Some thoughts on the recent article:1. Will there really be a deficit? The basis of the deficit argument relies on the estimates made by the Social Security Administration. Those estimates in turn are based on a projected annual GDP growth rate over the next 30 years of 1.75%. Now, it is the fiduciary responsibility of the SS Board to be as conservative as possible, but the failure of most commentators and politicians to point out that the projections are based on a near worse-case scenario strikes me as being self serving. Should the economy simply grow at the rate it has over the last three decades (a period that includes a wide variety of economic conditions, including recessions and high unemployment), the point at which the shortfall in revenues is moved forward towards the end of the 21st century.2. "Means" testing?While it may be logical to implement a need basis for Social Security, the negative consequences socially and politically may be far worse than the fiscal gain. It is the universality of SS benefits that makes it palatable to the American public. Make it selective, and it will soon be seen a simply seen another public welfare program. - and will carry all the negative bias that we have towards such. The idea of a means based system was considered when the program was first developed, but rejected precisely because they were aware of that bias.3. Lifting the wage base.Perhaps the most sensible idea, although the amount of additional revenue gained would not be significant. However if means testing also came in, it would seen simply as a not too stealthy tax hike for upper income Americans, and would have serious political problems
Isn't the real question whether the United States wants to have a welfare system for seniors or a retirement system for seniors. If the government takes money from the higher income folks, but excludes them from the receiving the retirement benefits, then what the government has done is to TAX the higher income folks in order to pay benefits for the welfare of others. Some would say that this is what the govenment has been doing all along, anyway.
You wrote:3. Lifting the wage base.Perhaps the most sensible idea, although the amount of additional revenue gained would not be significant. However if means testing also came in, it would seen simply as a not too stealthy tax hike for upper income Americans, and would have serious political problems Comment: the wage base is increased annually which makes sense as the inflation rate increases. doing away with a wage base does not make sense to me in that benefits have a maximum payout, so if the base were eliminated then the payout max would have to go with it. I do not think that the pool could handle the long term effect this would create.comments?Jenn
You said: Isn't the real question whether the United States wants to have a welfare system for seniors or a retirement system for seniors. I believe that this is exactly what many socialists masquerading as liberal democrats want. I am 43. I have been paying into SS for 27 years. Yes, since I was 15 working at my first after school and summer job. I once calculated that if I had taken my SS withholding and invested it at an average 8% per year I would have more than $500,000.00 by the time I retired. I used a 5% annual increase in wages based on my first job out of college. My increases have been larger and I could have earned 16% on CD's for a good part of the 1980's. I did not include what my employer pays. I am certain that I will never see a penny of this money because means tests will eventually succeed. Is this a legitimate function of government in a free society? We are losing our freedom of self-determination. With this kind of money invested very few would need SS in retirement. What is really needed is to change SS into mandatory IRA's. Think of the economic growth that would result if this capital were placed in the hands of private investors.
"I would have more than $500,000.00 by the time I retired."Might have had is more accurate. Returns on investments are always at risk - you could have done better, or considerably worse. Using historical returns as a basis to compare how much might have is flawed because you are using the advantage of hindsight."I am certain that I will never see a penny of this money because means tests will eventually succeed."A. It is exactly that belief which reinforces my argument that a "means" test will never be applied - it would over time destroy consensual support for Social Security.B. Even if there was an income limit imposed, to assume that one will never fall under the limit is saying that you know exactly what the future holds for you. It might be very Un-American to say this, but even the wealthy have been known to become poor."We are losing our freedom of self-determination."I wasn't aware that poverty was always a matter of choice."Think of the economic growth that would result if this capital were placed in the hands of private investors."Far less than you would imagine. Through IPO's and secondary offerings, the stock market provides a source of low-cost capital for the real business of this county. But the bulk of what occurs in the market adds little directly to economic growth - and that primarily through what is called the 'wealth effect:" higher consumer spending because they feel richer.The term "investor" is mostly a misnomer. What we really are is passive stakeholders in ongoing concerns who have bought our shares from other passive owners.
I stated in my first post that the projected growth rate used by the Social Security Administration was 1.75%. That is for the next 3 decades, the estimated growth over the next 75 years is projected at 1.4% In short the Board of Trustees believes that economic growth in this country over the next will be similar to the shorter period from 1925-1950. Outside of that era, we have never had an extended period of growth that low.The prime reason given as to why the Social Security Trustees believe that economic growth will decline so strongly is that the population is will grow less rapidly in the years ahead because of declining fertility (which means less workers and hence less contributions to SS). But even there, the estimate - a .7% annual population growth rate -- is lower than any we have experienced in the last century. And, it assumes that over the next 70 years immigration will fall dramatically. The basic model for defining economic growth is: population increase + productivity increase = economic growth. By that equation, the Trustees believe that over the next seventy years, productivity will decline to .7% annually, well below the average of the past century. Hmmm, perhaps they know something about the future that they should tell the rest of us. The dependency ratio.This is the most often used figure to raise red flags. That the ratio of the elderly to the work force is going to decline dramatically over the next few decades. What isn't mentioned is what exactly is the overall dependency ratio - the numbers of workers to all those who are dependent on them, i.e. children, the disabled, and the elderly. As it turns out, not only does the ratio grow less wide by a slower rate, but by 2030, the total dependency will be lower than it was during 1960-1975. The growth of the elderly population is offset by the decline in the number of dependent children. And, if we take that fertility figure that the Trustees wish to use, the ratio gradually becomes more favorable.
About 2 or 3 weeks ago John Stossle (sp.?) on ABC did a show called "Is America Number One?". It compared business, government programs, etc, of various contries. Over all, I came away with several impressions.First, America is number one overall, but there is still room for improvement.Second, the poor will always be with us no matter what is done. Some people just can't be or refused to be helped.Finally, my biggest wish would be to follow Hong Kong's tax structure. A 15% flat tax, almost no tax dedections, very little government interference in business, and few social programs. Ironically(?), Hong Kong has one of the highest standards of living and little poverty. I guess there's something about making it or breaking it on your own that is a great motivator. Which of course was the original attraction to this country in the beginning.JLC
The questions for the candidates are interesting and thoughtfull. However, I have to restrain myself from turning red when you talk about means testing and lifting the wage base. Social Security is supposed to be a retirement plan, NOT AN ENTITLEMENT PROGRAM! This is not supposed to be a game of stealing from the income-producers and giving it to those who fell asleep at the switch. Listen, I for one resent giving 14% of my money (7% of my paycheck and 7% from my employer)to the government to earn a negative return on it and then have some beauracrat tell me I'm making too much money to get any of it back. How about letting each of us decide if we want to participate in the Social Security Program at all after we have contributed a minimum threshold? Hey we're all adults and we're capable of living with the decisions we make. If given the choice, I would bolt the system in a heartbeat!
>>>I wasn't aware that poverty was always a matter of choice.Poverty is not always a matter of choice, but spending what you have earned should be.>>>But the bulk of what occurs in the market adds little directly to economic growth - and that primarily through what is called the 'wealth effectThis money could not be spent by consumers only invested. The extra money circulating throught the economy would cause economic expansion by increasing employment, lowering interest rates, increasing home ownership ...
Jkrou,"Comment: the wage base is increased annually which makes sense as the inflation rate increases. doing away with a wage base does not make sense to me in that benefits have a maximum payout, so if the base were eliminated then the payout max would have to go with it. I do not think that the pool could handle the long term effect this would create."There are two possible advantages to eliminating the wage base.1. Putting aside the question as to whether or not there really will be coming shortfall in the reserves (the deficit), ending the wage base now boosts the amount currently invested and increases the reserves by the added interest (in theory, the reality is more complex). That adds a small but appreciable cushion to the total monies set aside. It wouldn't solve the problem, but it would give a little more leeway. 2. Perceived fairness is at the core of Social Security. Which is why it was intended as a universal system (although it actually isn't, there are a few groups, which have been allowed to opt out of SS, but they constitute a very small fraction of the population). With a widening gap between the top 20% of households in terms of average income and the rest of American households, the "burden" of Social Security taxes falls less and less heavily on that cohort as compared to all others - which upsets the contract of equally shared responsibility. I do think that the wage base issue is the least important of those being discussed. The benefits of changing the current method are relatively minor.I do find interesting that, so far, there has been little response to my first point - that the estimates of any deficit at all may be fundamentally flawed. Do you have any thoughts on that?
"Second, the poor will always be with us no matter what is done. Some people just can't be or refused to be helped."Being an American, and therefore an optimist, I find it very difficult to shrug and accept that cynical, Old World, proposition.And given the history of this country - with steadily declining poverty rates - I think it is simply wrong.
"Social Security is supposed to be a retirement plan, NOT AN ENTITLEMENT PROGRAM!"Where did you ever get that idea? Social Security was not set up to be a pension system, but a means to reduce and hopefully end poverty among the elderly by providing supplemental income.The system was designed so that each generation of workers would help support the prior generation; a social contract, which is why it is called Social Security.For sound political reasons, the program was made universal -- in that all those who retired (and are by definition elderly) would have access to that supplemental income regardless of financial need.You may disagree on philosophical grounds as to whether we should have such a contract, but that is the system we have now and the debate is about how we can best manage it.
olapman,"This money could not be spent by consumers only invested. The extra money circulating throught the economy would cause economic expansion by increasing employment, lowering interest rates, increasing home ownership..."Perhaps I did not make myself clear enough: Buying stocks or bonds from anyone else than the issuing company itself does not create economic growth.(Well, it does help grow the brokerage industry since they get transaction fees, but they aren't exactly the major engines of growth in this country).Loaning a woman money to start a company and being made a partner as payment is one thing. Buying out a partner for their share of an ongoing business is another.What most people call "investing" is basically the latter, not the former.
Let me throw out a new question:Suppose that an adult is medically disabled and cannot work thus relying on government payments via SS, how can we allow them to live in poverty? Granted they are allowed insurance coverage through Medicare but it has a an annual deductible, 80-20 on futher visits, NO drug plan, no vision plan, no dental plan; is this in the best interest of our older and disabled Americans?I bring this up because my parents are both medically disabled. Their monthly income is $1700 which does not go far. They cannot save. They do not go to movies or restaurants. They cannot afford cable television. They cannot afford their heating/cooling bill. They buy $30 in groceries each week. They pay for a supplemental plan which will no longer provide coverage as of January 1; it has a drug plan. Drugs will cost $700-900 per month once the supplemental plan dies.Tell me, is this the reward our country gives hard working individuals? Sorry but I cannot believe that we are tolerating this type of treatment for our elderly and disabled adults. Is it their fault that they did not have high paying jobs as working adults? I have a hard time believing this to be the case.Sorry for the rant, but it continuously irks me that we are not taking care of this class of individuals.Jenn
<<<I do find interesting that, so far, there has been little response to my first point - that the estimates of any deficit at all may be fundamentally flawed. Do you have any thoughts on that?>>>The estimates are fundamentally flawed from the fact that they come from the government. When was the last time any government agency has been half way accurate? How do you think the phrase "close enough for government work" got started? You always have some political gain involved somewhere. Some places/people spend all they can and then some because if they don't, in next year's budget they suffer a cut. Negative reinforcement. Do well, be responsible, get punished.My personal conviction is to lean to the conservative estimates. Pay down the deficit while the getting is good. The government should have to live like the rest of us.JLC
<<<Being an American, and therefore an optimist, I find it very difficult to shrug and accept that cynical, Old World, proposition.>>>Not being cynical, being realistic. Being an American doctor, I see it everyday, some people actually refuse to help themselves, albiet a minority of the masses.JLC
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