Where is Social Security Being Addressed?

[blake]

I’ve read christophercarney and robdinsmore posts and they both bring up good points. I would like to see the cap removed, robdinsmore’s point that there is a wide verity cost of living rates is a good one. I know when I travel thru this country doing construction work I found in one place I live like a king, in another I could barely make it. My income didn’t change just my location. I was thinking that maybe it would be possible to keep the cap at $106,800 but bring it back in at $200,000 or $250,000. This should alleviate regional cost of living differences, while bringing in revenues for the Social Security System. If necessary this “windowed” approach can adjusted up or down depending on the city or state.

A sir tax on the top wage earners is not a bad idea, but I also like the “Buffet Rule” requiring 30% minimum tax for the top earners. Having said all that I would to like see a maximum tax rate set to govern the maximum rate that has to be pay, excluding S.S. and Medi-Care taxes. I would set this rate at 50%. This way income, payroll, and personal taxes do not add up to high.

[terryreed]

Super glad to see ya'll discussing SSA changes. Existing policy is terrible! Some people receiving disability now are starving, literally. Did you know they only go back ten years to calculate disability? So, if you took off, say .. to BE sick .. and didn't file right away, you will lose the previous 20 years of FICA payments? True! No pun intended, but it was sickening to learn that!

Apparently, when you pay in, you are actually paying for those receiving it at that time. So I've been told. But that is odd, because when I first started paying FICA, wages were fabulous compared to cost of living. Fewer people were using SS, disabled OR elderly, so there was a ton of money in it, but now? When I need it? It's gone because I waited too long to ask for it?! Yup, policy changes are definitely needed!

[christophercarney]

terryreed, thanks for the information. I don't know anyone drawing social security but it's important to understand how this program works. Anyone who can share personal information on this only helps us understand the issue more.

Social security, as I understand it, is a benefit (since you pay into it). It is not an entitlement program as so many would have you believe. But I think you are right, when you pay into it you're actually paying for those receiving it at that time. That's just a fact of accounting I think, without a huge surplus whatever it being paid out must be balanced by whatever is being paid in at that time.

You bring up a good point about how when social security was first enacted, wages were much higher compared to the standard of living, and there were far fewer people drawing from it. It seems we have the reverse now, with the cost of living so high compounded by the fact that the peak Baby Boomer generation is now starting to draw from it. It is my belief that this huge drawdown will start to drain the fund, how fast I have no idea. You can't trust any government statistics so my gut tells me we don't have the thirty years they say we have before the fund starts to become insolvent. It also depends on how many people are still paying into it through FICA, so if unemployment continues to stay high or get worse then the balance naturally gets more off-kilter.

Further compounding the problem is that the large rainy day fund that had been built up over the decades was raided and replaced with IOUs by our very own government some time ago, so there is no longer the cushion there to protect against a sudden shock to the system. However, that can be solved by simply borrowing yet more money to pay the IOUs, which will only drive the cost of living higher.

[tdrivertom]

Christopher Carney brings up another good point... IOU's Remember the "lock box?" Whatever happened to that idea?

Social Security is a sham the way it's currently structured! This is why you don't see people making more than $106,800 per year making a big noise to change the system. What would be their incentive for doing so? Social Security has been called a ponzi scheme. That may not be entirely accurate. But the people paying into SS now, are paying for the benefits of the people retiring today. The very wealthy know that that they may not get the money they pay into SS back when they retire. Instead they set up trust funds, 401K's and other investments for themselves.

Part of the solution to the SS problem will be to gradually wean people off of it. By requiring the wealthy to pay more into SS, it will buy time and allow the younger generation of workers the option to opt out of SS and set up their own personal retirement accounts with a 401K. It's sad that we didn't do this years ago when the Social Security "lock box" was raided.

[blake]

Sorry tdrvertom I don't see how that's going to work. The first problem is that some 401k plans do not make money, sometime they actually do loose money. I had one back in the late 90's, I lost money. $10,000 dollars with in the year before I ended it. That was principle not profit, and that did not include my companies matching funds either. I lost that too. 401k plans are a good idea individually, but it's not a replacement for the Social Security system. Though my experience was not typical it still happened. It wasn't even rare, I wasn't the only one. The problem with the 401k system is that it depends completely on Wall Street, aka the 1%. If the stock market dose good that year you'll do well, but if the stock market looses money that year someone has to lose with it. That is the nature of a market.

The power in Social Security is that you get it. You get it if you are smart, You get it if you are dumb, You get it if you are lucky, and You get it if you are not lucky. The power is that you get it irregardless of your actions. A 401k can't give that guarantee. Any replacement for the Social Security system will need to mirror the Social Security's universal coverage.

The last problem I see replacing the Social Security system with the 401k system is taxation. The people who are receiving Social Security right now get money for the payments from the current work force. With the 401k's tax exempt status their contributions will be removed from the revenue system. If the current work force is being wend-off the Social Security system their financial contributions will have to be made up for. This means either cuts for the program or an increase in taxes else where.

If we are going to pay through the nose in taxes to run away from the Social Security system, then why don't we just fix it in the first place. If there is a structural problem with my house I don't tear it down and then live in a tent. I just fix it, no matter the cost.

There was never a "lock box", instead they laughed at Al Gore and then voted for George W Bush. How did that work out for us?

[robdinsmore]

Feb 10, 2012 19:06:37 GMT -5 @tdrivertom said:

NO. You're not thinking about this wrong, christophercarney! I think robdinsmore failed to take what you pointed out into consideration.

? That's what I was trying to get at. Payroll taxes favor paying more to those that make over 107k than to those making less on the employer side and hence are a huge driver for income inequality. On the employer side these payments are a pure tax.

On the employee side they are not a pure tax, they are more like an insurance. If you raise the amount that people who earn more pay into SS then you also will raise the amount they get paid out when they start to collect.

Yes raising the cap will lower the incentive to partition pay increases unfairly, but if it's flat for all pay it won't reverse the trend. And it removes the nice little "bonus" in pay for people towards the end of the year if they make a little more than 107k. I don't see the need to increase the tax burden on these people, especially when they are likely at the point in their lives/careers where they want to put more away for retirement but are also trying to put a couple of kids through college. How would you feel if you were 45, the sole earner in a 4 person family made 150k and got hit with a new tax of 7.2% on the last 43k you made?

So what I am saying is keep it the same for employees/employes up until 200k or something and then throw in a progressive surtax starting at 8% for both sides that goes into funding medicare and SS but does not go back to the high earners when they start to collect.