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Let's Just Raid Social Security
Out of one side of its mouth, our political system talks about reforming Social Security to preserve it for a few more years, and out of the other side of its mouth, it proposes to expedite its demise. As rational observer, you'd just like to get a big roll of duct tape and close off all these orifices for a while.
There are rumblings everywhere about a one-year extension of the "temporary" payroll-tax cut. Effective for all of 2011, it reduces the employee portion of the Social Security tax from 6.2% to 4.2%, thus giving us a little extra spending money. And collectively, it's more than a little: $100 billion for the year. The idea is that we'd spend this extra money, which would nudge up GDP and create jobs somehow somewhere. Yep, GDP and consumer spending are up a bit, despite dropping real wages and sagging consumer confidence. Yes, the inexplicable American consumer.
However, the mind-boggling U.S. trade deficit, particularly in consumer goods, sees to it that much of this extra money is going overseas. And it certainly hasn't created many jobs in the U.S., as we know from our dismal jobs reports.
But here is one thing the payroll-tax cut has done very effectively: It has raided Social Security by $100 billion. And now, they're proposing to raid it again. But to be fair, let's include an employer portion. Combined, it would amount to $200 billion for next year. And why not make it permanent? Because letting it expire would be decried, much like today, as a huge jobs-destroying "tax hike," while the $2.6 trillion Social Security Trust Fund just sits there, fat and plump with all this "money."
So, if we want to phase out our Social Security Trust Fund, that's one way of doing it. After a decade or so, it'll be gone. China would have a quarter or more of it, and the rest would be spread around. End of story. We'd finally be rid of it.
It's like raiding your 401k. Just clean it out, buy some stuff, and go on. Don't worry about later. To heck with retirement. Sure, that's one way to proceed. And if that's what we want, let's say it outright. Let's state clearly that we want to phase out our Social Security Trust Fund, that we want to bankrupt the Social Security system on an expedited time line, and that this payroll-tax cut is a way to accomplish that in an efficient manner.
But assuming we want to preserve our Social Security system, we need to keep inflows and outflows in balance over time. When inflation, job losses, and demographics throw the system out of whack, we need to adjust it. Alas, that adjusting is called the "third rail" of politics. How much easier and politically more expedient it is to raid it! So, let's just go do that instead.
Wolf Richter - www.testosteronepit.com
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If you want a similar sweet deal, you could try and incur a similar brain injury. I doubt your friend is living large off of his SS check.
A little perspective, please. Who has ruined the economy of the USA, the disabled or the TBTF banks?
False choice, the answer is BOTH! Charity forced from someone at the point of a gun is NOT charity.
just watched the debate, at first i was non-plussed by the same war cry to privatise social security. then i watched the democratic reponse on rachel maddow. and then i truly realized that politics is irrelevant mostly for now. for the next ten years, this is going to be a total circus devoid of real discussion. it's fun for some, distracting for others, very profitable for a select few, but generally just perpetuating the slow march to destruction that is the status quo. the u.s. is following the japanese behavioral model. but true to form we will accomplish in ten years what took them 25.
people are predicting the end of the u.s. in 2012. i'll give it to 2022. but by then , i believe these talking heads on tv will simply be talking about getting their heads chopped off by the guilotine.
Your end days time line seems more reasonable. 10 years or more but certainly not more than 15-20.
What the U.S. will look like 30 years from now is anybody's guess but the optimists (those that are betting short could be considered optimistic about their own fortune) about the country are likely to be shocked.
The Guilotine will be all the rage. Many will find themselves a head shorter.
Long PM!
Short Guillotines!
I am in Paris. I can run tours for everyone so they know their way around. We still have all the equipment here ready to go.
I watched the same follow-up that you did. Not all that bad really. I knew what I'd get from Fox already. Dr. Paul got the short straw -- as usual. At least the usual liberal crowd was sprinkled with some credible Republican spokesfolks.
I noticed in my paycheck that my SS contibution went down but my income tax went up. Pretty sure Obama did that on purpose. Thanks Dem controlled congress.
The plan was to stimulate the economy ad then people wouldn't notice the extra $40 taken out of thier checks. Problem is the economy wentfurther south and the people will really notice the missing $40.
Well, yeah. If your FICA deductions decrease by 2% that means there's 2% more available for income tax purposes. But did you notice now that there are actually targeted taxes being taken out specifically for Social Security/Medicare?
How then can they be part of the overall budget crisis?
Answer: They aren't but dumbass Americans hide under a rock when numbers are mentioned and allow themselves to be led by ideologues from both wings of the money party.
"... my income tax went up. Prettys sure Obama did that on purpose..."
I don't usually respond to dumb asses, but I couldn't resist this one.
Your withholdings are completely controlled by, wait for it, wait for it... YOU! If you didn't know that, you must not have grown up or worked in this country for long. To adjust your wittholdings, go to your HR dep't (do I need to translate?) and fill out the little form.
Thanks, it's so tiring hearing this morons that don't understand how Congress works. Most of the time I just laugh and move on to the next laugh. O'Bummer isn't even a bad president I agree, but O'Bummer has nothing to do with budget, taxation other than signing the bill! Thanks keep hammering these numb-skulls and maybe they will pick up a book or the Constitution ha!
Obama is also responsible for the bunions and warts on his butt. Why not? Blame him for my stopped clock while we're at it. It's Obama's fault that those cheap Chinese batteries were imported by Walmart and I was forced to buy 'em.
How about the $2.5 Trillion in Social Security Bailouts??
http://moneywatch.bnet.com/retirement-planning/video/good-news-on-social-security/478373/
Lets Rob the Old People!! AGAIN!!
What the fuck are you are you talking about! Bailouts! Social Security is OWED 2.6 TRILLION, Social security is in surplus! STOP telling fucking lies asshole! Read the fucking story! IT says social security is in SURPLUS!
Most people are smarter than you think here! Do you work for the Cock Brothers?
SS is runing a cash flow deficit every year now. It will run a cash flow deficit for the next 75 years.
You think there is money in that trust fund. There is not. Those IOUs are just future taxes or more debt. There is no money in the trust fund. Got that?
Your in for a rude awakening soon. Accounting gimmicks is all that remains. A box full of IOU's backed by the full faith and credit of the US government. LOL.
Look, it's really simple. Social Security is broke. They don't have any $2.6 trillion. The money was taken by the government and spent. Somewhere there is a filing cabinet with some special Treasuries that say the Federal Gov owes the SSA $2.6 Trillion. The money is gone, spent, nada, GET IT??
That's the problem, Social Security now needs some of that $2.6 Trillion cause they take in less each month than goes out, and the Federal Gov has to ACTUALLY PAY SOME OF THE MONEY BACK! So, all the money I paid in, and all that you paid in was spent by politicians on other things, like wars, pork politics, corruption and so on.
The way to think about this is to forget the $2.6 Trillion and just think of the SSA as a money drain on the government. That's why they wanna get rid of it. No more surplus to steal, and they certainly can't pay back what they stole in the past.
The government didn't lose the SS trust fund, they borrowed it and invested it. It was invested in things like wars and Solyndra. Now these things didn't pay off, and that is a shame. What happens when you borrow and lose? A debt jubilee only for the government? Not quite. This is a default and the deadbeat in question has lots of assets e.g. grazing rights, mineral rights toll roads, etc. A receivership proceeding with assets being awarded to the injured party is feasible and proper. Then we'll see if the elderly of the USA can unlock the value in these assets.
If that idea could catch fire with the elderly (inundated though they be with AARP propaganda shit), then the political fireworks would be worth watching.
I like the way your mind works.
http://www.youtube.com/watch?v=Q6xIw9eYxOs
In the debate of job creation and how best to pursue it as a policy goal, one point is forgotten: Government doesn't create jobs. Government only diverts resources from one use to another, which doesn't create new employment.
Cato institute propoganda!
Less is MORE!!
Do NOTHING and everything will be better!! probelms fix themselves thru greed!
==> Do NOTHING and everything will be better!!
Doing exactly NOTHING would be orders of magnitude better than the bullshit they are doing at the moment.
I'd like to start a new party, on the platform of "DO NOTHING-ISM".
No new laws. No new regulation. No new taxes. No new wars. No new bailouts. No new stimulus. No new QE. No new ANYTHING.
Can a brotha get some votes?
A Do-Nothing-ISM! Brilliant!
We have gotten very good at predicting the weather but are largely powerless to control it but we still have the hubris to believe that we can control the economy. It would be easier and more beneficial to humanity to control the weather!
Sadly, we will probably never come to an understanding that while we can reasonably predict the economy, albeit far less accurately than the weather, we should treat the economy like the weather and attempt to protect ourselves from it in times of trouble instead of attempting to circumvent it.
What we have is a revival of the "Know nothing party"
http://en.wikipedia.org/wiki/Know_Nothing
"The Know Nothing movement was a nativist American political movement of the 1840s and 1850s."
I would add that ye should start sunsetting the Law(s) already on the books, then you'd have a viable platform! You can count on my vote, Sarge!
I'll go along with that if it means letting the Bush tax cuts expire without debate and allows the FICA tax holiday to expire without debate.
I would, however, like to see a constitutional amendment counting the chronically unemployed as 3/5's of a person for representation purposes. If we're gonna go backwards in this country may as well go full tilt.
Right. And I'm looking forward to this "infrastructure bank". That's what we need -- another Fannie/Freddie to eventually have to bail out at great cost to the populace.
Interesting that an "Infrastructure Bank" is controversial. One must wonder why fixing the decaying bridges and utility systems (water, sewage, power) is not a good investment from the perspective of the folks who don't want to pay the taxes to enable it--under any fiscal circumstances.
Maybe the ruling transnational corporations don't see this as a significant market in the not so distant future? It ain't rocket science that profitable job destruction will eventually yield demand destruction.
It looks like the final "Fuck You, suckers!" to me.
Well, maybe they should have said, "Screw the banks, let's fix the bridges first". No, they didn't do that. What was it George Bush said.... Fool me once, I won't get fooled again. We've been fooled too many times already and they think we're ready for another ass reaming. No thanks.
SocSec always was a scam. At the time of its creation, average life expectancy was 62 years of age and benefits kicked in 3 years later. Let's adjust that upward for today and that would bring us to where it should be, maybe 78 or 79.
Just demograhics and an understanding of an economic system that is based on perpetual growth (inflation requirement) is all that is needed to illustrate that SS is a ponzi scheme. It is unsustainable and always has been. If it were volutary, it would collapse immediately. Enough said.
The Social Security Trust Fund??
The virtual construct, which at best is a shoebox full of empty promises that the $2.6T will be borrowed from greater fools (or printed) when needed?
I think the fancy term is 'intragovernmental borrowing.'
rough sketch of the modern politician and their IOUs: http://1.bp.blogspot.com/_ZNmEYOA6GIg/SPRgEi08LqI/AAAAAAAAAVc/P99eE3Rh8i...
Nice article! You're so close, but you need to go one step further.
Any couple who both nearly meet or exceed the max FICA contribution level are pulling in about $350 extra a month due to this 2% reduction. Compare this to what the 2% means to your bottom line and what effect it has possibly had on luxury retailers and the like.
Talk about turning class warfare on it's head!
So again, while talking about one thing, the net effect is something totally different.
==> are pulling in about $350 extra a month due to this 2% reduction.
Fuck you. You have it ass backwards. These folks are NOT BEING ROBBED by a bankrupt, unsustainable, Ponzi system to the tune of $350 a month. They are not "pulling in" anything "extra". It was their damned money in the first place and you begrudge them for getting to keep it? I say again: Fuck you.
Keeping your money and not being mugged is now a problem? No wonder we're in trouble.
Once SS is gone, They will be coming after 401K's and IRA's. Why, because "that's where the money is"
Which is exactly why my wife and I disbursed our IRA and put it into the phyzz. It might take a few years to strangle SS to death, but once those funds are gone, it won't take long for IRA's to be zeroed, if they aren't by the time SS dies. Not that it's much of a loss anyway, by the time my generation is to 'retirement' age in +/- 30 years, we'll be lucky if 1/4th of us are still alive.
If my wife and I make it to 'retirement', it'll probably mean we are working the family land in the Pacific NW hoping that the crops yield enough for us to eat through the winter. Some retirement.
"It might take a few years to strangle SS to death, but once those funds are gone, it won't take long for IRA's to be zeroed, if they aren't by the time SS dies"
There are no SS funds. SS has been in the red since 2008. SS funding comes from income taxes and Benanke bux (QE).
That said there is a Bill drafted to end IRA/401Ks and for holders to either roll over their IRA/401K money into SS, or take it out and take a tax hit. However to make it happen the gov't will have to come up with a way to get people to want to move money out of retirement funds. Perhaps another market crash going back to S&P 666.
"If my wife and I make it to 'retirement', it'll probably mean we are working the family land" Sounds like a good plan.
"There are no SS funds. SS has been in the red since 2008. SS funding comes from income taxes and Benanke bux (QE)."
Point well taken, and you're right. I was angling to the time when the jig is up and the SS checks stop coming, but that certainly is complicated when they are backed by infinite printing. I really feel for the folks who are a decade out from retiring, whose IRA's are being halved or worse, because the young end of the baby boomers are going to be screwed when the system goes belly-up. Everyone's going to be hit hard, but this group might be feeling more pain than the most, at least as I see it today.
Everyone that isn't already dead (having lived a full life) is getting screwed
1. High energy prices - especially terrible for retirees living on fixed income.
2. near ZIRP on savings. Forcing people either to gamble on high risk investments or lose principle to inflation
3. No Jobs, no Jobs and No Jobs, especially for 50+ because no company wants to hire them, and the majority have outdated skills.
Anyone not already retired should complete write off SS and pensions, because neither will be worth the paper they're printed on in a few years. Anyone eligable for Retirement and still working should start collecting, while it still has some value (but keep on working) once our out of the workforce, you'll be out for good.
Agreed on all counts. I'd probably only add this:
1b. Rising food costs, based both on the rise in energy costs as an input, and increasing demand from developing countries. Maybe in the long-run demand will flatten as developing economies find more productive land in sub-Saharan Africa, where they are gobbling airable land as quick as they can, and we hit population decline. But for the next 10-20 years, food prices will probably pace energy. The trade-off between energy vs. food will be a nasty one. If I can dig up the link I will, but there was an interview over at Postcarbon Institute's site a few weeks ago talking about food production being used as a weapon, scary stuff indeed.
I don't think they will go for IRAs directly. A) Would tank the investment market, B) its too direct and they'd create huge civil unrest. They will do it by (1) means testing - make you use your IRA first before you get government support, (2) they will kill you early by withholding medical care, (3) they will increase the death tax and (4) they will monetize and pay benefits with worthless dollars.
Not fast enough. They need the money soon and can't wait 5 to 10 years for people to start dropping off. I believe it was Barney frank how made an off the record comment back in 2010, that the way to get Aericans to hand over their retirement savings is to get the market to tank so that people would despise investing and press to the people that no one lost their savings invested in SS and medicare.
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obama drama
They once asked the famous bank robber Willie Sutton why he robbed banks? He reply was: "Because that's where the money is".
Today they want to rob and loot Social Security because "that's where the money is."
The bankster scum bags are hell bend on looting Social Security and Obama and the Congressional whores are aiding and abetting them!
Its where the money WAS.
Now only the "revenue stream" counts.
Uncle Wilie sees your 401k as the next place to find the needed cash!
Legal Disclosure: Past performance is no guarantee of future performance.
It'll be the same "get over it, losers" line from "investors" when they drain the 401k "Dumb Money."
Re-Fi people who have kept up their mortgages. Principle stays the same. Let the RMBS holders take their overdue share of the shitstorm.
Or just rip up the IOUs in the Trust, and pass out what's leftover.
Good article and good point you make. Just another scam like everything else we read about every day. Every where you turn people are trying to take what's rightfully yours, rob you blind, grab your wallet, call small eggs extra large, sell empty air-filled bags of potato chips, force you to pay $60 for an extra suit-case on a flight, force you to pay high deductibles on health insurance, etc, etc, etc, etc. Life is turning into one big scam. It's a cheater's world. Too bad all that 2012 nonsense is just a fantasy--at this point I'd like to press the reset button.