dealing with absolutes. Immovable objects. And Mr. Krugman is unquestionably on the side of evil.
Theft is wrong. No matter how you try to sanctify it, theft is a sin. Done as pervasively and systematically as it is under the state, it is slavery on a sliding scale. When some of the fruits of your labor are forcibly taken away, what else do you call it?
People like Mr. Krugman like to pretend that as long as it’s not all of the fruits of your labor being stolen…as long as it’s some “reasonable” part decided upon by the those elected to office by those who covet…then it’s just fine.
Democracy is, indeed, the worst kind of government. Unlike totalitarian communism — in which the state doesn’t pretend not to own everyone and their labor — democracy allows its duped cattle to think that they’re free.
A man who thinks he’s free will work harder than a man who knows he is a slave. That’s why the democratic “capitalism” (it’s been socialist since the Social Security Act and the income tax) of North America managed to outlast the outright slavery of the Soviet Union. The duped slaves here outproduced the very aware slaves over there.
But long-term quasi-slavery doesn’t work either. Transferring stolen lucre creates distortions that ultimately bring a civilization down. It creates disincentives among the producers while breeding helplessness among the net receivers. Democracy eventually taxes the spirit that creates wealth to the point of death.
More than my advancing age, what makes me so very tired is that great minds have spent lifetimes writing, persuading, and proving that transfer schemes are a horrible idea…yet it’s the lies and ignorance that thrive.
Von Mises…Rothbard…Hayek. Almost nobody knows who they are. The majority thinks ideas about honest money, honest toil, and refrain from theft and force are all quaint, antiquated notions.
This majority may not have heard of Keynes…they may not have actually read Hobbes…but they believe what those men had to say: We are murderous brutes who would be poor, short-lived and utterly lost…unless we elect some of our most ambitious brutes and give them power over our lives.
It’s not just the immorality and destruction of violence-backed wealth transfers, however…
It’s the notions about human nature and the necessity of governments. It’s how people refuse to grow up, how they want to entrust responsibilities to strong and wise leaders, who ultimately come from the most pandering and avaricious among us.
The majority thinks that without government, we’d tear each out each other’s throats. No food would be grown and nothing would get done by the Invisible Hand. You need a very visible hand holding a weapon and directing the flow of things.
“Only government can decide what money is…”
“Only government can give us roads and schools…”
“Only government can make us deal fairly with each other…”
Like an abusive parent or husband, government and its enablers sap our self-esteem and foster our dependence.
But it needn’t be so. Almost as if by magic, liberty works better. Government transfers aren’t just wrong; they’re far less efficient at accomplishing the good they are supposed to do. Immoral…and far less efficient to boot! In fact, given enough time, they turn to harm.
Mr. Krugman promises:
“In future columns, I will no doubt spend a lot of time pointing out the hypocrisy and logical fallacies of the ‘I earned it and I have the right to keep it’ crowd.”
We’ll be here too, Paul.
And we’ll keep telling anyone who’ll listen about how dangerous your earnest misconceptions and your proposed meddling are.
Regards,
Gary Gibson
Managing Editor, Whiskey & Gunpowder and Laissez Faire Books
P.S.: I’m not kidding about fighting Krugman and his ilk tooth and nail.
And despite what the lovers of big government would have you think, I am not trying to incite any violence with my “rhetoric”…
My “ammunition” is a wonderful and brief book called The Market for Liberty <http://clicks.whiskeyandgunpowder.com//t/AQ/AAPhpw/AAPsLg/AAMvJQ/AQ/AtwiJw/GXk1> by Morris and Linda Tannehill.
It’s one of the most succinct and important books on liberty I’ve had the pleasure to read. It’s a boon to freedom and one of the most powerful tracts for liberty lovers that I’ve yet seen.
It answers some of the harder questions like…
* Why all the central planners are disastrously wrong about human nature (P. 6)
* Why no one — neither through divine right nor the ballot box — can make decisions for another (P. 7)
* Why democracy is immoral (P. 34 and 35)
* Why even “a little bit of government” so often gets to be too much (P. 32)
* How property comes into existence and how property ownership guarantees smart, sustainable use (P. 55 and 56)
* How free markets would abolish war (P. 136).
These are some things that many liberty lovers may not be too clear on themselves.
This book is one of my very favorites. It’s the book I’d give to the benighted, to the true believers in government, to get them out of the rut of mental dependency on the state…to show them that society would not fall apart if liberty were to gain ground against the slavery of government coercion…
Stop calling the people "peasants", "useless eaters", "slaves", etc. You only insult yourself, family and friends since everyone in this country comes from so called "peasants". One day you could end up one too -- "flying high in April, shot down in May" that's the American way. And none of this nonsense that Americans are stupid, asians are smarter, etc. China was a land of communist peasants only 40 years ago and they have copied EVERY American industry built by Americans. Even the NYT reported that the Chinese don't want their local Chinese architects building their villas/mcmansions. So the Chinese drove around each high income area in the country, noted the homes they liked and contacted the American architects to move to China and build all of them. They're real creative.
Social security doesn't need fixing. They want your security in their hands and they want it known that you security is not relevant to their interests. Get the message already. Secure people aren't malleable and easily manipulated.
Or let the ponzi die and be done with it.
Instead of your raising taxes on some which won't be enough (again) and will soon be applied to us all to keep the ponzi alive.
Instead of your reducing benefits for some which won't be enough (again) and will soon be applied to us all to keep the ponzi alive.
This is a surprisingly open-minded solution. I expected something much more draconian on ZH, but this is a solution that I can endorse.
Yeah, so open-minded that somebody's brain fell out.
What I can or can't "afford" is none of your business, Mr. Smith, much less the business of the federal government, or broke boomers who got stoned instead of saving for their own retirement.
I'm done kowtowing to the notion that need trumps property rights. It doesn't, and claiming so is the philosophy of mooching and death. Get off my lawn.
Bingo
Privatize the system, Milton Friedman was right.
if you don't you'll have the same problem again.
Government schemes are all fraudulent and subject to theft.
Milton Friedman evidently never studied the history of capital accumulation.
Dumbass didn't understand economics for shit, which in part explains why were in just a fix today.
Um, no. Milton Friedman is responsible for payroll deduction. It was his idea.
Friedman and the idiotic Chicago School are the *acceptable* "free market" school of economics within the mainstream.
And keep the money creation and regulation privitized too. That's worked well so far.
Just count the number of regulations on the financial sector. Except for nuclear energy, it's the *most* regulated industry in the world. The only regulation it needs is this: when you make bad decisions, you fail.
Idea #6. Start telling people they better buy some of the 42 million Silver Eagles per year the government is generously minting for us because if they don't they will be living IN A VAN.....DOWN BY THE RIVER!
Capitalist schemes universally result in plunder and genocide: 100% of the time.
Social Security is more of a SOCIALIST scheme, isn't it?
Ok, so after reading your several posts against the quasi Capitalist system we all reside under, I want to know specifically which system makes sense to you? Looking at social inequality, I do not see China as a leader in social security for its elderly? In fact China is looking down the barrel of a gun in dealing with it aging population. The difference here is most Chinese anticipate, and try to supplement for earlier in life, knowing the state will not be able to support them in later life. How is this different then many of the suggestions presented you utterly disdain? Why should people expect that the government is going to provide for them totally in their dwindling years when even quasi Communists don't expect this treatment from their government?
Random thoughts...
When Obama care gets fully implemented most medicare/ SS recipients will die 10 years sooner so that will solve a lot of the problem.
The remainder can probably be supported by the Soc Sec receipts from illegals that are flooding across the border taking all the hard jobs that could/would have been done in the past by the current welfare class back when honest work was considered virtue and people were actually embarrassed to be on the dole.
A 10% excise tax on foreign bound Western Union payments to offset medicaid emergency room charges would also be a plus. Of course, I realize that since we don't really have an illegal immigrant problem per the Feds this might not be a real windfall.
As for those of us that paid the max into the system for the last 40 years and actually had the chutzpah to plan our middle class retirement assuming we would get paid SS in addition to our pension, perhaps we could just settle up with a one time return of all $ paid into our individual accounts? Hell, I'll even take mine back without accrued interest and rounded off to the nearest hundrend k. Let's call it $300,000 even, ok? Let me be the first boomer to volunteeer for the individual buyout option!
We can call it my "1 point" plan if you like...the "1 point" being that before it was stolen by the govt, it was my money.
Pound sand, all you altruistic, elitist bastards.
Sadly, your random thoughts are actually the plan of the political class, with the exception perhaps of the excise tax on Western Union moneygrams (or giving you your SS contributions back, of course).
300k? Are you fkin joking?
What's the SS cap now, dude...what's the %? That x2 is your MAXIMUM possible yearly contribution and that amount is the highest it's been in history.
Great that you're proposing solutions without the vaguest understanding of how much you've actually paid in.
add in employer match and round up to the nearest 100k does = $300k.
Thats a lot of money down a rathole...
As a 60 year old that paid into something all my working life for the past 40+ years, how about at least giving me back what I paid in?
Having worked for a company that went bankrupt (Nortel) in 2009 and therefore losing big on pension promises plus no severence etc etc and
losing all home equity AND 40% of 401K investments what do you think?...that 60 year olds can start over? Would that we could.
Linda Amick worked for a big telecom firm for 24 years, climbing the ranks from lowly systems analyst making $14,000 a year to senior management.
"It was really a great place to work," Amick told the Huffington Post. She looked forward to a comfortable retirement on a few acres in a small town 50 miles from Atlanta, Georgia.
So much for that: Nortel Networks filed for bankruptcy protection in the U.S. and Canada in January, eliminating Amick's job.
Now, stuck in a home she bought on that small acreage in Maysville (pop. 1,247) just one week before the bankruptcy filing, Amick is pondering revenge.
"If I don't get rid of [this house], I don't want to stay here anyway, so they're going to ruin my credit," she said. "So what? I'll never be able to own a home again anyway. Honestly, I'm so angry, if I don't sell this house -- and let me tell you, it's been on the market six months for far less than I paid for it and not one person has looked at it -- I'm very much contemplating [defaulting on the mortgage], hopefully contributing to the demise of Wells Fargo."
Nortel's bankruptcy reminded Amick of last fall's wildly unpopular Wall Street bailout.
"Lemme tell you how big of a ripoff it was," said Amick, a 58-year-old divorced mother of two. "They went into bankruptcy in January and they have been paying quarterly bonuses to the executives."
In March, bankruptcy judges in the U.S. and Canada approved Nortel's plan to pay as much as $7.3 million to eight executives while the firm is in bankruptcy. Company attorney James Bromley told Bloomberg News that management needs that kind of compensation "because of the high level of expertise for these individuals."
An outcome that politically may have sounded correct at one time would be; pay SS benefits out in the fund holdings when pay as you go turns negative.
This means pay SS benefits out as instruments of debt. So the SS mailing to the retirery, would be a bond which has to be cashed (redeemed) from the US Treasury. But upon closer inspection you realize that the account upon which it is drawn is your bank account. In USDs preferably. It would save a lot of money in overhead (paperwork) if you just pay yourself. Thanks.
The point is, that we talk about the reduction in SS benefits. When the system contains no benefits only debt. So now going forward the average retirery will pay twice for a benefit that will ultimately be collected in ever more debased dollars, receiving less that PAR relative to the first installment. And it gets worse. We can see in real time the effects of monetary inflation as it creeps into price inflation (the normal delayed effect), reducing the ability of the tax base (money into the system from FICA) to maintain real worth (buying power) to the SS recipient.
----------
The idea that you can support any benefit system through uncontrolled debt is so ill conceived that it could only come from the US demented political class. What can congress do? Not pay. There is no money other than the claim on tax on labor, which is being debased. It would be better for the states (if they were not also politically union corrupt) to opt out of SS, Medicare, and Medicaid. That is, keep all FICA tax revenue at the state level and then impose state control over drug pricing and medical services (no insurance middleman). What ever one may say about my entitlement ideas or others, is that you must be able to pay for it, or it will not, get this.... be paid for.
Mark Beck
How many ways are there to pretend that these "borrowed" funds are not a Treasury debt? What a reprehensible fucking hustle!
I don't care if it was written on a fucking cocktail napkin. Default on some other debts first, bitches! This is no different from the situation in Ireland or elsewhere.
Can we just fucking get rid of social security already? If you are a working citizen relying on social security to hedge your nest egg, you deserve to get fucked out of money that was never really going to be yours in the first place.
Just put the fucking money in your own bank account. I wish to GOD I could do that instead of put it into a pool that I can play with in another 45 years.
Fuck social security, fuck medicaid, fuck welfare, fuck all of this bull shit that non-producing lazy asses get to live off of. It will run out eventually and it will leave all of the jackasses who think they're entitled to it on the street. I hate paying medicaid and social security on my paychecks but I have no choice. I sure as fuck am not looking at it with a smile though thinking of all the fixed-income payments I'm going to get and then be in the negative considering how badly I'll get raped by inflation if I even get social security by the time I retire.
I'm just going to BTFD and acquire hard assets. Sounds like "real security" fuck the social part.
Did you know that you had 82% of the fucks on the page?
Well that is until I said fuck a couple of times now you are down to 69%.
Things move fast hard to keep up.
Talk about socialist equalization...boy is this plan nuts. First it would encourage companies that now have plans to eliminate them. Second it equalizes SS benefits at the expense of those who were more productive and earned more during their lifetime (this would be especially egregious if companies decided to eliminate their plans).
I get it. From each acording to his ability. To each acording to his needs.
Has a nice ring. What we gonna call it?
I'd rather see the system go bust and let everyone take care of their own. This whole idea of what's 'fair' is ridiculous. Why should people who spent their discretionary income on flat screens, trips to Vegas, and whatnot be rewarded for their foolishness, while folks who invested, sought employers with pensions, and put time and money into education get punished?
I have no pity for those who spent all of their income and didn't bother to plan for retirement. I have foregone many pleasures, and saved 20% of my income for years; there is no reason that people like me, who already pay more than 70% of the tax burden in this country, should be punished further in some perverted sense of 'fairness'. Social security was originally sold with the promise that it would never be a pension system. What would be fair is to go back to that, and let the spendthifts suffer the consequences of their own inaction.
We have proven, yet again, that government creates no goods and provides no services. SS was a ponzi scheme from the beginning, it just took a little longer to blow up than most. We cannot put the government in charge of anything worthwhile, without having it degraded into uselessness, or turned from an asset into a liability.
Old age and retirement savings: SS
Old age and medical care: Medicaid
Savings for a rainy day: Welfare, UE and food stamps
Medical care in general: ObamaCare
Private charity: Medicare, among others
Every example of government intervention is a demonstration of why government shouldn't be involved, in any way whatsoever. Sorry, Mr. Smith, all you've done is demonstrate another government failure that should be shut down and NOT REPLACED, as soon as possible.
Statists never show how their way is actually better than private enterprise - they just assume it is, and go on from there, making asses out of you and me.
In other, completely fucking meaningless intellectual jerk-off news, a 13-year-old boy who's studied economics since he was six has discovered a way to control Medicare. In short, he intends to tell voters they can't borrow against their grandchildren's income anymore and they should pay for their own shit.
CHS and the 13 year old are no different in their egotism, nor the likelihood that politicians give a flying fuck at a rolling doughnut what they think.
Anyone trying to "save" Social Security at this point has an immediate loss of credibility with me.
Soylent Green. Let's hope ole granny is fit to eat and tastes good on the dinner table. That's what us boomers are going to be eating when we retire.
The proposed wealth redistribution plan sucks. Noblesse oblige my ass. Let the non-productive leeches on society burn in hell. The grasshoppers are bleeding the ants to death.
Meanwhile, the liberals in Washington have become the fat pigs of Orwell's Animal Farm. They can all eat shit and die.
Did I make myself clear?
All the folks wanting to cut or abandon social security have a problem. Old people vote and they have plenty of time to agititate. Old folks will always use the tools of democracy to defend their benefits. In order to stop them you'll have to remove the last remaining vestiges of democracy in this country.
Which is why SS will bankrupt the U.S. of A., which, as the premiere instrument of class warfare, it was designed to do.
Oh, I forgot. Fuck poor people! There have always been poor people and there will always be poor people. Some people are just meant to be poor. Even if everyone made a billion dollars a year, the fucking government would adjust the poverty level to be anyone making less than $200M a year.
No, fuck stupid people. :D
pensions are just for old people who cant stand to consider themselves on social security
deal with it!
What....no mention that abortion undermined the big ponzi scheme? Politically correct til our end it seems.
The brutal reality of Social Security is that it was doomed to fail from the beginning. It was only a matter of time. It'll be fun watching it go down the tubes.