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Obama in SOTU - Means Test SS?
Next week we get the State of the Union address. The question, “Is there anything that might come from the speech that will impact the markets? The economy? Maybe. One area that I think we may get a recommendation from the President is a means tax on Social Security benefits.
That is a pretty bold call by me. Should the President propose this
(and it is enacted) it does have significant implications. I have no
line into the President’s thinking. I come to this conclusion looking at
a few odds and ends.
-A friend attended an Ed Hyman ISI confab recently. He showed me a copy
of the slides used in the presentation. This stuff is private so I won’t
use Mr. Hyman’s graphs. But the handwritten notes from my friend are
interesting:
Notice the comments about SS and means testing. Let’s just say that Ed is part of the inner circle. (The Obama/Bernanke thoughts are also interesting)
-Christine Romer did an Op Ed for the NYT on January 15. Her words:
The Deficit Commission proposed thoughtful ways to slow the growth of Social Security.
One of those "thoughtful" ideas was a MT.
The President should ensure that spending cuts not fall on the disadvantaged.
A MT would do that.
The only realistic way to close the gap is by raising revenue. Some of it can and should come from higher taxes on the rich.
A MT would do that too. Ms. Romer is ex Administration. I think she is still talking their book.
- Where would the opposition come from? Republicans? On Jan. 5 influential Republican Governor, Mitch Daniels (Ind.) commented:
I always say, “Why do we send a pension check to Warren Buffett?”…
It comes down to the House on this. So where is Speaker John Boehner on MT?
Big changes are needed for Social Security, including reducing or ending benefits for retirees with "substantial" other income.
We shall see if all this apparent support stands. I don't really believe in love fests in D.C.
Speaking of love fests don't assume that this would be a slam dunk.
There are many who believe that SS is sacrosanct. Sen. Harry Reid had
this to say on Meet the Press last week. Surprised?
MR. GREGORY: Means testing? Raising the retirement age?
SEN. REID: ...don't--I'm...
MR. GREGORY: Do you agree with either of those?
SEN.
REID: I'm not going to go to any of those back-door methods to whack
Social Security recipients. I'm not going to do that.
Politics does make for some very odd bedfellows....
-Zero Hedge had an article a month ago regarding a comment by political blogger Robert Kutter. From the POLITICO.
The
second part, now being teed up by the White House and key Senate
Democrats, is a scheme for the president to embrace much of the
Bowles-Simpson plan — including cuts in Social Security. This is to be unveiled, according to well-placed sources, in the president’s State of the Union address.
Robert craps on the idea of cuts in SS as it would hurt Obama’s base. Not the case at all.
A means test hits rich old people. That’s not O’s base. It’s a very
small percent of the population. Make what you will of this.
-A SS means test is a legitimate option. I wrote about it back in July. Many others have as well. It will “sell” to a broad spectrum of the population. "Tax the rich" always sounds good. The President will have at his side Bill Gates and Warren Buffet (both getting SS checks). They will say that it’s the “right thing to do”. (they already have)
I am looking forward to see how this shakes out. Possible results?
Shrink the size of government? (Yup). Reduce the rate of growth of expenditures? (What last November was about) Stabilize SS without cutting benefits for most people? (Hard to say no.) A means test could allow for a permanent cut is SS taxes (ala 2011). (Who could say no to that!)
This is a very big step toward socialism. It would also be the first of many steps of unwinding SS. A means tax would undermine long-term support for the program. (Note: this issue could be blunted by giving Gates and Buffett a tax credit on federal estate taxes for what they lose in benefits).
Say this should happen. How do the markets react? Initially, it might be perceived as a positive. If the headline were: US Gets Serious on Debt Reduction then we might see some risk on
trades happening.
But the devil is very much in the details. It is possible this will be one of those things where the deal is: Starting in six years and increasing gradually over the next ten thereafter blah blah blah.
(Kick the can down the road) Should that be the case I (and many
others) will rain all over it. That outcome would bring a different set
of risk on/off results.
IMHO a means tax could be done with near immediate results. It could
translate into a permanent reduction of some employment taxes and it
would/could help SSA get through the next 15 years (boomers) without
forcing a run off of the Intergovernmental account (less debt to
public). Something that had both teeth and near term consequence could
possibly change sentiment. Who knows?
Nothing addresses all of America’s problems. A means test is an option
that should be considered. Depending on how it is done, it could make a
difference. I think it will come on the table next week.
»
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Dear Bruce,
You forgot to mention why summer 2012 was so important. The other stuff just makes sense .
Too early for election in my guess. Do you think that China said fix it or we are out and here is the time frame?
The only reason we would have to do this is because the Federal government robbed the trust fund.
If my contributions were allowed to grow in a trust fund (even with nominal interest) I would have well over a million dollars ready at retirement.
Now if I have saved too much, too much in my 401k, etc. they will take away any benefits.
I guess robbery get easier the second time around.
I tire of stating it
LAWS AND TAXES ARE FOR PEONS AND PEASANTS.
They rip us left and right (directionally and philosophically) by using tax laws and BS PoliSpeak.
Repeal the Federal Income Tax and relpace it with a national sales tax - easily understandable, and everyone pays.
Taxes on the rich never happens - actually "taxes on the rich" = taxes on the middle class. The rich always find a loop hole with the help of high-paid lawyers and lobbyist that create the (hidden) loop holes.
Looks like a good reason to buy precious metals. Hide your wealth and look poor to get what you were promised, what you paid for.
Some of the above posters got it right. If means testing begins you will be surprised to find how rich is defined. Do not allow government to open this door.
SS is a pay as you go program. The young are robbed to pay the old. The government can't save money, when it "saves" the SS surplus, it invests in Treasury bonds. There was no theft, just spending of tax revenues.
Is this a step towards socialism? I don't know, how is it not socialism to tax the crap out of the young and poor to pay for pensions and medical care for old rich people? I'd go farther with means testing, I would look at total wealth, including primary residence. For many people, what SS and Medicare do is protect their assets so that they can leave them to their children. I have no problem saying to those people, you can apply for SS and Medicare when your total net worth drops below $X.
In my opinion, it's a step away from socialism. What are these programs, close to 10% of GDP and heading higher? The original purpose, as most people understand it, was to help the poor elderly stay out of dire poverty. If the government stuck to those people, it could slash payroll taxes and still have enough money to care for these people. Younger workers would save more, knowing that there's a safety net, but if they want more, they will have to save for it. To me, that is the opposite of socialism.
And to be clear, this is necessary because the country is broke. If there was money, we could let the system continue and create a new system for younger workers. But the way the system is set up now, it will destroy the budget/currency and nobody will receive SS or Medicare.
And as for promises, if your 5 year old promises to give you a million billion dollars, do you sue them at 40 when they still haven't paid up? The young have zero political control, the people retiring today could have changed the system. Republicans tried in 1995 to reform Medicare, we saw how that went. If anyone is to pay for this mess, it's the people who made it. The old and rich, not the young and poor.
"To me, that is the opposite of socialism."
No, that is the very definition of socialism and there's nothing wrong with that at all. It amazes me how words can devolve to a context completely different from their meaning, like socialism and Keynesianism, warped to advance a politcal agenda.
Socialism bad. So taking care of old ladies eating cat food is now somehow bad? Man, we have gotten so warped ourselves in this country it is amazing.
A means test for social security - i guess this means that after years of contributing to the SSS system and being told I would get this money back when I retired, now I am being told I will not get the money back if i was too successful and "too much " money from other sources. I can only conclude that that it was all a big lie. the people who took my money and promised me something in return were lying to me. why should any younger people in the system believe any promises made to them?
I don't understand why means testing the welfare checks that are SS is somehow any more socialist than SS itself. I'd much rather take my chances being means tested out of some SS "benefits" in the future than have the earnings cap on SS taxes lifted. I'm not expecting to get SS welfare checks anyway.
..."This is a very big step toward socialism."....
Oh no. Quiver...quiver... not SOCIALISM!!! The socialism scare word has been overused to the point of ludicrosity. And in case that's not a word call Palin and she'll tell you if Lewis Carrol can pen 'groak' then I can pen ludicrosity. Seriously Bruce, were you on paranoia drugs when you wrote this or just testing to see if readers took the time to ponder your words. Exactly what is a big step towards the never-ending all-encompassing curse of socialism???
Theme for the first quarter of this century: "Punish the Prudent"
How was it in any way "prudent" to rely on a government handout, that no one believed was "insurance" or "savings," for retirement?
Well said.
The victim / entitlement / government dependency philosophy is moving full speed ahead.
I can't wait for the shooting to start.
DC thinks it can take on millions and millions of enraged, armed Americans?
Bruce - I think it is entirely possible that the President does a verbal trial balloon of this during the SOTU, but not sure it will be more than that. As pointed out above, we have no leadership anymore, and the GOP has a 1.5 year time horizon only... this is not the stuff of major near-term policy change. This move would come from desperation, possibly induced by massive muni crises (starting now) forcing government intervention in another September/October 2008 type way. If it is to happen, it will be in the next six months.
Means testing social security will not affect that many people. How many American's have adequately saved for retirement?
Those that are impacted will simply hide assets and income. And this won't be hard as the USA is going to develop one huge underground economy.
FAIL.
Not if it makes hiding it costlier than compliance, and/or if it allows for easy whistleblowing on these people.
That, and there really isn't anywhere to run or hide.
That, and there really isn't anywhere to run or hide.
Yep, and they better have their places already picked out.
Paybacks a Bitch...........
Means testing rich old people accomplishes nothing because there arent enough rich to matter. However if you define.rich as any individual with 4000 per month in non ss retirement funds then it makes sense. However franklin.roosevelt insisted that ss never be means tested because then it becomes just a welfare program and the majority will not.support paying into ss so low class trash who didnt save can get something for nothing. Roosevelt knew if it became a welfare program it would lose support and probably be ended since we all hate welfare or most of us do.
I think the number would be closer to $15k a month before one gets hit. Is that fair? You tell me.
It does change the trajectory of the program. SS is now 20% of the budget, going up from now on. Roosevelt had a vision. That was 75 years ago. Many things have changed since. I'm one who thinks we ought to deal with it head on. And that does mean that the program has to be socialized.
No it is not fair and I think you know it.
What do we means test next? The interest from your Treasury bonds? Your munis? The price of a car, a house, your Happy Meal, all dependent upon your income? Where the fuck does it end?
I'm 60. Been paying into the SS system for 42 years.
I don't expect to collect anything when I retire. But I'll
be dammed if I'll pay any kind of means tax because
I fall into someone's idea of "rich" category.
I understand you. Let's start at one extreme and work backward.
Are you okay with the idea that Buffett does not get a SS check? His income is $100 million a year (at least). I hope so. If not, there is nothing to say to you.
If you're okay with Buffett taking a hit how about some guy who makes only $10mm a year. Still okay?
How about a million? Even half million a year of pre tax income? If you still are okay, then I will ask you what is the cut off?
My answer is $250k. If you're 70 years old and still have that income you don't need the extra 22 grand from SS.
Do you have an argument with that? If so you are doing just fine and I suggest you quit yapping.
So you're saying -- sorry folks if you "contributed" more than your share to SS and also lived well below your means for decades to prepare yourself not to be a burden on others while everyone else decided not to kill themselves at school and in the workplace while they spent money on things they could not afford but thought they were entitled to (ranging from a house >1,200 sq ft to owning more than three pairs of shoes, to eating at restaurants, going to movies, having a cell phone and cable tv, taking vacations, etc, etc). The successful and responsible OWE it to the less productive and irresponsible.
Turning SS into welfare for the elderly is bad policy and sends terrible signals to all.
SS has never been anything but welfare for the elderly. It is not "insurance", there is no "lockbox," and it is not "savings." It is a welfare check for oldsters. Let's not kid ourselves about the reality of SS.
It is not "welfare" until it's means-tested.
If you took away all SS benefits fron the crowd earning over $250K, that's only about $50B a year. You will have to drop the means test much lower to get the numbers needed to make a difference. Spreading the wealth around is hard work when the confiscation is limited to just the SS checks.
Bruce:
I have never paid in any SS, since I have always worked contract, and mostly abroad, so really have no dog in this hunt. No doubt, people who have incomes in the ranges your suggest do not need the extra SS income - if they do, then they have probably screwed their finances up with too much late debt or need every penny to support a lifestyle choice beyond their retired means. My fear is that once means testing is implemented, it will filter down to people who really do need it, but it will have taken political turns to "deal" with other issues other than income....remember, laws are rarely taken off the books, but are commonly extended to cover wider range than the original intention. This is the reason the AARP will fight it - and will likely prevent such a thing happening. I think it is a good, common-sense theory, but not likely to happen in practice.
This is the stuff of assassination conspiracy.
dup
They author may be right, but he's wrong on the assumption that this means test is for just rich people. It's being pushed like it's for rich people but this isn't for them, it's for all of us. As he said the devils in the details, and that 25% tax without any deductions wasn't explained either. the rich are a very very small majority and their social security they are getting isn't a dent in the whole mess, it's the rest of the population of baby boomers (around 78 million people) and ones getting it for being hurt. What will be the means test and will it even be published and/or under the judgement of a SS judge. What I see happening is that you will go to get your SS and they will want all this information about your income and assets and savings etc. etc.. They will reject you the first time and you will re-apply, they will say on the form that you must tell the truth yada yada yada otherwise you trying to commit fraud on the govt.. This way they will find something that is fraudulant and try to deny you. Then you fight and go through their process of arbitration or court. Once done they may say okay you get the SS and Medicare, but you will have to give information every year about all your assets and savings etc. to the IRS and they will see if your still within means testing. And if not you may bet dumped and have to reapply.
They are trying to slow down the process and make it alot of hurdles for people to get these benefits that they paid into with their taxes. And then tripping them up when something doesn't look right. This means test is going to be a arbitrary point that the decision makers will make in regard to if you get SS and Medicare or get a part of it. Both sides know that coming out and saying we will cut these programs would have them thrown out of office in a week, so what they do is hide the cuts through the process and so if people complain you as the politician can blame the workers and make committees to look into it etc. etc., while every month that goes by without giving them the service is one more month of not putting that money to the people and keeping it in the treasury.
That is exactly how medicaid operates!
Looks like you've been to this rodeo before! A better solution would be gradual phase-out of the whole notion of Social Security (along with a crapton of other Govt programs)!
Its amazing how all the SS reform cockroachs are crawling out of the woodwork at this time to pontificate their ideas on how to save SS.
First it starts with means testing for all the multi-millionairs and devolves down to anyone that made over 30 grand a year.
Don't worry, you can continue to contribute till the day you retire, but don't bother planning on collecting your benefits.
In fact what we need are Social Security death panels to advise retirees that they should die off as early as possible so as not to draw down more SS benefits than they paid into the system.
This could go hand in hand with the Obamacare death panels advising retired seniors to head off to the Soylent Green factory as soon as possible so as not to spend too much Medicaid/Medicare dollars which are needed to provide medical care for the truly deserving, namely politicians, government workers, welfare parasites, illegal aliens, and their squatter birthright citizenship children.
End of life consultation = death panels? Hmm, lemme look out my window, I think I can see Russia...
Oh noes, they'll tax the rich! That's so terrible I want to slit my wrists and cry...
Please send your Youtube link. I'm off to get the popcorn. - Ned
I will, but I'm so distressed because those poor poor rich folk are getting taxed that I might miss the submit button!
;-(
Turning SS into welfare for the elderly (= means testing) is bad policy. Understanding there are a relatively few tragedy exceptions, it is incentivizing and subsidizing laziness and irresponsibility and fostering a dependency on government. Just bad policy.
Sorry fellow suckers if you "contributed" more than your share to SS and also lived well below your means for decades to prepare yourself not to be a burden on others while everyone else decided not to kill themselves at school and in the workplace while they spent money on things they could not afford but thought they were entitled to (ranging from a house >1,200 sq ft to owning more than three pairs of shoes, to eating at restaurants, going to movies, having a cell phone and cable tv, taking vacations, etc, etc).
Pathetic.
Wow, Bruce. What a fabulous source you have there. What is the Ed Hyman ISI confab? Also, about the SS system. I am 51 this month and I have to say that when I found out they changed social security to a "welfare program" and not a pension, and that there was no "trust fund" was about the time I started earnestly becoming interested in politics. i pray Obama does say something about means testing in the SOTU because maybe a few more of my republican friends who think everything is going just fine will start asking "why and how does government get away with lying and changing a contract like this" Then again it will be kind of hard to get them to take their attention off of their new car and vacation and their next project at the office.....
All the best to you. I enjoy your work so much
LOL the "deficit commission" at least everyone I've seen primary solution is more immigration.
They often ask "how do we get Americans to save more?"
You do that by NOT PUNISHING SAVERS and extending more bebefits to non-savers.
Of course this policy will motivate even more people to NOT save for retirement.
Would you save for your retirement if you got dramatically fewer benefits that folks that didn't? Fuck NO
Why should anybody save for their retirement if the govt is going to shower benefits on those that dont and take the funds from those that do? That's a chumps bet.
Humans are intensely economic beings and will always act in their own best interests and "game the system", this is why Socialism and Comunism dont work and will never work, humans are just too smart to act in other people's best interests and not their own, even monkeys exhibit this behavior.
You counter this by having strictly limited benefits with no extras for the grasshoppers that dont save for the future paid for by the ants that saved for the future, this means elderly renters dont get a dime more than elderly homeowners.
America should be limiting benefits, not expanding them, we should start by eliminating the Medicare PartD senior drug plan which today's retiring seniors didn't paid for.
LOL the "deficit commission" at least everyone I've seen primary solution is more immigration.
They often ask "how do we get Americans to save more?"
You do that by NOT PUNISHING SAVERS and extending more bebefits to non-savers.
Of course this policy will motivate even more people to NOT save for retirement.
Would you save for your retirement if you got dramatically fewer benefits that folks that didn't? Fuck NO
Why should anybody save for their retirement if the govt is going to shower benefits on those that dont and take the funds from those that do? That's a chumps bet.
Humans are intensely economic beings and will always act in their own best interests and "game the system", this is why Socialism and Comunism dont work and will never work, humans are just too smart to act in other people's best interests and not their own, even monkeys exhibit this behavior.
You counter this by having strictly limited benefits with no extras for the grasshoppers that dont save for the future paid for by the ants that saved for the future, this means elderly renters dont get a dime more than elderly homeowners.
America should be limiting benefits, not expanding them, we should start by eliminating the Medicare PartD senior drug plan which today's retiring seniors didn't paid for.
LOL the "deficit commission" at least everyone I've seen primary solution is more immigration.
They often ask "how do we get Americans to save more?"
You do that by NOT PUNISHING SAVERS and extending more bebefits to non-savers.
Of course this policy will motivate even more people to NOT save for retirement.
Would you save for your retirement if you got dramatically fewer benefits that folks that didn't? Fuck NO
Why should anybody save for their retirement if the govt is going to shower benefits on those that dont and take the funds from those that do? That's a chumps bet.
Humans are intensely economic beings and will always act in their own best interests and "game the system", this is why Socialism and Comunism dont work and will never work, humans are just too smart to act in other people's best interests and not their own, even monkeys exhibit this behavior.
You counter this by having strictly limited benefits with no extras for the grasshoppers that dont save for the future paid for by the ants that saved for the future, this means elderly renters dont get a dime more than elderly homeowners.
America should be limiting benefits, not expanding them, we should start by eliminating the Medicare PartD senior drug plan which today's retiring seniors didn't paid for.
+55.
What the fuck is the difference between what Madoff did and what the Congress has done with SS's annual surpluses? Answer: nothing except Madoff is in jail and the fucktards in Congress will never face a jury.
When Bruce finally addresses the criminal nature of the program I will be impressed.
Bruce, they stole the fucking money.
I don't think they stole it. More like they borrowed on the assumption they could pay it back without difficulty, but then it turned out not to be the case.
"I don't think they stole it. More like they borrowed on the assumption they could pay it back-"
Don't be a sucker Bruce. I learned when I was 11 years old to hide my money in a tin and bury it or my parents would 'borrow' it. If I could figure out my parents would never pay me back surely you can look at the record and pull on your grown up pants and see Congress is a thief?
c'mon Bruce:
I was born at night, but it wasn't last night. There has been so much discussion and so much evidence (and so much off-the-books fraud) for so long, that, if not active theft, is active complicity. And who has been beneficiary? Look at any blue-red county-by-county measle map of the U.S. Cross that with the municipal thread tonight. Concord Coalition
http://www.concordcoalition.org/ has been around for a long time.
So the information is out there but is in conflict with certain other approaches to using the fruits of public taxation and debt creation.
- Ned
(and this is also to say that I really enjoy your work, please keep at it).
Actually, they're buying the votes of senoir citizens!