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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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However, said charities also receive it from less ethical, morally different people wanting to evade taxes.
Not all, but there are very few who come out with their original morality intact.
Rainman-
When you said 'unintended' you forgot to put the html code <\sarc> at the end.
Right?
- Ned
Dup
Indeed Rainman.
Still, SSA is viewed by a significant portion of the population as "welfare", not a retirement supplement, and there is no reason to give folks who possess and earn significant income "welfare". Especially to support charitable giving on the government check rotisserie. This makes me wonder if this sort of philanthropy really is philanthropy...
Look up de minimis and you will find "means testing for SS" Are you serious? This would cut how much?
I'll bet we spend more in one month fighting homeless people errr the War in Afghanistan, than we will save doing means testing.
What a crock means testing is. The vast majority of SS benefits are paid to people that it makes an enormous difference to. It's either means test a negligable amount of the liabilities away, or **** over a lot of poor old people.
Sure, I'd love for them to turn it into a welfare program, then they can't make me pay into it anymore.
Somewhere along the line, Social Security morphed into welfare for senior citizens, ignoring the disabled recipients.
I would have opted out 10 years ago if given the chance. Now they better not touch my SS (even though I am not depending on it). It's a matter of principal to me. I would consider participating in a solution only after Fed employees and Congress pensions are wiped out and they join SS with the rest of us!
Dear DBCooper,
I agree with your sentiment exactly, sir. Perhaps all federal employees should receive SNAP cards only in lieu of wages, as long as the federal budget remains unbalanced.
Cheers,
Beef
Means testing workers who have put hundreds of thousands into the system in good faith is a crass fraud, nothing else.
DB Cooper: Jump, You Fucker!
Sorry I couldn't resist... You opted out of SS when you jumped with your knapsack full of pension cash out of the back door of that 707...
"I would have opted out 10 years ago if given the chance.Now they better not touch my SS (even though I am not depending on it). It's a matter of principal to me."
Same here DB.
It's theft.
The only way I would ever agree to this is if the year after implementation they quit taking SS from an eighteen year old so they don't have to deal with the theft later in life.
It must end.
Otherwise, they can kiss my ass...I'll go completely off the grid...they will get nothing.
Federal employees covered by FERS fully participate in SSA. Get a clue.
Now if we see members of congress do away with their retirement benefits unless they have served 30 or more years we'll know we're getting somewhere. Of course, it would be nice if the same 30 year standard applied to executives as well. Both will never happen
oh come on DB...what did you do with the money from your plane trip????? inquiring minds want to know
Bahahahahaha!!!! They don't even pay the same taxes we do! LOL!
What different taxes do federal employees not pay that you do? hahahahaha
ALL, because their paid with TAX MONEY.
None.... as in don't... or at least use the Public Service Edition of Turbo Tax
That version looks best suited for H & R Block, AIG, ADM & TBTF employees as they are the face of public service today
taxex always go up and never down.
http://covert2.wordpress.com
bill gates is not old enough yet to get ss