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What is the transition cost and where did it come from? When OASI began the tax rate was 2%. The tax rate should have been closer to 11.83%. OASI was fine since the there was only one cohort of retirees in 1940 and added only one more each year. By the 1950's it was clear the program was going broke. The Tax rate was increased to 3%, base increased and the number of covered workers were expanded. This did nothing for the solvency of OASI long term. It simple increased current OASI revenues for a long term unfunded liability.

This unfunded liability as with the original retirees was created because the system was not prefunded nor were the tax rates sufficient to begin with. It would have been possible to start OASI without prefunding, but the tax rate should have bene much greater.

The transition cost is nothing more than the amount it will cost or would have cost in the beginning to begin an OASI program which was not prefunded. Today the OASI tax is 10.6% with a targeted 42% benefit. It is very simple to calculate the critical worker to retiree ratio from this information. Basically we take 42% and divide it by the 10.6% and we get 3.96 workers for every retiree. If the worker to retiree ratio never dropped below this, we would have no problem funding OASI at the current tax levels.

The problem is the birth rate declined. The decline in the number of births affects the worker to retiree ratio about 18 to 20 years later. OASI has no problem paying bills as long as it can raise the taxes, raise retirement age, change COLA or the OASI benefit formula. The problem is retirement planning is life long plan. Making changes to the OASI structure will affect those who plan to apply for benefits.

Basically those who were working in the 40's, 50's and 60's kept the taxes low in the hopes succeeding generations would pick up the tab. Either through government cover up or ignorance on the part of workers, they simple failed to pay enough and create a fund to help cover their OASI benefits. They passed teh bill to current workers and hope they will pay it.

The mood in the country is no one wants to see the OASI tax increased. Voters are also becoming leery of raising the retirement age. Still others have performed internal rates of return on the contributions and have found the OASI benefit lagging the US Treasury rate by almost 50% or more. OASI has publicly stated they can pay 69% (January 2000) of projected benefits without changes. Many do not like this and want to change to a private system.

Going to a private system entails allowing some portion if not all of a workers contribution to be diverted to a private account. If this is done, there are no longer enough funds to pay current benefits. In essence the critical worker to retiree ratio changes. As the tax rate is reduced, the worker to retiree ratio must increase to maintain benefits. However, this is not possible with declining births. Hence a divergence between revenues and benefits of extreme magnitudes.

In many proposals, their is a term used called transition costs. It is basically the sum of money needed to continue paying current benefits while allowing workers to divert a portion or all of their contributions. The transition cost is based on what changes are made to the OASI benefit (Current and future) and tax rates. The transition cost and unfunded liability are the same thing. The approach the cost from to opposite directions, but they are the same.

If we do nothing and allow OASI to just pay benefits as it can, the transition cost is $11 Trillion to future and current workers. Many will say there is no cost to workers. They pay the same tax, retire at the same age and get what ever OASI revenues in the year can pay. However, I say the cost is a reduced benefit.

If we were to repeal the Social Security Act today and not pay any more benefits, there is a transition cost. The cost would be born by those who have accrued benefits. Mostly current retirees and soon to be retirees.

The primary debate is who pays the transition cost? Most all proposals presented allow current retirees to keep their benefits un changed. This portion of the $11 Trillion unfunded liability/transition cost is about $4 trillion for those who are currently over 62.

The sum of all changes to OASI wether they be current benefit cuts, changes to future retirees benefits, change in retirement age, taxation of benefits, tax rates must total in effect about $11 Trillion in to days dollars. For example if you stopped paying all current retiree benefits today, the unfunded liability would be reduced by $4 trillion. This would be a transition cost of $4 Trillion which current retirees would pay by not receiving any more benefits.

If we eliminated COLA from now on, the unfunded liability might drop by $1 Trillion. Current retirees might contribute 70% of this $1 Trillion with the remainder being paid for by not yet retired workers. Again the this would be a transition cost.

The transition cost falls upon two groups of people, workers or retirees. Shifting this transition cost or unfunded liability to one group versus spreading the cost among all, increases the burden substantially.
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I guess I don't understand why there's an inherent problem with a pay as you go system. Taxes were low when social security started because the benefits paid out were also low. As more people retired, the taxes had to be raised. A pre-funded system would have been preferable, but with a pre-funded system the first SS generation would have had nothing. They wanted to give them benefits. It's kind of like adding prescription drug coverage to medicare. We could start now with those entering the workforce at age 18 and increase their medicare tax by 0.1% so that by the time they retire there will be a huge surplus to pay for their prescription drugs. Or, we can raise everyone's payroll tax and pay for the current retirees prescription drugs. I don't want to get sidetracked on medicare reform, I just don't understand why a pay as you go system is "doomed to failure".
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Taxes were low when social security started because the benefits paid out were also low. As more people retired, the taxes had to be raised.

Maybe rather than adjusting taxes, the retirement age should have been adjusted. SS payments rise as the cost of living rises. Why not raise the retirement age, as life expectancy increases?

When average life expectancy was 67, nobody considered retiring at 47 to spend 20 years poolside in Florida, but now that people regularly live into their mid 80's, people must consider financing a retirement that lasts as long as their working years.
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Average life expectancy hasn't really increased that much. You have to look at the average expectancy of a person at 65. 60 years ago not as many people lived to see 65, but those who did lived on average around 4 years less than 65 year olds do today.

So you're suggesting that we raise the retirement age so that more people die before they ever collect a dime in social security. Hmmm....doesn't quite seem fair to me.
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So you're suggesting that we raise the retirement age so that more people die before they ever collect a dime in social security. Hmmm....doesn't quite seem fair to me.

Actually I'm suggesting privatizing SS so that individuals are free to accumulate more savings without needing to hire lobbyists to ensure that their monthly benefits aren't cut. With larger nest eggs, individuals would likely be able to retire earlier if they choose, and should they die early, they could leave that nest egg to their heirs. The current system, which permits SS contributions to be lost if one doesn't live to retirement, is unfair. Raising the retirement age is simply one method (along with higher taxes and reduced benefits) for paying the transition costs to a better system.
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A pay-as-go plan is doomed to failure because it is unfair. As long as everyone percieves they are not being over charged for the service, there are few complaints.

How many complained about a 2% payroll tax and getting huge benefits from sush a small amount? A gift from heaven? When did complaints begin? Was it in 1951 when the tax was raised by 50% and the base increased? No, SSA did a fine job of putting spin on the tax and base increases. They also did a fine job of spin control when more covered workers were enrolled. The problem with spin, is if is a lie, then it comes back to bite you.

There is no problem with a pay-as-go plan as long was everyone is willing to pay the taxes in support of it. I think the program is evil. It robs people of the ability to create wealth. It stifles self rule and creates dependcy on the government. It is a bad deal since it earns 6.9% on US Treasury Notes, but in effect pays less than half of this in benefits and when the IRR calculation is done correctly is negative.

The problem is there is a growing lack of support for the program because the truth is peaking through all the past lies.
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The current system, which permits SS contributions to be lost if one doesn't live to retirement, is unfair. Raising the retirement age is simply one method (along with higher taxes and reduced benefits) for paying the transition costs to a better system.

Raising the retirement age excaberbates the very thing which you feel (and I agree with you) is unfair. I'm not interested in doing something unfair to undo something unfair.
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eliminateSS, in my last post I said that:

a simple modification to the current pay-a-you-go program will eliminate the coming financial imbalance and allow the program to continue indefinitely.

and that your core problem with SS is not that it can't survive financially, but that you believe it is "unfair".

I take these comments from your post to indicate that I was correct:

A pay-as-go plan is doomed to failure because it is unfair.

There is no problem with a pay-as-go plan as long was everyone is willing to pay the taxes in support of it. I think the program is evil.


In spite of your earlier "Titanic" analogy, you didn't attempt to show that the system will fail financially, you simply said that you don't like the basic idea.

You predict that eventually we'll get a majority of voters to be so convinced of the "evil" of the system that they will be willing to do something like cut benefits to existing retirees by 70% just to get out. I won't try to make political predictions.

I will simply say that:

the financial "pain" of transitioning to a privatized system is substantial,

the people who pay that cost won't be around to reap the "benefits",

I'm not sure that there are any large benefits when you look at the whole economic picture,

and therefore the better decision is to put the current system into a long term balanced position.




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PMcMullenCT, you say:

Actually I'm suggesting privatizing SS so that individuals are free to accumulate more savings without needing to hire lobbyists to ensure that their monthly benefits aren't cut. With larger nest eggs, individuals would likely be able to retire earlier if they choose, ...

You may have noticed that I'm skeptical of these claims that most people would be better off financially if we privatized SS.

I have claimed that any program that actually "adds up" requires that large numbers of current workers or retirees lose ground financially.

You have mentioned the GWB proposal. He has not put any numbers on his plan. I believe that the reason is his advisors know that the above statement is correct.

He wants some sort of a bi-partisan commission that can make a private deal on changing SS before he puts numbers into his plan -- because he knows that any significant public debate will highlight the fact that there will be lots of losers.

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You may have noticed that I'm skeptical of these claims that most people would be better off financially if we privatized SS.

I have claimed that any program that actually "adds up" requires that large numbers of current workers or retirees lose ground financially.

A growing number of workers under 40 have little faith that SS will provide them with support in retirement. With SS offering such a meager rate of return already, the ability to divert increasing percentages into private accounts, where individuals can view the balance of a retirement portfolio with their name on it may be more comforting to many than the promises of a politician that the government will take care of them.

Means testing might be another method to ensure that the pain of phasing out SS will not send seniors into poverty. Seniors with sufficient investment income would likely accept reduction or elimination of their retirement benefits, if it meant their children would be freed from SS.
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I think there are pretty good studies out there that show that a pre-funded, privatized system would provide more retirement money for everyone. However, we don't have a pre-funded, privatized system so to move to that state requires a significant transition cost.

Social Security right now pays out about $350 billion in benefits. In order to move to a prefunded system we would need around $4.375 trillion right now to be in the collective retirement accounts of all current retirees earning 8% interest. That doesn't even count the next 20 years of retirees, or factor in the demographic change.

$4 Trillion is a heck of a lot of money, around 40% of our GDP isn't it? There is absolutely no way that we can move to a completely pre-funded system without it bringing everyone in the U.S. a large amount of pain.

I suggest that we look at ways to add personal retirement accounts as a way of moving toward a privatized system and as a way of blunting some of the social security benefit cuts that will have to be enacted because of the demographic change. I also suggest that we change the nature of social security benefits to reflect what I believe is the true nature of the program and give everyone basically the same benefit. I believe this same benefit should essentially be the mean social security benefit currently and then reduced around 30%. I also believe that social security should both be financed by the federal income tax, and the benefits be treated as normal income. I also believe that retirees should have the same standard deduction a workers. If some of these changes reduce the amount that the poorest workers receive from SS, then I believe the formula should be adjusted to give everyone a bit more, or more money should be devoted to SSI.
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A growing number of workers under 40 have little faith that SS will provide them with support in retirement

And rightfully so. No one should think that SS will support them in retirement. However, it would be incorrect to believe that workers under 40 will receive nothing from social security when they retire.

Seniors with sufficient investment income would likely accept reduction or elimination of their retirement benefits, if it meant their children would be freed from SS.

You have an awfully altruistic opinion of wealthy seniors. I'm fairly certain that they will fight tooth and nail against any reductions in their benefits. But, there are more workers than retirees and if people are informed correctly (no scare tactics by politicians) I think they would support some modest changes to social security.
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Social Security right now pays out about $350 billion in benefits. In order to move to a prefunded system we would need around $4.375 trillion right now to be in the collective retirement accounts of all current retirees earning 8% interest. That doesn't even count the next 20 years of retirees, or factor in the demographic change.

One idea is that by diverting a portion of SS contributions into private accounts, they will reduce the obligation to the next 20 years of retirees. One plan I heard called for the return on those private accounts to replace benefits that would otherwise have been paid by SS. By allowing that money to grow at market rates, the reduction in contributions now would be more than offset by reductions in benefits in the future.

I don't intend to imply that the transition will be painless. At some point the SS surplus will be depleted, and the government would have to raise taxes, cut benefits or borrow money. Perhaps for some period after private accounts have replaced SS, SS taxes will still be deducted from paychecks to pay down a SS debt incurred during the transition.
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One idea is that by diverting a portion of SS contributions into private accounts, they will reduce the obligation to the next 20 years of retirees.

The way this would work most efficiently would be for the government to subtract whatever earnings you have from your personal retirement account from what your social security benefit would be. However, I am sure there would be widespread opposition to such a plan. What instead would happen is that people would demand they get their full SS benefit and keep all of "their money" which is in their personal retirement account.

SS is running a small surplus right now, and will for the next 10-15 years. What you're suggesting is take that surplus and invest it in the stock market (either in personal accounts or Clinton's plan for the government to do it), earn a greater return and thereby push off social security's insolvency date (meaning the date where expected benefits are greater than expected revenues). The problem is, that surplus is already being invested in government securities. You would have to find an investment that beats the rate on a government bond. It's not easy to find a guaranteed investment that pays better than a bond, the best I think you could do would be 2-3% better, which is really not all that much in terms of saving social security.
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And rightfully so. No one should think that SS will support them in retirement. However, it would be incorrect to believe that workers under 40 will receive nothing from social security when they retire.

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(I am 28) Actually, I think means testing will happen. No one thought there would be taxes on SS and now the "rich" pay it. The next to most likely things to happen to SS will be to remove the cap on the amount paid in, per year, and some level of means testing. Very small at first, but it will slowly include more and more people.

I am not going to need SS when I retire, as I am 28 and already have started to save, assuming nothing from SS. Many of my friends are doing the same thing. That is why it will happen, we don't need or want it.
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The way this would work most efficiently would be for the government to subtract whatever earnings you have from your personal retirement account from what your social security benefit would be. However, I am sure there would be widespread opposition to such a plan. What instead would happen is that people would demand they get their full SS benefit and keep all of "their money" which is in their personal retirement account.

If you rule out all the options to which there will be opposition, then SS is doomed. The demographics of longer lifespans and the retirement of baby boomers will results in a much lower worker to retiree ratio. Something's got to give. Either reduce benefits, increase taxes, or improve the rate of return on the money available. Allowing at least some of those assets to grow more aggressively at market rates will reduce the amount of necessary tax increases and benefit cuts. While future retirees may object to trading the return on their private accounts for SS benefits, the alternative is either reduced benefits or increased taxes.

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Actually, I think means testing will happen. No one thought there would be taxes on SS and now the "rich" pay it. The next to most likely things to happen to SS will be to remove the cap on the amount paid in, per year, and some level of means testing. Very small at first, but it will slowly include more and more people.

Then you will have completely removed the link between what is paid into the system, and what benefits are paid out. At which point we can dissolve the SS administration and consolidate welfare for the young and old into a single program. Retirement "savings" would exist only as private accounts (IRA's, 401K's, etc.).

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Agreed!
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I am sure that even the rich will receive something from social security. Yes, some people now pay tax on social security benefits, so if they are among the wealthiest individuals they pay 39% tax on some of their benefit (I don't think all of social security is taxable even for the Bill Gates' of the world). It's still something.
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Then you will have completely removed the link between what is paid into the system, and what benefits are paid out. At which point we can dissolve the SS administration and consolidate welfare for the young and old into a single program. Retirement "savings" would exist only as private accounts (IRA's, 401K's, etc.).

If you're thinking I'll disagree with this, than you're wrong. Although I think welfare for the young and old in one program may not really be efficient. As you can tell from earlier posts, I don't believe that a person deserves more SS benefit because they paid more in SS taxes. The SS taxes that they paid went to support the retired people when they (the current retirees) were working. SS Taxes are not saved for your own retirement.
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I don't believe that a person deserves more SS benefit because they paid more in SS taxes. The SS taxes that they paid went to support the retired people when they (the current retirees) were working. SS Taxes are not saved for your own retirement.

I think most people disagree on this. Why else would the SS administration bother to track your contributions and issue benefits based upon those contributions? People view SS taxes as an investment which will be returned when they retire. Thus, there is no stigma with collecting SS checks to supplement their retirement income. Most people believe that they deserve SS benefits because of the contributions they made throughout their working lives. While their actual contributions may not be held in an account, the belief is that a contract has been entered into with the SS administration.

Once you start applying means tests and using SS to redistribute wealth, then SS checks will become undeserved handouts from the federal government. Then it would be best to abolish the SS administration and consolidate welfare programs for the young and old. The only "deserved" retirement income would come from individual accounts (IRA's, 401K's etc.)
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OASI benefits are not based off contributions or taxes paid. OASI benefits are based on the workers work history. The tax rate has changed along with the base to which this tax is subjected. The correlation between OASI taxes and OASI benefits is not very good for current retirees. However, if no further changes in the OASI tax takes place, then about 40 years from 1983, equilibrium will set in and there would be a good correlation between taxes paid and benefits recieved.

For an analysis into how the OASI benefit formula works, you may like to read the following. This has been posted several times in the past. Even though the subject matter is different, it does describe how the OASI formula works.

http://www7.50megs.com/justsayno/math.html
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I agree with you that most people don't see SS in this light, but I think that most people are wrong. Look at the history of social security. The first woman to every collect a monthly SS check (the first couple years people got a lump sum on retirement) was Ida May Fuller. Ida May Fuller paid social security taxes for three years, a total of $24.75. Her initial monthly check was $22.54. She retired at age 65 and lived to be a 100, collecting a total of $22,888.92 in Social Security benefits. Now, how could anyone after paying $24.75 into the system think that their monthly check of $22.54 was deserved?

If Social Security is a retirement program where people "invest" money in taxes and get back a "return" in the form of a monthly benefit, then it's an absolutely absurd program and was little more than a pyramid scheme for the first half of its existence. Ida May Fuller and all her cohorts got much, much more out of the system than they put in, around a 1000X more than they put in. Was that wrong? It depends on what the point of the program was.

The point of the program, and I think this is pretty much a fact, was to give money to the elderly so that they wouldn't be in poverty. They instituted a formula of how much you got based on how much you earned when you were working to make people think that they weren't getting a handout (most people don't like handouts). But, that's exactly what SS is. It's a means of transferring wealth from the working population to the retired population.

You may disagree, but just because something is undeserved doesn't mean that it's wrong. I think there is considerable public good that comes from not having our elderly living in poverty when they can't work anymore. I don't think there is considerable public good in giving people with multimillion dollar nesteggs an additional source of retirement income they can blow at bingo.
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OASI benefits are not based off contributions or taxes paid. OASI benefits are based on the workers work history.

The more a worker earns (up to a point), the more he pays into SS.

The more years a worker works, the more in total he will have paid into SS.

Those who work for long periods of time, at higher salaries have paid more than those with lower salaries and short work periods.

Since benefits are also higher for those with higher average salaries and longer work histories ("Once all the indexed wages are determined, the average of the best 35 years is used to determine the OASI benefit."), there IS a relationship between SS taxes paid and benefits earned.

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PMcMullenCT, you say:

With SS offering such a meager rate of return already, the ability to divert increasing percentages into private accounts, where individuals can view the balance of a retirement portfolio with their name on it may be more comforting to many than the promises of a politician that the government will take care of them.

I'll agree this would be more "comforting",
but where do you plan to get those "increasing percentages"?



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If Social Security is a retirement program where people "invest" money in taxes and get back a "return" in the form of a monthly benefit, then it's an absolutely absurd program and was little more than a pyramid scheme for the first half of its existence. Ida May Fuller and all her cohorts got much, much more out of the system than they put in, around a 1000X more than they put in. Was that wrong? It depends on what the point of the program was.

That's my point. It is a pyramid scheme that is dependent on a sufficient ratio of workers to retirees. By converting to a system of mandatory private accounts, you are no longer dependent on favorable demographics, and the elderly are no longer held hostage by politicians.

The point of the program, and I think this is pretty much a fact, was to give money to the elderly so that they wouldn't be in poverty. They instituted a formula of how much you got based on how much you earned when you were working to make people think that they weren't getting a handout (most people don't like handouts). But, that's exactly what SS is. It's a means of transferring wealth from the working population to the retired population.

Correct, it is redistributing from workers to retirees, but the retirees receive, in return for their contributions, an income somewhat proportional to those contributions when they retire. The problem is that it only works as long as the population grows suffiently, and people die as scheduled.

True, the first generation of retirees to benefit paid nothing into the system, but since then everyone has received retirement income in exchange for, and in proportion to, taxes paid. Breaking that relationship through means testing and progressive taxation, will turn it into another wealth transfer from the rich to the poor - punishing those who study, work and save in favor of those who don't. If you must suppplement the income of the poor, do it with welfare checks and the associated stigma, rather than through SS.

You may disagree, but just because something is undeserved doesn't mean that it's wrong.

I do disagree. I don't disagree with charity itself (those who give it or receive it), but I do object to the claim that people are entitled to charity.

I think there is considerable public good that comes from not having our elderly living in poverty when they can't work anymore.

Then make private retirement account mandatory so that every senior would be guaranteed a nest egg.

I don't think there is considerable public good in giving people with multimillion dollar nesteggs an additional source of retirement income they can blow at bingo.

Is there public "evil" in the existence of affluent seniors? With too few setting aside money for retirement, is it wise to punish the few who have been particularly successful.
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I'll agree this would be more "comforting",
but where do you plan to get those "increasing percentages"?


The population of retirees without such private accounts would reduce over time through attrition. With each passing year, new retirees would have held these accounts with compounded returns for increasingly longer periods of time, replacing more and more of the benefits that must be provided to them.

Someone who is 55 when private accounts are created, will have only 10 years of compounded interest on that account, and will likely still require some level of SS benefit. However, an individual who was 30 at the time of the program's creation will have 35 years for those assets to grow, and might have his SS benefits completely replaced by income from that private account.

As older retirees, who received 100% SS benefits, die, they are replaced by new retirees who will have their benefits reduced by amounts equal to the revenue on their private accounts.

Retirees will be increasingly supporting themselves via private accounts. As fewer benefits must be paid by the government, more SS taxes can be diverted into private accounts.
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PMcMullenCT, you say:


The population of retirees without such private accounts would reduce over time through attrition. With each passing year, new retirees would have held these accounts with compounded returns for increasingly longer periods of time, replacing more and more of the benefits that must be provided to them.

This sounds good, until you actually do the math. The problem is that you need to put money into the private accounts today, but the decrease in benefits doesn't build up until many years from now.

If you do the calculations with the current SS system, you'll find that the decreased benefits (which are offset by private accounts) don't get here fast enough to make this work.

You need to find lots of money from some other source. This is why a large number of current workers or retirees will be worse off as a result of transitioning to the private system.
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SS is running a small surplus right now, and will for the next 10-15 years. What you're suggesting is take that surplus and invest it in the stock market (either in personal accounts or Clinton's plan for the government to do it), earn a greater return and thereby push off social security's insolvency date (meaning the date where expected benefits are greater than expected revenues). The problem is, that surplus is already being invested in government securities. You would have to find an investment that beats the rate on a government bond. It's not easy to find a guaranteed investment that pays better than a bond, the best I think you could do would be 2-3% better, which is really not all that much in terms of saving social security.

Now this doesn't even pass the giggle test. The junk paper in the SS "Trust Fund" are investments? Which generation is going to pay the interest on these investments? Whose wallet will fund the redemption of those junk bonds? This is the most unfair part of the current situation, the younger generation has the highest SS tax rate in history and will be on the hook to pay for the older generation's retirements TWICE! You can bet your bottom dollar that our taxes that go toward the redemption of the junk bonds won't be part of the SSA's calculation of our benefit.
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If you do the calculations with the current SS system, you'll find that the decreased benefits (which are offset by private accounts) don't get here fast enough to make this work.

You need to find lots of money from some other source. This is why a large number of current workers or retirees will be worse off as a result of transitioning to the private system.

I have acknowledged that there would be transition costs, paid either through raised taxes, cut benefits and/or increased return on assets. In that particular post I was answering a question that had been posed about how the amounts that could be diverted into private accounts would eventually increase as the obligations to retirees reduced over a long period of time.
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I don't think you quite understand. Imagine if the social security surplus wasn't "invested" in government bonds. Those bonds that are currently sold to the social security administration would instead be sold to the general public. In fact, you could easily take that 2 Trillion is bonds that are theoretically in the "trust fund" and sell them for $2 Trillion in cash right now. The debt that the general budget has is the same, whether it is owed to social security or to the public. I agree with you that having that debt is a problem, but the debt doesn't exist because of social security, the debt exists because the general revenues were (up until this past year or so) less than general expenditures. Taxes needed to be higher or expenditures needed to be lower.
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That's my point. It is a pyramid scheme that is dependent on a sufficient ratio of workers to retirees

It isn't a pyramid scheme any more, although it was for awhile. For awhile, SS didn't include all types of workers (state and local government employees, and I think various types of professional occupations) so when SS experienced a cash crunch they decided to cover more workers increasing the revenue for SS, but also increasing its obligations. Pretty much everyone is covered by social security now, so the pyramid scheme days are over.

Ask yourself this question, is there some reason why social security can't be adjusted so that the benefits paid out equal the revenues coming in?

I don't disagree with charity itself (those who give it or receive it), but I do object to the claim that people are entitled to charity.

You see, this is the paradox. People believe, wrongly in my opinion, that the social security taxes they paid entitle them to benefits when they retire. I'm saying that they don't, and therefore they aren't entitled to anything. You don't like retirees saying they are entitled to benefits, and you also say that you are entitled to the taxes you pay in. If you are entitled to the taxes you paid in, then they are entitled to their benefits. I'm saying that the SS taxes we pay now are used to pay for the retirement of today's working generation. The only thing that we're entitled to is seeing that those taxes are used to pay for the retirement of retirees, and that the money is used efficiently to fight poverty in the elderly.

Then make private retirement account mandatory so that every senior would be guaranteed a nest egg.

I agree with this statement, it should be mandatory. But, unfortunately, this doesn't help the current and future generations of retirees who don't have a nest egg or don't have enough working years left to accumulate one.

I don't think there is considerable public good in giving people with multimillion dollar nesteggs an additional source of retirement income they can blow at bingo.

Is there public "evil" in the existence of affluent seniors? With too few setting aside money for retirement, is it wise to punish the few who have been particularly successful


I'm not using the term public good in a normative sense, like good vs. bad. I'm talking about a public good in the economic sense such as durable goods, consumable goods, etc. A private good is something that an individual pays for and consumes because it benefits only them, like a twinkie. A public good is something that the public has to pay for, because the public consumes/benefits from it, like national defense, public park, and charitable works such as caring for the poor.

Since I believe that social security is a charitable program, those who are well off shouldn't receive charity.

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The population of retirees without such private accounts would reduce over time through attrition. With each passing year, new retirees would have held these accounts with compounded returns for increasingly longer periods of time, replacing more and more of the benefits that must be provided to them.

I understand where you're coming from, because I felt exactly as you do. The problem is that the numbers don't work. EliminateSS is probably the most numerically gifted of the posters on this board, and he can tell you that your plan wouldn't balance.

Think about the payments which are due social security as a liability, or debt. Say for example you owe $50, and the interest payments on it are $3.50 each year. In order to pay down that debt, you have to increase your total contribution, say pay $4.50 each year. By increasing by a dollar (between 25% and 33%), you would pay off the debt in a little less than 50 years.
So, in order to pay off the social security liability, you have to increase the amount that goes towards social security, and it would take a long time to pay off. You could make it take less time by simply defaulting on the loan (eliminate SS benefits), but I don't think people would accept that.

My question is, why do you have to pay off the $50 loan? If you always pay the $3.50 in interest every year, eventually you'll die and the $50 loan will be tranferred to the next generation. Yes, the interest is wasted from generation to generation, but the only way to break the cycle is for one generation to pay it off. That generation won't get any benefit from paying off the loan, but the next generation will benefit. Are you willing to pay extra to pay off the SS liability realizing that you will see no benefit whatsoever?
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/
Are you willing to pay extra to pay off the SS liability realizing that you will see no benefit whatsoever?
/

Short answer, I expect I will, with paying SS all my adult life and receiving little to no benefit by the time I retire. Because I (and many people my age) expect it to happen, it will be politically possible. SS is no longer the 3rd rail of politics. George Bush won the presidency proposing a massive overhaul of the system, and became president. (Please don't talk about the election.) The system is going to change because it needs to and people are finally willing to discuss it.
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Short answer, I expect I will, with paying SS all my adult life and receiving little to no benefit by the time I retire.

I don't think this belief is true, however. I'm no defender of social security, but the system does "balance" if taxes are capped at their current levels and benefits are cut by 30%. So, you will get 70% of the benefit that current retirees get. If you want to move towards a privatized system you have to be willing to receive less than 70% of the current benefit.
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It isn't a pyramid scheme any more, although it was for awhile. For awhile, SS didn't include all types of workers....Pretty much everyone is covered by social security now, so the pyramid scheme days are over.


I don't see how including all workers matters. The pay as you go systems by it's nature is a pyramid scheme, regardless of what percentage of workers particpate.

Ask yourself this question, is there some reason why social security can't be adjusted so that the benefits paid out equal the revenues coming in?

I have never said that the system can't be continued by adjusting revenues and/or costs. My argument is that it's a bad system and it should be replaced.

You see, this is the paradox. People believe, wrongly in my opinion, that the social security taxes they paid entitle them to benefits when they retire. I'm saying that they don't, and therefore they aren't entitled to anything.

The tell my why does the SS administration calculate benefits based upon average earnings and the number of years worked. The more a worker pays, the more he receives.

You don't like retirees saying they are entitled to benefits, and you also say that you are entitled to the taxes you pay in. If you are entitled to the taxes you paid in, then they are entitled to their benefits.

No. You're putting words in my mouth.

I don't think that people who haven't paid into the system are entitled to receive benefits from it.

I'm saying that the SS taxes we pay now are used to pay for the retirement of today's working generation. The only thing that we're entitled to is seeing that those taxes are used to pay for the retirement of retirees, and that the money is used efficiently to fight poverty in the elderly.

You've got a different impression of SS than I, and most other Americans, who feel that, in exchange for their contributions, they will recieve proportional compensation when they retire.

But, unfortunately, this doesn't help the current and future generations of retirees who don't have a nest egg or don't have enough working years left to accumulate one.

No. Once again you're putting words in my mouth.

Savings accounts do not benefits those who do not have them. As I have said before, there is a transition cost associated with moving from a pay-as-you-go to a retirement savings system. That transition cost is what helps those retirees without such accounts.

I'm not using the term public good in a normative sense, like good vs. bad. I'm talking about a public good in the economic sense such as durable goods, consumable goods, etc. A private good is something that an individual pays for and consumes because it benefits only them, like a twinkie. A public good is something that the public has to pay for, because the public consumes/benefits from it, like national defense, public park, and charitable works such as caring for the poor.

Neither am I. You seem to be implying that one should eat a Trinkie, because such an act provides no public goodness. Simply because a retiree has saved a sufficient, or even what you might call excessive, amount for retirement, that does not, in my opinion, justify appropriating those assets to support those who have not saved.

Since I believe that social security is a charitable program, those who are well off shouldn't receive charity.

It seems you wish to transform SS into a charitable program. I disagree with the arguements that it currently is a charitable program and that it should be transformed into one.

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Yes, the interest is wasted from generation to generation, but the only way to break the cycle is for one generation to pay it off. That generation won't get any benefit from paying off the loan, but the next generation will benefit. Are you willing to pay extra to pay off the SS liability realizing that you will see no benefit whatsoever?

I would consider freedom from dependence on government checks for future generations of seniors to be worth the costs. I would accept imposing means testing and higher taxes to cover the costs of transition to a better system if it meant SS as it currently exists would be abolished. Personally I don't expect to see any significant return from SS anyway.
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The pay as you go systems by it's nature is a pyramid scheme, regardless of what percentage of workers
particpate.


I don't think that's correct. As even EliminateSS will admit, if pressed, their is nothing economically wrong with a pay as you go system. It's not a pyramid scheme once all workers have been covered by the system. In the early days their were 40 workers paying into the system for every covered retiree receiving benefits. This meant that the return on benefits was extremely high, e.g. Ida May Fuller. Each year more people retired, and more workers entered the work force until the worker to retiree rate was more like 3 to 1. Now the returns aren't nearly as great.

Imagine an isolated island with 75 workers and 25 retirees. If each worker pays 10% of their salary in taxes, each retiree will get a replacement rate of 30% of salary. There is no reason why such a system couldn't exist for eternity. In the early days of social security, only 3 of those retirees were covered by social security. So, therefore taxes could be less, only 3% of salary, and those three retirees received a replacement rate of 75% of salary. As time went on, those 22 retirees who weren't covered by SS died and were replaced by 22 retirees who were. Now each person had to get less and the tax rate had to increase.

The tell my why does the SS administration calculate benefits based upon average earnings and the number of years worked. The more a worker pays, the more he receives

The reason the SSA keeps track of earnings is because your SS benefit is based on your earnings and number of years you work, obviously. What I've been saying is that the benefit shouldn't be based on your earnings.

You've got a different impression of SS than I, and most other Americans, who feel that, in exchange for their contributions, they will recieve proportional
compensation when they retire.


I agree that this is the impression that many Americans have, but I think they've been misled. The FICA taxes you paid last year are gone. They weren't saved for your retirement. There's nothing to stop the government from abolishing SS the year before you retire.

Savings accounts do not benefits those who do not have them. As I have said before, there is a transition cost associated with moving from a pay-as-you-go to a
retirement savings system. That transition cost is what helps those retirees without such accounts.


Have you thought about how much that transition cost would be? If SS right now pays out $350 billion each year in benefits, that means you would need to be able to deposit over $4 Trillion into private accounts earning 8% interest in order to provide income for them. Everyone under 35 would probably do alright, but all those between 35 and 65 would also need additional funds to add to their nest eggs. That's a heck of a large transition cost. I don't think it's a scalable mountain.

I'm not using the term public good in a normative sense, like good vs. bad. I'm talking about a public good in the economic sense such as durable goods,
consumable goods, etc. A private good is something that an individual pays for and consumes because it benefits only them, like a twinkie. A public good is
something that the public has to pay for, because the public consumes/benefits from it, like national defense, public park, and charitable works such as caring
for the poor.

Neither am I. You seem to be implying that one should eat a Trinkie, because such an act provides no public goodness. Simply because a retiree has saved a
sufficient, or even what you might call excessive, amount for retirement, that does not, in my opinion, justify appropriating those assets to support those who
have not saved.


I'm saying nothing of the sort. I'm saying that the market provides twinkies because people will pay for them and consume them all by themself. The market doesn't provide public goods, because the benefit is shared by everyone (at least theoretically) and the market won't provide it unless everyone pays for them. You're awfully naive if you think that those who are poor in retirement are there only because they didn't save. I want to cut the total benefits paid out in Social Security in order to pay for future generations to be able to save more. I think taking away benefits from those who are poor would be harmful. Therefore, the only people left to take benefits away from are those who are rich. The benefits have to be cut somewhere, should the poor or the rich have their benefits cut?
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I want to cut the total benefits
paid out in Social Security in order to pay for future generations to be able to save more. I think taking away benefits
from those who are poor would be harmful. Therefore, the only people left to take benefits away from are those who
are rich. The benefits have to be cut somewhere, should the poor or the rich have their benefits cut?


I guess when it comes down to it, every government program eventually turns into welfare because that's all they know how to do. If the benefits are to be cut, everyone's benefit should be cut regardless of means. SS isn't welfare. If you make it welfare, kiss it goodbye. In fact, I wish it would go away.

Did you know that a separate welfare program exists called SSI for poor people?

Since when it SS a welfare program that is based upon means?

razor.
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You are missing my point. I assume that I will receive 0%. I am making retirement plans with that assumption in mind. If a canidate stood up today and said, elect me and I will eliminate SS, I would vote for him. If one stood up and said, everyone under the age of 40 will get 0% of SS everyone over would get normal benefits, I would vote for him. I know I am in the minority, but the number of people who agree with me is growing.
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If the benefits are to be cut, everyone's benefit should be cut regardless of means.

Since when it SS a welfare program that is based upon means?


If SS isn't charity, then how do you explain Ida May Fuller?

Why should everyone's benefit be cut the same amount?
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You are missing my point. I assume that I will receive 0%.

I realize that it's valuable to assume that. But you will not receive 0%.

If everyone under 40 could be exempted from SS, then they certainly would be better off. The problem is, there isn't enough money to pay full benefits to everyone over 40. There's no such thing as a free lunch. Where is the SSA going to get taxes to make up for everyone under 40 who no longer has to pay taxes?
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It's not a pyramid scheme once all workers have been covered by the system. In the early days their were 40 workers paying into the system for every covered retiree receiving benefits

It doesn't matter what percentage of workers are covered. The pay as you go system is dependent upon the entry of new workers into the system to pay benefits. It's dependent on sufficient ratios of workers to retirees.

The reason the SSA keeps track of earnings is because your SS benefit is based on your earnings and number of years you work, obviously. What I've been saying is that the benefit shouldn't be based on your earnings.

You've compared it to a charity, stating that benefits were unearned. I argue that since benfits are tied to contributions, those benefits have been earned.

I agree that this is the impression that many Americans have, but I think they've been misled. The FICA taxes you paid last year are gone. They weren't saved for your retirement. There's nothing to stop the government from abolishing SS the year before you retire.

It is at least an implied contract, where contributions earn workers a benefit when they retire.

Have you thought about how much that transition cost would be? If SS right now pays out $350 billion each year in benefits, that means you would need to be able to deposit over $4 Trillion into private accounts earning 8% interest in order to provide income for them.

The gov't would not need to cover the entire $350 million. In the plans I've heard, the majority of SS taxes still go towards benefits for current retirees. The gov't must only cover the shortfall, and that short fall will decrease over time, as future retirees will rely increasingly on revenue from their private accounts, rather than gov't checks.

The market doesn't provide public goods, because the benefit is shared by everyone (at least theoretically) and the market won't provide it unless everyone pays for them.

I dispute that the money in the SS trust is a public good. Retirees have rights to benefits based on their contributions. SS must be replaced by private accounts before politicians with views such as yours begin using those assets for political purposes.

You're awfully naive if you think that those who are poor in retirement are there only because they didn't save.</I.

There are plenty of reasons, some reasons may even be beyond the control of the individual. Government has charitable programs to address such needs. SS should not become one of these.

I want to cut the total benefits paid out in Social Security in order to pay for future generations to be able to save more.

Private account, even in conservative investments, offer greater returns than SS, and will allow future generations to save more.

I think taking away benefits from those who are poor would be harmful. Therefore, the only people left to take benefits away from are those who are rich. The benefits have to be cut somewhere, should the poor or the rich have their benefits cut?

It is quite likely that means testing, plus benefit cuts and tax increases may be necessary to cover the transition costs, to free future generations from dependence on the federal government.
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Since benefits are also higher for those with higher average salaries and longer work histories ("Once all the indexed wages are determined, the average of the best 35 years is used to determine the OASI benefit."), there IS a relationship between SS taxes paid and benefits earned.



No, there is no direct relationship between taxes paid and OASI benefits recieved. The only relationship is that between OASI wages earned and OASI benefits recieved. The tax rate was not and has not been uniform. If a person paid 2% payroll taxes for ten years and then increased incrementally there after till retirement, what you are implying is the OASI benefit could be calculated by the amount of tax paid. It does not work that way.
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You need to find lots of money from some other source. This is why a large number of current workers or retirees will be worse off as a result of transitioning to the private system.

This is exactly the problem. You have to find lots of money to make it work or lots of cuts. If you do nothing, cuts will be the solution. The question is doing nothing now is worse than doing something. The reason is very simple. The unfunded liability is growing faster than the ecnomoy. The longe it takes to make changes the more costly it will be in terms of benefit cuts, tax increses, etc.

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I don't think this belief is true, however. I'm no defender of social security, but the system does "balance" if taxes are capped at their current levels and benefits are cut by 30%. So, you will get 70% of the benefit that current retirees get. If you want to move towards a privatized system you have to be willing to receive less than 70% of the current benefit.

Theoretically speaking this is the case. But is it reality? Let us say the cut is 30%. The low wage earner sees a cut of 30%. What do you think is going to happen? I would imagine there is going to be some harsh words for politicians. A cry from workers to help the low wage earner retiree. Keep in mind todays retirees seem to have a hard time getting by. Using their meager SS benefits to buy electricity, PRX's, etc. If today's retiree is having a tough time with 100% of their benefits, what will it be like with 70%?

Therefore, I believe those with other incomes, wealth, will be taxed or their benefits reduced in some way as to allow those with low incomes/wealth to recieve 100% of their benefits. What does this do? It breaks the link between wages earned and the OASI benefits more drastically than just taxing the benefits. This will in essance present Social Security for what it really is, wellfare.

Social Security will be different in thirty years. Either we have begun transitioning to a private system or we will forever be ensnarled in politics to the detriment of the worker and retiree.
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PMcMullenCT:

<<<<The reason the SSA keeps track of earnings is because your SS benefit is based on your earnings and number of years you work, obviously. What I've been saying is that the benefit shouldn't be based on your earnings.>>>>

"You've compared it to a charity, stating that benefits were unearned. I argue that since benfits are tied to contributions, those benefits have been earned."

It is only loosely "tied" --- no private plan would contain such a generous COLA provision (without alot higher cost)or return different percentages to lower income earners (who receive something like 70% of pre-retirement income), average earners (who receive something like 42% of pre-retirement income) and high wage earners (who receive something like 15% of pre-retirement income). I also doubt that any private plan would be so generous in defining quarters worked.

<<<<I agree that this is the impression that many Americans have, but I think they've been misled. The FICA taxes you paid last year are gone. They weren't saved for your retirement. There's nothing to stop the government from abolishing SS the year before you retire.>>>>

"It is at least an implied contract, where contributions earn workers a benefit when they retire."

You are wrong, as the USSC has ruled. From another poster, long ago:

Short answer: Social Security is an entitlement and not a right, as is specified in the original legislation and clarified by the Supreme Court. Social Security benefits are not an "asset". You've been had.

Long answer:
http://www.socialsecurity.org/pubs/ssps/ssp-19es.html

"One of the most enduring myths of Social Security is that a worker has a legal right to his Social Security benefits. Many workers assume that, if they pay Social Security taxes into the system, they have some sort of legal guarantee to the system's benefits. The truth is exactly the opposite. It has long been law that there is no legal right to Social Security. In two important cases, Helvering v. Davis and Flemming v. Nestor, the U.S. Supreme Court ruled that Social Security taxes are simply taxes and convey no property or contractual rights to Social Security benefits.

As a result, a worker's retirement security is entirely dependent on the political decisions of the president and Congress. Benefits may be reduced or even eliminated at any time. Given the program's looming financial crisis, benefit cutbacks are increasingly likely. Therefore, the entirely political nature of Social Security places workers' retirement security at considerable risk. Indeed, Congress has already arbitrarily reduced Social Security benefits of some groups of workers. Moreover, because Social Security benefits are not a worker's property, they are not inheritable."

http://ftp.ssa.gov/history/nestor.html
"There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor."

http://resource.lawlinks.com/Content/Legal_Subject_Index/elder_law/Social_Security.htm

"Have you thought about how much that transition cost would be? If SS right now pays out $350 billion each year in benefits, that means you would need to be able to deposit over $4 Trillion into private accounts earning 8% interest in order to provide income for them.>>>

"The gov't would not need to cover the entire $350 million. In the plans I've heard, the majority of SS taxes still go towards benefits for current retirees. The gov't must only cover the shortfall, and that short fall will decrease over time, as future retirees will rely increasingly on revenue from their private accounts, rather than gov't checks."

Nice try, but Nathar said $350 billion not million (and $4 trillion plus simply to pay benefits to those currently retired until they all die off). If you start diverting a portion of current SS taxes into private accounts, the shortfall will hit sooner (rather than circa 2015 +/- under current projections). You really should read some of eliminateSS's earlier posts if you want real sobering numbers.

"I dispute that the money in the SS trust is a public good. Retirees have rights to benefits based on their contributions."

Wrong. See earlier discussion about no vested rights.

"Government has charitable programs to address such needs. SS should not become one of these.

SS has always been one of these programs. It has always been a walth transfer program. If you continue to belive otherwise, you have fallen for political spin --- which started day one with FDR.

I want to cut the total benefits paid out in Social Security in order to pay for future generations to be able to save more.

"Private accounts, even in conservative investments, offer greater returns than SS, and will allow future generations to save more."

To save more --- I doubt it. To accumulate more, maybe; assuming that people actually invest and reasonably well -- no more chasing returns that lead to buying high and selling low, no load or low load funds instead of high load funds with 12b-1 fees or surrender charges, etc.

"It is quite likely that means testing, plus benefit cuts and tax increases may be necessary to cover the transition costs, to free future generations from dependence on the federal government."

Quite likely --- more like almost mandatory.

THere has been some wonderful (and sobering) discussion on this board during its short history. You might find a review of the board interesting and enlightening --- 2000 posts is not really that many in total and you would soon recognize posts that you could skip --- if you just read prior posts from eliminateSS, Nathar, and Adder (the three recently active posters in your dialog), I beleive that you would find it invaluable.

Regards, JAFO
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Therefore, I believe those with other incomes, wealth, will be taxed or their benefits reduced in some way as to allow those with low incomes/wealth to recieve 100% of their benefits. What does this do? It breaks the link between wages earned and the OASI benefits more drastically than just taxing the benefits. This will in essance present Social Security for what it really is, wellfare.

Your objection to social security is a moral issue for you, and I respect that. From reading your posts, the thing which you think is "evil" about social security is the fact that people you think are wealthy get social security benefits with taxes taken away from workers who are poor, or less wealthy. Am I correct? If that's the case, I don't see why means testing or taxing of benefits should be objectionable to you.

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It doesn't matter what percentage of workers are covered. The pay as you go system is dependent upon the entry of new workers into the system to pay benefits. It's dependent on sufficient ratios of workers to retirees.

If you increase the number of workers who are covered you increase revenues, and increase liability. That is the issue I am talking about. Our federal government is a pay as you go system. If we didn't have new workers being born income tax revenues would drop.

The gov't would not need to cover the entire $350 million. In the plans I've heard, the majority of SS taxes still go towards benefits for current retirees. The gov't must only cover the shortfall, and that short fall will decrease over time, as future retirees will rely increasingly on revenue from their private accounts, rather than gov't checks.

It'd be great if this worked, it really would. I'm afraid that the numbers just don't work. EliminateSS can tell you that there is no way to move to a pre-funded system without the current retirees and the next generation of retirees having their benefits cut by a drastic amount - far more than simple means testing would give you.

I dispute that the money in the SS trust is a public good. Retirees have rights to benefits based on their contributions. SS must be replaced by private accounts before politicians with views such as yours begin using those assets for political purposes.

You are totally misunderstanding what I'm saying. I'm saying that caring for the poor or elderly is a public good, something that benefits everyone. I'm not talking about the trust fund.





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JAF031

It is only loosely "tied" --- no private plan would contain such a generous COLA provision (without alot higher cost)or return different percentages to lower income earners (who receive something like 70% of pre-retirement income), average earners (who receive something like 42% of pre-retirement income) and high wage earners (who receive something like 15% of pre-retirement income). I also doubt that any private plan would be so generous in defining quarters worked.

No private plan would survive if it offered such low returns as SS; with or without COLA's.

The relationship may not be direct, but there is strong correlation between what taxes are paid and what benefits are earned. I would prefer we strengthen the relationship by switching to a system of private accounts, so retirees will no longer be dependent on the generosity of politicians. If you feel you must practice charity with someone else's money, don't try to hide it within SS by applying means tests and progressive taxation.
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It'd be great if this worked, it really would. I'm afraid that the numbers just don't work. EliminateSS can tell you that there is no way to move to a pre-funded system without the current retirees and the next generation of retirees having their benefits cut by a drastic amount - far more than simple means testing would give you.

I didn't mean to imply that it would be painless or easy. It would likely require a combination of means testing for benefits, improved returns from money diverted to private accounts, increases in the payroll tax rates and raising, or possibly eliminating, the cap on income subject to SS taxes.
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I didn't mean to imply that it would be painless or easy. It would likely require a combination of means testing for benefits, improved returns from money diverted to private accounts, increases in the payroll tax rates and raising, or possibly eliminating, the cap on income subject to SS taxes.

In order to move to a pre-funded program you need to:

1) Decrease benefits
2) Raise taxes

Remember, you need to decrease benefits and raise taxes just to account for the baby boomer problem. To move to a pre-funded program you have to do even more. Doesn't seem like a good deal to me.
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Edgington, you say:

If one stood up and said, everyone under the age of 40 will get 0% of SS everyone over would get normal benefits, I would vote for him. I know I am in the minority, but the number of people who agree with me is growing.

I want to be sure that I'm reading this correctly. Are you saying that if a candidate said "everyone under the age of 40 will pay SS taxes at about the current rate for the rest of their working careers, then get 0% when they retire" you would vote for him/her?

And you would do this knowing that it's perfectly sound financially for another candidate to propose "everyone under the age of 40 will pay SS taxes at exactly the current rate for the rest of their working careers, then get 70% when they retire"?
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PMcMullenCT, you say:

I didn't mean to imply that it would be painless or easy. It would likely require a combination of means testing for benefits, improved returns from money diverted to private accounts, increases in the payroll tax rates and raising, or possibly eliminating, the cap on income subject to SS taxes.

I think you are underestimating the cost.

Maybe the best way to communicate is for you to explain how much of the cost you (or some hypothetical worker, if you'd rather not give up too much privacy) are willing to bear.
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I am still not being clear. I am saying I would pay FICA until the last eligible person left the program (and I wouldn't even hunt them down either ...) so long as I knew once everyone over forty was off the program died, I would no longer pay it and SS would be no more.
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want to be sure that I'm reading this correctly. Are you saying that if a candidate said "everyone under the age of 40 will pay SS taxes at about the current rate for the rest of their working careers, then get 0% when they retire" you would vote for him/her?

-- YES! Although I would have to believe that the FICA money would really come back to me.

And you would do this knowing that it's perfectly sound financially for another candidate to propose "everyone under the age of 40 will pay SS taxes at exactly the current rate for the rest of their working careers, then get 70% when they retire"?

-- Yes, for two reasons.
1.) First and foremost I don't believe the 70% number works, but even assuming it does ...
2.) The smaller the government is, and the less people have to rely on it, the better.

The government should provide a social safety net, preferable a temporary one or one that solves a problem. Look at all the programs where the government just hands someone a check forever. Name one of those programs that works. The programs that work are the ones that provide temporary or one time assistance to people and make the self sufficent. (Home loans, ed. loans, short term welfare ...)

Yes, I am a Republican ...

Edgington
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-- YES! Although I would have to believe that the FICA money would really come back to me.

Let me restate that more clearly.

I would have to believe that the FICA tax would go away and I would not have to send the money in, in the first place.
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Your objection to social security is a moral issue for you, and I respect that. From reading your posts, the thing which you think is "evil" about social security is the fact that people you think are wealthy get social security benefits with taxes taken away from workers who are poor, or less wealthy. Am I correct?

No, the evil portion pertains to my religious beliefs which I try and keep to myself and not impose on others.

I am against be enumeriated - Number one issue. When SSA was begun, there was wide spread fear the SS# would become a universal number. The early SS cards including mine state in the lower right corner "not to be used for identification."

Guess what? The DMV wants to use it, the schools want to use it, need it to get a fishing license, hunting license, was planned to begin using it to board all YS air planes in June 2001 (but was not funded), IRS and more. Now we have a run away problem with identity theft. Where will it end? I have good idea.

Second, the program is the definition of a ponzi scheme. A ponzi scheme benefits a few at the expense of many. This means a federal ponzi schem is catastrophically bad for a nation. I served my Country and gave a lot of blood for it. I do not want over 200 years of sacrifice by others to be thrown out just because we are in love with a failed program. Social Security is ruining this country. It will pit young against the old. It will continue to break up the american family and destroy family values.

Economics is a large factor, but just as with many divorces in this country occur over money, so is the debate with Social Security. The divorse in this case is the destruction of the American nucleous.
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Maybe the best way to communicate is for you to explain how much of the cost you (or some hypothetical worker, if you'd rather not give up too much privacy) are willing to bear.

I fully expect that if we do not move to private retirement accounts, I will continue to pay SS taxes at increasing rates until I retire and, thanks to dilligent savings in IRA's and 401K's, I will be "means tested" out of any benefits whatsoever.

That being the case, I would prefer that the money I am giving away in SS taxes be used to free future generations from a similiar fate.
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I am still not being clear. I am saying I would pay FICA until the last eligible person left the program (and I wouldn't even hunt them down either ...) so long as I knew once everyone over forty was off the program died, I would no longer pay it and SS would be no more.

That's great! A true martyr. Now, do you think that the majority of people under 40 would be willing to pay the full FICA tax for the next 30 years or so and get zero social security benefit when they retire? Because that's an incredibly bad deal.
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Second, the program is the definition of a ponzi scheme. A ponzi scheme benefits a few at the expense of many.

I agree that the program was a ponzi scheme for the first 30 years, but I don't think it's that way any more. The first retirees paid hardly any tax, and were able to collect benefits until they died. Today's retirees are not getting the same great deal because they paid taxes their whole life.
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I fully expect that if we do not move to private retirement accounts, I will continue to pay SS taxes at increasing rates until I retire and, thanks to dilligent savings in IRA's and 401K's, I will be "means tested" out of any benefits whatsoever.

Obviously you are an above average saver, congratulations. However, even if you are means tested out of 100% of benefits (which I find extremely unlikely since the most draconian means tests only cut benefits by 50% for the wealthiest seniors) the average person your age will not be means tested out of benefits. Should they vote for your plan? Not if they are looking out for their best interest.
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Obviously you are an above average saver, congratulations. However, even if you are means tested out of 100% of benefits (which I find extremely unlikely since the most draconian means tests only cut benefits by 50% for the wealthiest seniors) the average person your age will not be means tested out of benefits. Should they vote for your plan? Not if they are looking out for their best interest.

With the ever growing participation rates in 401K plans and increasing contributions to IRA's, more and more people will come to view SS as a smaller portion of their retirement income. This, combined with increased rhetoric from politicians villifying the "rich" and calling for means testing, will lead more and more to see that maintaining SS in it's current form is not in their best interests.

SS can only offer workers promises that future politicians will take care of them. As soon as workers start seeing balances in an account with their name on it, support for additional privatization will only increase.
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