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Senators Graham, Paul & Lee on Social Security Reform– “If you're under 47 - bend over”
Three heavy hitter Republican senators have put forward a plan to restructure Social Security. Lindsey Graham (R-SC), Mike Lee (R-UT) and Rand Paul (R-KY) have sponored the Social Security Solvency and Sustainability Act, S. 804.
Overall, I give this plan a “C”. That grade is composed of two distinctly different analyses. On the pure question of economics, I give the plan a “B”. But on the more critical issue of “Is this fair” I give the plan a “D”.
Given that the proposal has some positive economics attached to it I
think that something along these lines is what me might see if Congress
ever got around to doing its business of passing legislation and fixing
problems. I believe that if this plan were pushed to a vote it would get
support from some Democrats and actually has a chance of passage
sometime in 2012. The reason that there might be some Dems who cross the
aisle to vote for something like this is that the structure of the
proposal is very much a “Kick the Can Down the Road” approach. All politicians love that way of thinking.
The issues at Social Security are easy to define. It’s the Boomers that are the problem.
The solutions are also relatively easy. Benefits can be cut, or taxes
can be increased. A very convenient way to cut expenses is to just
increase the age for eligibility by a few years. The critical questions
are (1) when do these changes take place and (2) what age group is going to get screwed as a result.
Some details of the proposal:
A)
Gradually increase Social Security’s full-benefit age starting in 2017,
from today’s age 66 to age 70 for Americans born on or after 1970.
B) The
legislation would increase the early-benefit age starting in 2021, from
today’s age 62 to age 64 for taxpayers born on or after 1966.
C)
Gradually change the benefit formula starting in 2017 so that
upper-income Americans would start to receive smaller benefits while
benefits for those with lower incomes would remain the same. These
changes would become fully effective in 2055.
The financial health of SS is measured actuarially. This science looks
at projected income and expense streams over a 75-year period and draws
some conclusions. I don't see a better way to evaluate this mess. But
I’m convinced that it is a flawed analysis. No one has the slightest idea what the world will look like in 50 years.
And more importantly, the problems for both the broad economy and
society that SS is bringing us have a window of only the next 15-years
or so. It’s my opinion that if the USA does not address the imbalances
that are currently impacting SS we will not make it to 2025. The system
will sink from the weight of these UNFUNDED liabilities.
Clearly Senators Graham, Paul and Lee don’t see it that way. The vast
majority of those who do pick apart the numbers would agree with them.
So I'm a bit out in left field calling for a blowup. I will say that if
one did adopt the 75-year measure of financial health, the proposals put
forward in S. 804. would, in fact, move the needle in the right direction.
The plan does not include any increase in taxes on worker's or their
employers. To me, this is essential. SS is already sucking up 12.4% of
worker's income. That’s too much. If anything the program should be
scaled back so that the contributions are lowered. Under no circumstances should they be increased.
The Senator's proposal increases the socialization of the system. I
think that is essential. Workers with high lifetime earnings will be
subsidizing those who had low lifetime earnings. Call this a tax on the rich. I don’t see anyway around this.
Increasing the age limit is something that significantly improves the
financial profile of SS. It looks like an easy way to push the numbers
around. That’s true, but it’s not without consequence. I would point to
the riots in France just two years ago when the retirement age was
increased. Who were the protesters? A coalition of younger and older workers.
The older ones had obvious reasons. The younger ones were brought to
the streets because they desperately wanted the old folks to retire. Why?
Because they wanted the jobs that would become vacant. Youth
unemployment in France is north of 20%. That is exactly where it is
headed in the USA. So raising the retirement age “fixes” SS but it also
closes some doors for younger people all the way down to their early
20’s.
For these reasons I give that favorable “B” grade (there is no “A”). But now consider who is getting screwed.
The Baby Boomers will reach age 65 in 2011. This population bulge will continue to hit the SS system until 2029. Note this. We are on the very first rung of a very tall (and shaky) ladder.
The problem for SS over the next 20 years (and a Medicare in a bigger way) is the Baby Boomers.
When you look at the age group that is causing the problems and overlay
the proposed changes you see that the Boomer contribution to the “fix”
is not very much at all.
(a) Increasing the age limit to 70 after 2017 only impact those born after 1970. So the Boomers get a free ride.
(b) Increasing the early retirement age is limited to only those born after 1966. Another miss.
(c) Changing the benefit formula starting in 2017 would hit the boomers
(At least it would on paper). But the phase in of this takes place over
40 years. The Boomers will be dead and buried before the actual hit
takes place.
So who are the losers in the Graham, Paul, Lee plan? The answer is that anyone born after 1966. If you’re younger than 47 today, bend over.
The Boomers are going to screw you. You’re going to pay more than you
should and you’re going to get less than the boomers got.
How could that possibly happen? Easy. It’s the
demographics. Those who will “win” this age war out vote those who will
lose. There are some very powerful lobbies at work as well. The AARP has
a very big stick; they use their weapons on the Pols very effectively.
I will be sad if this comes about. This would be the greatest “Pass the Trash”
for any generation in history. While the proposed changes would take SS
off the discussion table for another decade or so it will come back
into the headlines in a very big way at some point. There is absolutely no fairness in a plan that protects Boomers at the cost of the rest of society.
I think that in their hearts, Senators Graham, Paul and Lee don’t really
believe in SS and would like to see it go away. It is, fundamentally, a
socialist approach and it does suck up a huge amount of current tax
revenue. But even these powerful Senators can’t kill SS. If their
proposals are adopted it would destroy Social Security. Ten/Fifteen
years from today public support for SS will have completely evaporated.
It will just take that long for those younger generations to realize how
badly they got set up.
I’m a cynical guy. I think that Graham, Paul, Lee (and all the others)
understand that they are lighting a slow burning fuse on a very big bomb
with plans like this. But they want to keep their jobs, power and influence, so they don’t do the right thing. They propose to kick the can to another few generations.
Color me disappointed. Especially with Rand Paul.
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Earth to Krasting, the boomers have not even retired and yet you blame them for SS????
It was the "greatest" generation that have pumped up SS and medicare to such unsustainable monsters. The boomers just starting to join AARP. You can blame a lot of things on the boomers, but not this.
Sorry. dead wrong. It's the boomers that are causing the problem.
Read what I said. We are on the first rung of the ladder. It's the boomers fault. not the great generation.
You're no Milton Friedman. But you are a boomer-baiter.
It's the governments fault for getting involved in the first place. Gov.co caused the huge distortions in the medical marketplace making medical care unaffordable. They've done the same thing to College Tuition. They've done the same thing to the legal system. They're now doing the same thing to energy costs.
The SS tax has done the same thing in a negative sense to wages, and there's no question that people would have been better off with fuller employment and higher take home wages, and then making their own retirement investments than to trust the government to do it for them (M.Friedman).
Using your logic, it's the Russians fault for not ending the Cold War sooner. Or, OPEC's fault for driving up oil prices. Or, the Blacks fault for not keeping up. Or, the Hispanics fault for all the anchor babies. Or, GenXers for being slackers. Or, the socialists fault for making people promises they knew could never be kept in the first place --- they had slide rules back then, you know.
Scapegoats are a dime a dozen, that's the beauty of scapegoats. It's never your fault, it always gets to be somebody else's "fault"!
(disclosure, not a boomer)
Wrong. The boomers are the largest voting block in the country. The shit eating boomers have allowed congress to spend the social security surpluses for decades. As the boomers retire by the millions these next several years the system will collapse. Go back to smoking dope, drop some acid, grow your side burns back, worship some more Elvis, and wear peace beads you Woodstock boomer fucks.
I'm 39, and I've never believed I'd ever get anything out of the SS money stolen from my paychecks by this government.
I also was not raised to believe in any government "taking care of me". I take care of myself. Since I can't stop these D.C. thieves from stealing from my paycheck, I save and budget and prepare for my old age and a lot of rainy days. They can keep what they've stolen from me...I don't care, because I don't want anything in return from their crimes.
I don't have a problem w/ the boomers or whoever at this point getting more of what will be left in SS while I get nothing because I've always been prepared. I'm not rich by far, but I've been stacking the phyzz bitchez, and I know I'll be self-sufficient and able to get by fairly well when the SHTF and in my old age, however long that will last.
Whatever bill they come up with is going to suck for one group or another. Fine...get over it...and then start preparing accordingly.
I believe anyone should be free to opt out of SS anytime they want to. We don't need the government lying and stealing from us any longer. But we all know they will never allow that option.
So in any case, the real loser and suckers in all of this will be the horribly miseducated generations younger than myself (40 in 9 days). They don't have a freakin' clue what is right in this world. They have not been taught to save for a rainy day. They have been seriously neglected by their parents on what it means to be responsible, educated, and self-sufficient. And they've been indoctrinated by our disgusting socialist liberal criminal gov't sponsored public "educational" system...if you can call what they provide an actual education at all.
They are misguided useful idiots who think gov't will and should provide for them and when they eventually pull their heads out of their asses and realize they've been totally screwed by this corrupt system all their lives only then will they see the light. Unfortunately you can't tell the vast majority of these people anything, so they will just have to learn for themselves, and it will be a painful lesson indeed. Just look at the riots in Greece and elsewhere for glaring proof of what it's like to see those types of people wake up to realize how screwed they really are.
If the gov't wants to come up with a bill like this then they should also include the opt out option, plus provide the proper education on how to save and invest properly. I know investing is risky in our corrupt croney system these days, but even basic saving and wise budgeting education would be better for the younger generations than having their money stolen for broken promises by corrupt politicians.
Home school your kids if in any way possible. Don't allow the socialist system to ruin your kids lives and rot their brains. Teach them yourself...teach them proper history, and economics, math and proper English, etc. Teach them the perils of living on credit and beyond their means.
Do the right thing by your kids and one day they will prosper and they will do the right thing on down the line. Otherwise those generations will be so screwed it will make the life of a Somali pirate look charming.
Teach them what is right and what is wrong and they'll do just fine. Just don't teach them to expect anything from this government or anyone else outside their family and friends...they must work hard for what they want themselves because nothing will be free, cheap or easy. Any belief to the contrary is a pipe dream at best and dangerous to their future well-being.
Be prepared folks...things are going to get much worse for a massive amount of people before things ever start to get better again. That's just the plain and simple truth.
Stack your phyzz as best you can along w/ all other necessities that are important to you. Forget about what you may or may not get from SS, MCare, or MCaid. If you get something out of it one day, then great. But don't expect any of those programs to provide you any kind of quality of life as you continue to get older. It just won't be there in the way you'd like it to be, so prepare for it.
I'm not saying we shouldn't fight for what is right to change all this bullshit gov't regulation. We should. We should wipe everything they've ever created out and start over with as limited gov't power, ability, and involvement in our lives as possible. Follow the Constitution...it's a very very very good start!
It would be great to reset all of that, but when has more legislation ever reduced legislation? And when has it ever changed quickly enough for the better. Very rarely at best.
But we can always keep trying WHILE WE PREPARE OURSELVES FOR THE WORST. We can elect the best people possible and we might see some reform, but we'll be long gone before any real effective change ever occurs. The only way to change things fast at this point in time is to go to war with ourselves. The gov't knows that. The military knows that. It's the only way to throw off the shackles of tyranny that this monsterous government has turned into. But will we do that? I doubt it.
So again it comes back to being mentally and physically prepared for anything on our own. That's it from me I guess. Rant off, lol :)
Thanks much. Love ZH and all who contribute.
Plop, plop, phyzz,phyzz, oh what a relief it is !
Tks for this rant. I will forward your thoughts to Paul, Lee and Graham. Who knows? They might read them.
bk
Tks for this rant. I will forward your thoughts to Paul, Lee and Graham. Who knows? They might read them.
bk
I know what you meqan dude..Im 40 and I do NOT EXPECT to get shit..If I do get a little something then fine but I am damn sure not counting on it..
Anybody who thinks gen X, Y, Z, etc. won't catch on to this and figure out a way not to get fucked by this are kidding themselves.
Ummmm. Yes.
Get ready for passport seizures. Akin to trading these markets. If you aren't ahead of the move consider it the proverbial ship already at sea.
"Exodus theme" has been presented. Who has what it will take to thrive in that world?
+1
On a cynical note: Our Messiah already did the first step by lowering SS contributions by 2% start of the year!
As noted before by BK in his other posts, the issue is our growth rate. If the US has Japanese style growth rates for the next decade or so then, its game over. No way will the US be able to keep on forking out what it has promised SS/Medicare beneficiaries.
I think the Japanese have resolved thier growth rate issues..
We will too..
Well, actually the Japs were in severe population decline long before Fuck-ishima. Just like the Europeans and the Russians.
http://search.japantimes.co.jp/cgi-bin/ed20100115a2.html
Russian:
http://geography.about.com/od/obtainpopulationdata/a/russiapop.htm
European:
http://www.populationpress.org/publication/2004-1-myers.html
The US has only been able to barely stay afloat, or reach par, due to massive immigration.
Good point Mr Evil....But really we elite satanic cult sun-worshipping bastards have to take what we can get...6.5 million people on the planet...We need to get the number down..500,000,000 max. http://en.wikipedia.org/wiki/Georgia_Guidestones
Just came back from the meeting St. Moritz and we are working on the final solution...
Let the looting continue . WTF. Give me back everything I have put in so far. hang Congress and take back your freedom.
Yea..I say go ahead..take it all you fuckers..Steal from the working class some more! Get the people pissed! Give us a good reason to revolt..Right now "fearless leader" is on a golf outing with that crybaby scumbag boner to figure out how to compromise on the debt ceiling and fuck the middle class and poor out of SS and Medicare at the same time.
Don't worry, the "Elite" cure to all thier problems is a World War..Where the first FF operation occurs is anybody's guess. Population reduction bitchez!
either that or that ill wind blowing out of the Pacific will fix the books nice and tighty.
anyone born after 1966 gets screwed
That is totally correct, but one should also note that because of demographics this is the default scenario. So any kind of "restructuring plan" will likely not correct that fact.
But kudos to you Bruce for pointing to the obvious but not shying away from stating "Under no circumstances should they [SS constributions] be increased."
Note: your sixth paragraph ("Clearly...") is confusing and seems self-contradictory to me.
Take away the oligarchs in the senate deluxe pension and put 'em on SS, they will fix it then instead of pitting generation against generation.
In the event that doesn't work..Make sure you have a pitchfork and torch on hand and maybe some spares for your friends...The "Starve the Beast" BS has gone on long enough!
If i was a boomer I wouldn't want to be on the tail end. These benefits will be cut as soon as enough die to pair their voting influence.
Probably not. How many dairy farmers are there? A well organized minority will role over the majority every time. One of the many inherent flaws of large scale "democracy."
Doesn't matter how many dairy farmers there are, what matters is how many senators represent states within which dariy famers have an efective loby, same for congressionl districts.
Yep, it's easy to heard the horde into the meat grinder.
It is a shame that no one seems to have a reasonable solution. Unfortunately, many people will never be able to retire due to the retarded implementation of SS. The reality is that the lock box has been providing a form of QE for a very long time. Now it's government pensions turn. The end game is quickly approaching.
When the money starts coming out the benefits of QE likely reverse and rates back up. Granted the Fed may be forced to perpetual QE, how long can they get away with it is anybody's guess.
The politicians need to, and won't fix this. They've proven consistent in their ineptitude.
I thinkg the pols are either
1. dishonest
2. competent individually but inept as a group (they did go to school right?)
or the worst and certainly most likely
3. extremely competent at dishonesty
Yep, it's door 3
I have the solution. Defund the NIH research budget (~$30B almost a third of federal research spending). Why are we spending this money only to lengthen livespans by finding cures for stuff ( a lot of old age stuff)? Seems rather counter-productive to me vis a vis the social security and medicare. To "enhance" social security/medicare solvency, it would seem to me a solution would be to decrease average life-span, right?
sarc/ well, sort of..
That's supposed to be the job of booze, cigarettes, fast food, illegal/legal drugs (the fun kind anyway), and casual sex (STD's).
But, of course, the Health Nazis are doing everything in their power to eliminate the first three, while the War on Drugs is/was supposed to stop the fourth.
"That's supposed to be the job of booze, cigarettes, fast food, illegal/legal drugs (the fun kind anyway), and casual sex (STD's)."
The problem with these slow death methods is they cause disability long before death, and disability costs money.
Most anti-personnel mines are designed with that in mind.
Social Security is nothing more than a welfare program. It was never insurance, there is plenty of law already settled on this. Enough of this "righteous" indignation. The Feds got the money and spent it and now they are scrambling to see how they can keep from showing the folks how bankrupt we really are.
Let those who want to opt out be able to get out. All you folks who want to raise taxes and allow for a bigger revenue grab can't seem to get away from wanting big Gov to take care of everybody. Let it go. Call it welfare and fund the truly needy and kill the rest of the program. We can't afford it anymore.
It is ridiculously easy to opt out. Start your own business (preferably a socially useless hifrequency trading hedge fund) pay yourself peanuts and take the majority of earnings out as dividends (or better cap gains), put large amounts into a SEP IRA the max is like 25k annually.
And see now you really, really don't need SS, and you have opted out.
Better yet, open a Fidelity SEP/401(K) and the max out is around $44K or $46K, not sure of the hard numbers. It was $42K back in 2007.
Plus its totally deductable from income taxes.
What a hoot, eh?
welfare ... as in general welfare ...
go read what life was like for older people before social security ....
How is YOUR family my responsibility (through taxes taken from me)?
govt-given welfare (corporate or otherwise) is theft and it is not charity, nor is it charitable.
For those who didn't save and plan ahead, then there is real charity from those who would give willingly. Real charity is appreciated by its recipients, welfare is taken as an entitlement.
[...Real charity is appreciated by its recipients, welfare is taken as an entitlement.]---I did it by Occident
Excellent post, Occident.
The current SocSec solvency issue is a losing argument and a distraction. The nation is bankrupt; that is the issue at hand.
After the cause of our bankruptcy is determined, answers to the problems of SocSec will be obvious.
Bankruptcy is born in the seeds of socialism.
I know, it sucks to have to take care of your own family when they get old doesn't it? Better to have the government do it, then you don't have to deal with that whole extended family thing.
I would definitely prefer to buy a new plasma tv.
is that easy ... isn't it?!
I'm afraid not, unfortunately.
Truth is, the few people who sucked entire economies dry will not be accountable because they are 'mobile' ... as for the rest.
In all seriousness you're imagining there is magic money coming from somewhere that suddenly makes SS a more viable form of elderly care. But SS is not funded by taxes from the wealthy, it is a purely regressive tax. So the burden on the lower and middle class progeny to care for their parents is not eleviated at all by the SS structure. Instead the govt merely takes 10% off the top for handling (or whatever the SS operational overhead really is). It is really a ponzi scheme perpetrated by grandparents on grandchildren. In the short term the elderly have forced younger generations to eliviate them of their fiscal responsibility to plan for their own retirement and to overly mitigate the humilities of getting old. Because it is a ponzi scheme the sufferings you feel this alleviates are only shifted to, and thus will be intensified for the next generations since they will necessarily have less proportional wealth for mitigating their own decay. On top of this, Peak Empire is upon America, the next generations will not have the benefit of being the sole industrial power for 20 years; instead they will also continue to suffer wage arbitrage with China and India.
Actually, any monies left over after paying out to recipents is used to buy treasuries and the money to buy the treasuries is then placed into the general fund at the treasury and spent as the congress critters see fit.
That's why they describe all those treasuries as being in a"lock box". Because if they unlocked the "lock box" the only thing you'd find was paper fit for the wiping of arses. And, that's why they store it in a lock box, that way you won't be able to see that it's just roll after roll of very expensive, high quality grade Toilet Paper. Very smooth to the touch and soothing on the whole.
Paper cuts!
I thought the "Lock Box IOUs" were "non-marketable" and not really typical USTs?
I paid in the max for decades and would gladly do my part by getting a refund of all SS I put in....and the employer match for a kicker. Same for medicare. No interest, no harm and no foul. I yearn for the fantasy of being completely divorced from Uncle Sugar's insanity with these programs.
Nice. Now ask yourself what a GenX'er will get from all the SS he did and will put in...
Hint: It's going to be a lot less than all.
Since I'm one of those X'ers, I'll bite.
How's this for an idea- let the boomers have what they paid for, and let me opt out. I'd like a refund, but as long as I don't have to pay in anymore, I'd take that lesser screwing as a pseudo-win.
I really don't want to take away the SS from older folks. We're supposed to believe in a fair deal in the US, and we should honor it if we can. But the flip side of that is that I know that there will not be Social Security for me when the time comes, and need that money now so that I can invest it elsewhere. They can fund the SS with money they are currently wasting on nonsense until the boomers no longer need it, and then it can be a footnote in history, as far as I'm concerned.