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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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I've lamented the same thing since the early 70's, but the present embodiment of the government will never do it. It's all about indenturement and control. Student loans, mortgages, consumer credit, welfare, healthcare, social security, incentives, regulation, stimulus etc.
They will pay off though, no matter how much they have to debase the currency.
They will try to inflate their way out of an otherwise unsolveable problem in a slow, controlled manner by creating and churning Fed reserves. It will be interesting to see how successful they are at finessing the throttle. They don't even have to raise taxes to do it.
Taxes now are just the way they keep the middle class under their thumb.
Rainman,
I've been paying in for over 30 years, and after doing the math; I've confirmed that I would actually be better off opting out today and letting them keep everything I've already paid in; provided they stop taxing me from now until retirement.
Pretty sad really...
That employer match is actually yours. Like medical benefits, social security matching is considered a part of your overall salary compensation by your employer. They just don't tell you that, and they only concentrate on the holiday/vacation/medical benies side.
The real kicker is that the employer then gets to deduct the amount they paid for your half of social security from their income taxes to arrive at the AGI.
Having worked Misc 1099's for quite a few years I was responsible for paying the full 15.2% but was able to deduct half of that from my income taxes to arrive at the AGI.
What an incentive for corps to pay half your Payroll taxes and then not tell you it counts as part of your salary.
Another wonderful thing was being able to open a SEP/401(K) and deduct the whole amount up to specified limits from your income. The SEP/401(K) allowed up to $42K a year the last time I participated, and goes up every year like IRA contributions.
What a hoot, eh?
Were you planning to buy USTs with that SEP/401-K?
I saw the impossibility of the math and surrendered any thought of getting SS 30 years ago.
Boomers stood silent while SS was raided and now want to be exempted from consequences?
I can draw in 3 to 6 years. If it is there, fine. That would be a pleasant surprise.
The pain is gonna have to be spread universally.
Agree. I expect there will always be a SS payout in nominal terms but the purchasing power of the dollar will be such that the benefit won't make much of a dent in living expenses (we are about the same age and made the same calculation evidently). So my plan does not include SS. If there is something for me by then fine, but I don't expect it to make much difference.
The inane idea, that raising taxes on anybody will fix this, or any other government cluster fsck, is nothing more than unicorns shitting skittles from the eternally obtuse. This has already been attempted with SocSec several times since its inception (witholding started at 2%). The only valid conclusiong is that giving the government more money just means that they will leverage, and spend it, further enslaving y'alls demon spawn.
Junk Fuckers
It would be too much of a shock for the poor Baby Boomers if they had to face the music. They shall be spared. I think it's actually going to be even more of a shock to Gen X, Y and whoever else follows because they have been even more consumerised and are that much further into the culture of narcissism.
Austerity for you but not for me does not bode well when speaking of large portions of the population who have lost the sense of shared sacrifice.
Only the earliest boomers benefit from the big scam: Born before 1950? Your benefit reflects your ten best years. Born after? It will reflect an average of your 30 best years. I've a parent who made the minimum until 59, then made the maximum income level for 10 years, then retired at 72 with? The maximum benefit. There is no reasonable correlation between payin and payout over the decades. It was 'the silent generation' that gained the most... those too young for WWII but born before 1946. Oh, and let's not leave out the spouses that stayed home long after the kids (if any) were grown: minimum 50% of hubby's 'earned' SS payout even if they divorced after 10 years, full amount if surviving. It sounds like Greece, but it's the US, and you X'ers and Y'ers don't even know about it.
I'll tell you what...nd I'd be perfectly fine with the complete dismantling of the entire SS/MC system in exchange for no longer taxing me for it. I still have many years to save for my own retirement, thank you very much, and 15% of my income times all those years (properly invested in an array of PM vehicles) would take care of me quite nicely in my golden years (pun intended).
Get the gov't out of the retirement business entirely!
"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."
It's never been a flawed analysis.
It's always been a fraud analysis and "they" never really care what happens after they snatch their political payoffs and retire in affluence and comfort.
Don't blame the boomers.. they inherited the mess from their parents and grandparents.
They just continued the same old scam.
The real scam is that the politicians who posture and rant about SS don't have any skin in the game. They have their own, quite separate, retirement system, fully funded and bulletproof to any taxpayer meddling. Now tell me again how much these worthies really care about what happens to Joe Sixpack 50 years from now.
Unfortuntely, Bruce, with the shitty economic system we have in place, and with wages deteriorating ever faster, SS was THE safety net for a loooooot of people ....
If they get this wrong too, it will make a depression look like a joke
this time, there are no farms to go to.
Everyone should sacrifice, even boomers. They should not be exempt at the expense of future generations.
"Everyone should sacrifice..." Bullshit. No one should sacrifice - well maybe the occasional goat.
Thing is any long-term or even mid-term SS debate is pointless because soon Uncle Sugar won't be in any condition to be redistributing wealth. And since there's less and less middle class wealth to confiscate and redistribute...
Those Boomers that you hate are the ones that will be screwed over the most - having paid the most into this doomed collectivist system/nightmare that's unraveling so quickly.
But you're screwed, too.
lol at the part about the goat.
Before we talk about 're-distributing' ... how is wealth being distibuted right now? ... who makes the rules up? ... for whose benefit? ...
Once you can honestly answer that, then we can talk re-distributing
Fact is, we can't say one day that the economy/market is rigged, only to complain the next day about people trying to change the rules ...
This is why I hate baby boomers.
They want to force us to sacrifice to pay for their retirement by forcing more taxes on us. They want to burden the children with more taxes and debt, all so they can have all the goodies for themselves without any sacrifice on their part.
Lay the fuck down on the couch and have yourself a bottle of prozac and shake your baby rattle you fucktroll.
Topcallingtroll... I dislike Gen X that suck tit until it's dry. Your comments are a vexation to the spirit.
Oh yes.... and you are a PUD.
" This is why I hate baby boomers. " ........ gee, did you hate baby boomers when they were paying all those taxes in their prime working years ? did you hate them when they were paying double Social Security taxes after Greenspan doubled their taxes under the Social Security Reform Act of 1983 ? did you hate them for paying all those property taxes under artificially inflated property prices ? did you hate those baby boomers for buying all the crap needed to take care of their kids ?
in other words, do you hate your baby boom parents for taking such good care of you when you were little & feeding you & watching over you !! ....... take that you little ingrate whipper-snapper .
funny, they loved us once when we were PAYING all those taxes, now we're being reviled.
Excuse me but the boomers paid in a fucking huge amount in total which has been consumed by outrageous health care costs of their parents. Boomers deserve most if not all that is promised. The rest of you can fight over your low wage contributions for the next 20 years. Stock up on cat food.
HA! Good One! The problem is - the boomers, the largest voting block in the country, have allowed CONgress to spend the Social Security tax revenue surplus for DECADES. Sadly, the boomers, with heads squeezed deep into their own asses haven't paid attention one bit, or cared in the least, that every penny (trillions and trillions of pennies), of THEIR surplus Social Security contributions have been used to paper over the deficit for decades. So, now SS is running a yearly deficit with no end in sight: You boomers that allowed your representatives to spend your SS surplus for decades can eat my cat food created shit.
I'm a "boomer", sorry I was born in 1949. I get my first SS check in August and it'll be close to the maximum paid out. All I can really say to you is "JUST KEEP PAY YOUR FUCKING TAXES BITCH!" I'm looking at a new Gas Hog Pickup to carry all my guns and gold to Canada where my check will be sent! Have a Great Day.
Exactly.
The people you should be angry with are FDR and the earliest recipients of SS who paid little/nothing in, yet reaped benefits for their remaining lifetimes.
SS was nothing but a ponzi scheme from the very beginning.
Of course the problem now is that all the 'winners' have already cashed-out and left the rest of us with nothing but a huge tab...
The first person to receive SS paid in $18. She received more than $20,000, for a payout of more than 1,000 to 1. Bernie Madoff would be proud.
My income peaked in 1993. By then I'd already paid enough to overfund my SS. Medicare, not so much. Medicare/Medicaid already chews up much more than SS.
If you work the cold hard numbers, SS/Medicare/Medicaid have to be cut by roughly 50% to balance the budget. This is political suicide and will not happen. So tthe Ponzi will continue, until it can't. That will coincide with a lack of bread lines, due to a lack of bread. Those who lived in the Soviet bloc before 1990 (and many after) know what it means to wait for food that isn't there.
Signs we are near the end: 1) empty garbage truck, because nobody throws things away. Many in the U.S. have waste baskets in every room.
2) People hanging outside restaurants at closing time, waiting for food to be tossed.
3) Bars closed due to lack of business. Russia never got that bad.
4) Violence directed at government officials. When food stamps can't buy food due to empty shelves.
5) Empty Walmart at end of the month. Business is slow by 30% already, but not yet dead.
6) Auto repair approaching Cuban ingenuity. They still have cars from the 1950s running.
Signs that things are finally improving:
1) Common people against regulations on principle kicking out any politician who dares support them. So far only in New Hampshire. A Democrat politician, originally from another state, pushed for an income tax. When she lost in the Democrat primary, the standing ovation in the legislative chambers was lead by leaders of the Democrat party.
2) Courts ruling regulations violate U.S. and/or state Consitutions.
3) Repeal of regulations passing in California and upheld by courts.
4) Silly season subsidies (windmills and ethanol) ending, because people prefer money, food and electricity.
5) Someone with a name of Paul or Rand chairing an important committee. Wait, already happened.
6) A large decrease in spending in an election cycle, as the rich (natural people and corporations) decide the federal/state budgets don't have enough money to be bothered with electioneering/lobbying.
Baby Boomers have paid SS and Medicare taxes for 30-40 years.
You should be mad at the politicians who blew that wad on welfare and medicine for illegal immigrants or throwing money at tin-pot dictatorships and bridges to nowhere.
bingo!!
the "jar" was full. the politicians emptied it, without asking anyone.
look at what it was spent on, when cutting.
Have you ever wondered how come the Baby Boomers never were/got mad?
You don't know what you're talking about if you think boomers aren't mad.
Let's see -- if you survived the Vietnam war intact, you work hard all of your life, pay income taxes, pay property taxes, pay into SS, pay into 401k & IRA, buy a house... then in your old age, the value of your house tanks, Wall St takes your money, they want to cut the SS benefits that you already paid for, gas is hella expensive, medical care is on the moon expensive, the dollar is worth less every day, your pension has been cancelled, and you lose your job to someone in New Delhi.
I was talking more in a historical perspective, aka horse/barndoor.
When the dollar crashes, all this will change anyway. Baby Boomers will be mad then.
Go ahead, throw that futile pink frilly excuse for a gauntlet; Republitards at their finest.
How about a voluntary opt-out of SS with a different tax schedule if you waive it?
How about uncapping the amount top N%ers chip in?
Or means-testing at the back-end?
Plenty of better proposals sitting in the wings once these dimwits get done prancing about to assist their future ambitions.
SS and all other programs that are unfunded or fully looted, are dead as currently constituted. No fixes are going to work, and you are insulting our intelligence when you talk about taxing the "rich"--not Soros, mind you, who doesn't pay any taxes, but merely high earners. End these programs and replace them with a Singapore-Chile type private health and welfare system; you will probably have to keep current recipients until you run out of money--maybe 2 years. There aren't any better proposals in a ponzi scheme currently leaking several trillion per year.
Galveston also.
They got out just in time...the law was changed by Congress to not allow anyone to opt out.
http://www.ncpa.org/pub/ba514
I agree with you that your suggestions, except the opt out, will be the final solution.
That is why us smart people will make sure we qualify due to astute financial planning. You may attempt to raise taxes on us. You will not gain as much as you expect, and I will laugh and laugh as I qualify for everything yet still control more wealth than allowed.
All your solutions do is turn it from a social insurance program into a social welfare program. Roosevelt felt it would eventually lose support if it were just a welfare program for people who either weren't, or didn't try, to work hard and be successful. He was afraid the program would be ended on moral and ethical grounds if it were just a welfare program and not a social insurance program.
I'm not sure what is the right path here ...
all I know is that before Unions and SS, life was really bad for the big majority of people ...
I like to play the system ... but I do not want a desert around me ...
When has life ever not been "bad" for the big majority of people?
Let's get rid of social safety nets and we shall see what bad is.
They're not safety nets anymore. They're paved roads. With rest areas.