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Three Ways to Fix Social Security

Microsuck
Posts: 1,562
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12/20/2012 9:00:01 AM
Posted: 3 years ago
The Problem with Social Security

Over the next 75 years, Social Security will owe an estimated $11.3 trillion more in benefits than it will receive in payroll taxes. It has been running deficits since 2010, according to the Social Security Administration.

To make up the difference, Social Security will need "massive annual injections of funding in addition to what the program receives from payroll taxes," John writes. Don"t believe the liberal myth that Social Security is on solid financial footing. The numbers don"t lie. It"s very much part of the spending debate facing Washington.

The longer Congress delays action, the harder it will be to solve the problem.

How to Fix the Problem

1) Fix the annual inflation adjustment. The current index used to determine Social Security"s yearly cost-of-living adjustment does an inferior job of measuring inflation. A better solution is a "chained" index, which more accurately measures inflation. This change would immediately result in savings for Social Security. And it"s easy to do " the new index can be implemented quickly and without complication.

2) Increase the full retirement age. Americans are living longer thanks to advances in medicine. And yet Social Security has not kept pace. The important number here is the how much longer people who have reached age 65 will live. That number is trending upward, by nearly a year, according to recent government data. Congress should gradually increase the full benefits age to 68 and then index it to life expectancy in the future.

3) Focus benefits on those who most need them. It"s time to return Social Security to one of its original purposes: protecting seniors who face economic hardship. In order to make Social Security a true insurance program, upper-income seniors would face reduced benefits or none at all. This would strengthen the program"s finances and prevent future tax hikes on younger workers.

http://blog.heritage.org...

And if I may add this: Paul Ryan's budget "Pathway to Prosperity", and Bohener's "Plan B" is unacceptable in unsatisfactory."
Wall of Fail

Devil worship much? - SD
Newsflash: Atheists do not believe in the Devil! - Me
Newsflash: I doesnt matter if you think you do or not.....You do - SD

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Thaddeus
Posts: 6,985
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12/20/2012 9:14:15 AM
Posted: 3 years ago
My three ways to fix social security.

My problem with social security is the misallocation of funds.

1. We take all the money out of existing programs.

2. Burn everyone on welfares house down.

3. Free hookers, drugs and booze for everyone. With a local casino in every community, which people must attend every sunday.
Contra
Posts: 3,941
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12/20/2012 3:02:12 PM
Posted: 3 years ago
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
Khaos_Mage
Posts: 23,214
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12/20/2012 3:10:55 PM
Posted: 3 years ago
At 12/20/2012 9:00:01 AM, Microsuck wrote:
The Problem with Social Security

Over the next 75 years, Social Security will owe an estimated $11.3 trillion more in benefits than it will receive in payroll taxes. It has been running deficits since 2010, according to the Social Security Administration.
This is half-true, as SSA has been running deficits, but it does have a surplus of over $2 trillion in the form of treasury notes, per the law.

To make up the difference, Social Security will need "massive annual injections of funding in addition to what the program receives from payroll taxes," John writes. Don"t believe the liberal myth that Social Security is on solid financial footing. The numbers don"t lie. It"s very much part of the spending debate facing Washington.

The longer Congress delays action, the harder it will be to solve the problem.

How to Fix the Problem

1) Fix the annual inflation adjustment. The current index used to determine Social Security"s yearly cost-of-living adjustment does an inferior job of measuring inflation. A better solution is a "chained" index, which more accurately measures inflation. This change would immediately result in savings for Social Security. And it"s easy to do " the new index can be implemented quickly and without complication.
Agreed, but it won't solve the problem. There will still be bleeding, it just won't be as bad.

2) Increase the full retirement age. Americans are living longer thanks to advances in medicine. And yet Social Security has not kept pace. The important number here is the how much longer people who have reached age 65 will live. That number is trending upward, by nearly a year, according to recent government data. Congress should gradually increase the full benefits age to 68 and then index it to life expectancy in the future.
Full benefits currently is 67, and again, this cannot does not solve the issue, as it cannot take effect quickly enough (you can't tell those 55 that they can't retire when they were planning because they won't have the money).

3) Focus benefits on those who most need them. It"s time to return Social Security to one of its original purposes: protecting seniors who face economic hardship. In order to make Social Security a true insurance program, upper-income seniors would face reduced benefits or none at all. This would strengthen the program"s finances and prevent future tax hikes on younger workers.
The higher earners do receive less, in terms of amount paid in. Someone paying 4.5x as much as someone else will receive benefits of only 2.5x more. Plus, you stop paying SS tax at around $110K, so benefits are capped for the wealthy already.

http://blog.heritage.org...

And if I may add this: Paul Ryan's budget "Pathway to Prosperity", and Bohener's "Plan B" is unacceptable in unsatisfactory."
My work here is, finally, done.
Khaos_Mage
Posts: 23,214
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12/20/2012 3:15:03 PM
Posted: 3 years ago
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

Agreed.
Since there is a surplus, it can be phased out like this:
1. Those over 60 are unaffected.
2. Those between 40-60 have the option to recieve what they have paid in or stay on the plan.
3. Those under 40 will recieve a check for the amount they have paid in, so SS will end with the last 40 yr old's death.

4. End FICA taxes on employees who have opted/forced out, and reduce the tax on employers, and over time, the employers tax will drop to zero.
My work here is, finally, done.
Contra
Posts: 3,941
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12/20/2012 3:17:50 PM
Posted: 3 years ago
At 12/20/2012 3:15:03 PM, Khaos_Mage wrote:
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

Agreed.
Since there is a surplus, it can be phased out like this:
1. Those over 60 are unaffected.
2. Those between 40-60 have the option to recieve what they have paid in or stay on the plan.
3. Those under 40 will recieve a check for the amount they have paid in, so SS will end with the last 40 yr old's death.

4. End FICA taxes on employees who have opted/forced out, and reduce the tax on employers, and over time, the employers tax will drop to zero.

That's an awesome way to plan it out. Medicare could go the way of Paul Ryan's voucher scheme and over time be shifted to personal retirement needs.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
joetheeconomist
Posts: 9
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12/20/2012 5:06:46 PM
Posted: 3 years ago
At 12/20/2012 9:00:01 AM, Microsuck wrote:
The Problem with Social Security

Over the next 75 years, Social Security will owe an estimated $11.3 trillion more in benefits than it will receive in payroll taxes. It has been running deficits since 2010, according to the Social Security Administration.

To make up the difference, Social Security will need "massive annual injections of funding in addition to what the program receives from payroll taxes," John writes. Don"t believe the liberal myth that Social Security is on solid financial footing. The numbers don"t lie. It"s very much part of the spending debate facing Washington.

The longer Congress delays action, the harder it will be to solve the problem.

How to Fix the Problem

1) Fix the annual inflation adjustment. The current index used to determine Social Security"s yearly cost-of-living adjustment does an inferior job of measuring inflation. A better solution is a "chained" index, which more accurately measures inflation. This change would immediately result in savings for Social Security. And it"s easy to do " the new index can be implemented quickly and without complication.

2) Increase the full retirement age. Americans are living longer thanks to advances in medicine. And yet Social Security has not kept pace. The important number here is the how much longer people who have reached age 65 will live. That number is trending upward, by nearly a year, according to recent government data. Congress should gradually increase the full benefits age to 68 and then index it to life expectancy in the future.

3) Focus benefits on those who most need them. It"s time to return Social Security to one of its original purposes: protecting seniors who face economic hardship. In order to make Social Security a true insurance program, upper-income seniors would face reduced benefits or none at all. This would strengthen the program"s finances and prevent future tax hikes on younger workers.

http://blog.heritage.org...

And if I may add this: Paul Ryan's budget "Pathway to Prosperity", and Bohener's "Plan B" is unacceptable in unsatisfactory."

You aren't fixing Social Security. You are paying for it by lowering the economic returns. The problem is that you are lowering them on people who have paid the most to protect those who have paid the least. This is a receipe for disaster.

Today Social Security is like spending a quarter to buy a dime. Now you want us to agree that our children will spend a quarter to buy a nickle. You either fix it for all generations or it will fail one generation in spectacular fashion.
Fix Social Security Now
www.FixSSNow.Org
joetheeconomist
Posts: 9
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12/20/2012 5:08:57 PM
Posted: 3 years ago
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

So your solution is to shift the burden of Social Security from payroll taxes on the young to income taxes on the young. How is that different? It is massively different in one respect. It adds about 20 trillion of debt on the coming generations. Once workers have to pay 16% or so of increased income taxes what will they have left to save?
Fix Social Security Now
www.FixSSNow.Org
joetheeconomist
Posts: 9
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12/20/2012 5:11:26 PM
Posted: 3 years ago
At 12/20/2012 3:15:03 PM, Khaos_Mage wrote:
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

Agreed.
Since there is a surplus, it can be phased out like this:
1. Those over 60 are unaffected.
2. Those between 40-60 have the option to recieve what they have paid in or stay on the plan.
3. Those under 40 will recieve a check for the amount they have paid in, so SS will end with the last 40 yr old's death.

4. End FICA taxes on employees who have opted/forced out, and reduce the tax on employers, and over time, the employers tax will drop to zero.

The problem is that there are people who are 64 that expect to outlive the systems ability to pay full benefits. The idea that you can protect those 60 and over is unfortunately not possible anymore. The result of doing nothing has consequences.
Fix Social Security Now
www.FixSSNow.Org
Contra
Posts: 3,941
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12/20/2012 8:20:29 PM
Posted: 3 years ago
At 12/20/2012 5:08:57 PM, joetheeconomist wrote:
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

So your solution is to shift the burden of Social Security from payroll taxes on the young to income taxes on the young. How is that different? It is massively different in one respect. It adds about 20 trillion of debt on the coming generations. Once workers have to pay 16% or so of increased income taxes what will they have left to save?

Oh, I got an opponent.

Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money.

People would be opposed to raising income taxes, so it would fuel anger against entitlement programs (I hate them too). I like the suggestion from Khaos, which is to gradually reduce the payroll tax on employers, this in my opinion (his whole suggestion) is a great plan.

Personal accounts would give the owner of the account the freedom to choose what they invest in, how much, and where. The average CAGR of the S&P 500 is around 7% after administrative costs, compared to 1.2% for Social Security. People should also divert some of their investments in their personal account after they turn 65.

After they retire, out of the securities that have been liquidated, and portion of them are turned into annualized payments, and a fixed lump sum is deposited into the individual worker's HSA annually, so personal responsibility, and individual self interest work together to continue to lower health care costs.

Investing in the stock market is actually a better key for retirement security and grows the economy, by providing businesses the capital to engage in business expansion, to invest in workers, capital goods, productivity, and R&D. In other words, this plan enhances the average guy's wealth for retirement, and it can be passed down to their kin, and it grows the economy. A multifaceted approach that would help us.

That $20 trillion is a bloated number too, it is estimated to be more like $10 trillion. However, the cost of doing nothing (unfunded liabilities) is around $120 trillion. My plan kicks as* compared to sitting and relying on government's welfare/redistributionist ponzi scheme.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
bossyburrito
Posts: 14,075
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12/20/2012 8:23:08 PM
Posted: 3 years ago
"Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money."

How are they shielded? They get payed what the company thinks they are worth. They think they are worth X and they minus taxes and you get Y.
#UnbanTheMadman

"Some will sell their dreams for small desires
Or lose the race to rats
Get caught in ticking traps
And start to dream of somewhere
To relax their restless flight
Somewhere out of a memory of lighted streets on quiet nights..."

~ Rush
Contra
Posts: 3,941
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12/20/2012 8:38:25 PM
Posted: 3 years ago
At 12/20/2012 8:23:08 PM, bossyburrito wrote:
"Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money."

How are they shielded? They get payed what the company thinks they are worth. They think they are worth X and they minus taxes and you get Y.

Joe works at McDonald's. He cooks burgers, and his labor "produces" $10 in value per hour for the company. The minimum wage is at $7.25, but for his state it's at $8. He generates a marginal profit that is thus $2, after the inputs of the operation are taken in. If Joe was paid the exact value of his contribution to the business, the business could not generate revenue to expand, hire other workers, and invest in other things, say new restaurant goods and paraphernalia.

Those $8 are taxed with lets say payroll and income taxes. The worker only gets $6.78 an hour after the payroll taxes, and that income appears as his income on the paycheck. Joe actually has to file his income taxes and do it himself, so he notices the impact of those taxes. The payroll taxes are more subtle, and thus more dangerous.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
bossyburrito
Posts: 14,075
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12/20/2012 8:40:07 PM
Posted: 3 years ago
At 12/20/2012 8:38:25 PM, Contra wrote:
At 12/20/2012 8:23:08 PM, bossyburrito wrote:
"Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money."

How are they shielded? They get payed what the company thinks they are worth. They think they are worth X and they minus taxes and you get Y.

Joe works at McDonald's. He cooks burgers, and his labor "produces" $10 in value per hour for the company. The minimum wage is at $7.25, but for his state it's at $8. He generates a marginal profit that is thus $2, after the inputs of the operation are taken in. If Joe was paid the exact value of his contribution to the business, the business could not generate revenue to expand, hire other workers, and invest in other things, say new restaurant goods and paraphernalia.

Those $8 are taxed with lets say payroll and income taxes. The worker only gets $6.78 an hour after the payroll taxes, and that income appears as his income on the paycheck. Joe actually has to file his income taxes and do it himself, so he notices the impact of those taxes. The payroll taxes are more subtle, and thus more dangerous.

The thing is that they aren't shielded, they're just not looking.
#UnbanTheMadman

"Some will sell their dreams for small desires
Or lose the race to rats
Get caught in ticking traps
And start to dream of somewhere
To relax their restless flight
Somewhere out of a memory of lighted streets on quiet nights..."

~ Rush
Contra
Posts: 3,941
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12/20/2012 8:45:50 PM
Posted: 3 years ago
At 12/20/2012 8:40:07 PM, bossyburrito wrote:
At 12/20/2012 8:38:25 PM, Contra wrote:
At 12/20/2012 8:23:08 PM, bossyburrito wrote:
"Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money."

How are they shielded? They get payed what the company thinks they are worth. They think they are worth X and they minus taxes and you get Y.

Joe works at McDonald's. He cooks burgers, and his labor "produces" $10 in value per hour for the company. The minimum wage is at $7.25, but for his state it's at $8. He generates a marginal profit that is thus $2, after the inputs of the operation are taken in. If Joe was paid the exact value of his contribution to the business, the business could not generate revenue to expand, hire other workers, and invest in other things, say new restaurant goods and paraphernalia.

Those $8 are taxed with lets say payroll and income taxes. The worker only gets $6.78 an hour after the payroll taxes, and that income appears as his income on the paycheck. Joe actually has to file his income taxes and do it himself, so he notices the impact of those taxes. The payroll taxes are more subtle, and thus more dangerous.

The thing is that they aren't shielded, they're just not looking.

It's more subtle though you have to admit, unless you know what FICA is, you probably tend to ignore it.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
joetheeconomist
Posts: 9
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12/20/2012 8:56:36 PM
Posted: 3 years ago
At 12/20/2012 8:20:29 PM, Contra wrote:
At 12/20/2012 5:08:57 PM, joetheeconomist wrote:
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

So your solution is to shift the burden of Social Security from payroll taxes on the young to income taxes on the young. How is that different? It is massively different in one respect. It adds about 20 trillion of debt on the coming generations. Once workers have to pay 16% or so of increased income taxes what will they have left to save?

Oh, I got an opponent.

Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money.

People would be opposed to raising income taxes, so it would fuel anger against entitlement programs (I hate them too). I like the suggestion from Khaos, which is to gradually reduce the payroll tax on employers, this in my opinion (his whole suggestion) is a great plan.

Personal accounts would give the owner of the account the freedom to choose what they invest in, how much, and where. The average CAGR of the S&P 500 is around 7% after administrative costs, compared to 1.2% for Social Security. People should also divert some of their investments in their personal account after they turn 65.

After they retire, out of the securities that have been liquidated, and portion of them are turned into annualized payments, and a fixed lump sum is deposited into the individual worker's HSA annually, so personal responsibility, and individual self interest work together to continue to lower health care costs.

Investing in the stock market is actually a better key for retirement security and grows the economy, by providing businesses the capital to engage in business expansion, to invest in workers, capital goods, productivity, and R&D. In other words, this plan enhances the average guy's wealth for retirement, and it can be passed down to their kin, and it grows the economy. A multifaceted approach that would help us.

That $20 trillion is a bloated number too, it is estimated to be more like $10 trillion. However, the cost of doing nothing (unfunded liabilities) is around $120 trillion. My plan kicks as* compared to sitting and relying on government's welfare/redistributionist ponzi scheme.

A dollar is a dollar. The dollar raised by the income tax is no different than the dollar raised by the payroll tax. The formula is different but paying a dollar of income tax is no different than a dollar of payroll tax or a dollar of transportion tax. It is a dollar. Both taxes are direct, and you are seriously mistaken to think that people are unaware of it. It is a hated tax because there are no deductions and no credits.

I am not sure on what basis you say the 20 trillion is bloated. AP more recently put the figure at 30 trillion. The Trustees use generous if not agressive assumptions to reach the 20 trillion. Where do you get the 10 trillion?
Fix Social Security Now
www.FixSSNow.Org
Contra
Posts: 3,941
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12/20/2012 9:04:25 PM
Posted: 3 years ago
At 12/20/2012 8:56:36 PM, joetheeconomist wrote:
At 12/20/2012 8:20:29 PM, Contra wrote:
At 12/20/2012 5:08:57 PM, joetheeconomist wrote:
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

So your solution is to shift the burden of Social Security from payroll taxes on the young to income taxes on the young. How is that different? It is massively different in one respect. It adds about 20 trillion of debt on the coming generations. Once workers have to pay 16% or so of increased income taxes what will they have left to save?

Oh, I got an opponent.

Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money.

People would be opposed to raising income taxes, so it would fuel anger against entitlement programs (I hate them too). I like the suggestion from Khaos, which is to gradually reduce the payroll tax on employers, this in my opinion (his whole suggestion) is a great plan.

Personal accounts would give the owner of the account the freedom to choose what they invest in, how much, and where. The average CAGR of the S&P 500 is around 7% after administrative costs, compared to 1.2% for Social Security. People should also divert some of their investments in their personal account after they turn 65.

After they retire, out of the securities that have been liquidated, and portion of them are turned into annualized payments, and a fixed lump sum is deposited into the individual worker's HSA annually, so personal responsibility, and individual self interest work together to continue to lower health care costs.

Investing in the stock market is actually a better key for retirement security and grows the economy, by providing businesses the capital to engage in business expansion, to invest in workers, capital goods, productivity, and R&D. In other words, this plan enhances the average guy's wealth for retirement, and it can be passed down to their kin, and it grows the economy. A multifaceted approach that would help us.

That $20 trillion is a bloated number too, it is estimated to be more like $10 trillion. However, the cost of doing nothing (unfunded liabilities) is around $120 trillion. My plan kicks as* compared to sitting and relying on government's welfare/redistributionist ponzi scheme.

A dollar is a dollar. The dollar raised by the income tax is no different than the dollar raised by the payroll tax. The formula is different but paying a dollar of income tax is no different than a dollar of payroll tax or a dollar of transportion tax. It is a dollar. Both taxes are direct, and you are seriously mistaken to think that people are unaware of it. It is a hated tax because there are no deductions and no credits.

Ok.

I am not sure on what basis you say the 20 trillion is bloated. AP more recently put the figure at 30 trillion. The Trustees use generous if not agressive assumptions to reach the 20 trillion. Where do you get the 10 trillion?

It was from Bush's 2005 Social Security reform commission. Still, the personalization of entitlements (personal accounts) by your statistic would still save an estimated $90 trillion. That's over 5 total years of USA's GDP.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
joetheeconomist
Posts: 9
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12/20/2012 9:05:10 PM
Posted: 3 years ago
At 12/20/2012 8:20:29 PM, Contra wrote:
At 12/20/2012 5:08:57 PM, joetheeconomist wrote:
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

So your solution is to shift the burden of Social Security from payroll taxes on the young to income taxes on the young. How is that different? It is massively different in one respect. It adds about 20 trillion of debt on the coming generations. Once workers have to pay 16% or so of increased income taxes what will they have left to save?

Oh, I got an opponent.

Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money.

People would be opposed to raising income taxes, so it would fuel anger against entitlement programs (I hate them too). I like the suggestion from Khaos, which is to gradually reduce the payroll tax on employers, this in my opinion (his whole suggestion) is a great plan.

Personal accounts would give the owner of the account the freedom to choose what they invest in, how much, and where. The average CAGR of the S&P 500 is around 7% after administrative costs, compared to 1.2% for Social Security. People should also divert some of their investments in their personal account after they turn 65.

After they retire, out of the securities that have been liquidated, and portion of them are turned into annualized payments, and a fixed lump sum is deposited into the individual worker's HSA annually, so personal responsibility, and individual self interest work together to continue to lower health care costs.

Investing in the stock market is actually a better key for retirement security and grows the economy, by providing businesses the capital to engage in business expansion, to invest in workers, capital goods, productivity, and R&D. In other words, this plan enhances the average guy's wealth for retirement, and it can be passed down to their kin, and it grows the economy. A multifaceted approach that would help us.

That $20 trillion is a bloated number too, it is estimated to be more like $10 trillion. However, the cost of doing nothing (unfunded liabilities) is around $120 trillion. My plan kicks as* compared to sitting and relying on government's welfare/redistributionist ponzi scheme.

Second, what is your source for "compared to 1.2% for Social Security. " The economic returns of Social Security vary widely. For a low-wage worker the returns reach levels that aren't availalbe in the equity markets. High-wage earners can lose as much as 50 cents of every dollar. Returns vary widely depending upon retirement year, marital status, and wage. The 1.2% is a pointless number.

You are comparing apples and oranges when you compare the 1.2% to 7%. You are comparing a Social Security system that carries the burden of legacy costs with a market return that doesn't. If you switch to a PRA, those costs will still be there - but your presenting a return as though it is gone. If the first 90% of your 'market investment' is poured into the bottomless pit we call entitlements, the return will not be 7%.
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joetheeconomist
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12/20/2012 9:11:30 PM
Posted: 3 years ago
Investing in the stock market is actually a better key for retirement security and grows the economy, by providing businesses the capital to engage in business expansion, to invest in workers, capital goods, productivity, and R&D. In other words, this plan enhances the average guy's wealth for retirement, and it can be passed down to their kin, and it grows the economy. A multifaceted approach that would help us.

This is no longer possible even at 12.4% of wages. If we divert money to PRAs, we have to get the revenue from somewhere. Incremental govt borrowing will simple offset anything that is put into PRAs. 10 years ago, you could have made this argument on a small basis because the system was cashflow positive. Today, it is a myth unless you bail on benefits to existing retirees.
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Contra
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12/20/2012 9:13:11 PM
Posted: 3 years ago
At 12/20/2012 9:05:10 PM, joetheeconomist wrote:
At 12/20/2012 8:20:29 PM, Contra wrote:
At 12/20/2012 5:08:57 PM, joetheeconomist wrote:
At 12/20/2012 3:02:12 PM, Contra wrote:
1) Phase out social security, current expenses shifted to general fund.
2) End all payroll taxes.
3) Incentivize young people and workers to establish their own personal accounts so they have funds for a secure retirement.

So your solution is to shift the burden of Social Security from payroll taxes on the young to income taxes on the young. How is that different? It is massively different in one respect. It adds about 20 trillion of debt on the coming generations. Once workers have to pay 16% or so of increased income taxes what will they have left to save?

Oh, I got an opponent.

Income taxes aren't the only thing that funds the general fund, though it's the majority. Income taxes are direct, meaning people are aware of their costs. Payroll taxes are applied before the worker gets their paycheck, so they are shielded from its apparent effects, these taxes are a dangerous tool to grow Washington's ever expanding hunger for our money.

People would be opposed to raising income taxes, so it would fuel anger against entitlement programs (I hate them too). I like the suggestion from Khaos, which is to gradually reduce the payroll tax on employers, this in my opinion (his whole suggestion) is a great plan.

Personal accounts would give the owner of the account the freedom to choose what they invest in, how much, and where. The average CAGR of the S&P 500 is around 7% after administrative costs, compared to 1.2% for Social Security. People should also divert some of their investments in their personal account after they turn 65.

After they retire, out of the securities that have been liquidated, and portion of them are turned into annualized payments, and a fixed lump sum is deposited into the individual worker's HSA annually, so personal responsibility, and individual self interest work together to continue to lower health care costs.

Investing in the stock market is actually a better key for retirement security and grows the economy, by providing businesses the capital to engage in business expansion, to invest in workers, capital goods, productivity, and R&D. In other words, this plan enhances the average guy's wealth for retirement, and it can be passed down to their kin, and it grows the economy. A multifaceted approach that would help us.

That $20 trillion is a bloated number too, it is estimated to be more like $10 trillion. However, the cost of doing nothing (unfunded liabilities) is around $120 trillion. My plan kicks as* compared to sitting and relying on government's welfare/redistributionist ponzi scheme.

Second, what is your source for "compared to 1.2% for Social Security. " The economic returns of Social Security vary widely. For a low-wage worker the returns reach levels that aren't availalbe in the equity markets. High-wage earners can lose as much as 50 cents of every dollar. Returns vary widely depending upon retirement year, marital status, and wage. The 1.2% is a pointless number.

It's from the Heritage Foundation. Furthermore, the average guy, and poor minorities, are now putting more in the system than they will receive, generating a negative return for the vast majority of people.

You are comparing apples and oranges when you compare the 1.2% to 7%. You are comparing a Social Security system that carries the burden of legacy costs with a market return that doesn't. If you switch to a PRA, those costs will still be there - but your presenting a return as though it is gone. If the first 90% of your 'market investment' is poured into the bottomless pit we call entitlements, the return will not be 7%.

The last sentence somewhat confuses me, people would probably invest their funds into stocks, bonds, and to a lesser degree other securities.

Are you really an economist?
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joetheeconomist
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12/20/2012 9:16:20 PM
Posted: 3 years ago
It was from Bush's 2005 Social Security reform commission. Still, the personalization of entitlements (personal accounts) by your statistic would still save an estimated $90 trillion. That's over 5 total years of USA's GDP.

First, 2005 statistics are long gone. Last year alone, the system lost more than a trillion dollars of projected interest income. The unfunded liability grew about 2 trillion last year alone.

Second, I am not sure where the 90 trillion comes from. Today benefits are automatically cut when funding is insufficient to meet benefits. Once you fund this out the general fund there is no circuit breaker. You have simply created 20 trillion of liabilities on top of the 16 trillion that we already have. There is no savings.
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joetheeconomist
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12/20/2012 9:23:47 PM
Posted: 3 years ago
Second, what is your source for "compared to 1.2% for Social Security. " The economic returns of Social Security vary widely. For a low-wage worker the returns reach levels that aren't availalbe in the equity markets. High-wage earners can lose as much as 50 cents of every dollar. Returns vary widely depending upon retirement year, marital status, and wage. The 1.2% is a pointless number.

It's from the Heritage Foundation. Furthermore, the average guy, and poor minorities, are now putting more in the system than they will receive, generating a negative return for the vast majority of people.

Yes Cato uses the same number. It comes from the Social Security Administration. What you have to realize is that the figure is a composite used by think-tanks which want you to jump to the wrong conclusion. If you look at the money's worth-studies out of SSA, you find that returns vary widely.

They tell you that the system returns 1.2% on average - which is true. They then point you to poor minorities - without telling you that 1.2% is not relevant for low-wage workers. The 1.2% does not factor in tax credits - the EITC - which is an offset for the high cost of payroll taxes.

Unless the minority is not poor or has few children, Social Security is not a bad deal. It is a very, very high risk investment.
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FREEDO
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12/20/2012 9:30:01 PM
Posted: 3 years ago
Social Security should be payed through an automatically adjusting income tax.

It can still be partially based on how many hours you worked.
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joetheeconomist
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12/20/2012 9:31:04 PM
Posted: 3 years ago
You are comparing apples and oranges when you compare the 1.2% to 7%. You are comparing a Social Security system that carries the burden of legacy costs with a market return that doesn't. If you switch to a PRA, those costs will still be there - but your presenting a return as though it is gone. If the first 90% of your 'market investment' is poured into the bottomless pit we call entitlements, the return will not be 7%.

The last sentence somewhat confuses me, people would probably invest their funds into stocks, bonds, and to a lesser degree other securities.

Are you really an economist?

Yes I am an economist. No it isn't saying much. Whatever I say, will be refuted by another economist. This is why I rarely say opinion. I simply quote the Trustees.

Social Security has a massive hole - existing beneficiaries. The majority of your money goes into that hole. You are comparing that to a system which has no hole, the market which returns 7%. The hole is still there, but you are hiding the hole in 'higher income taxes'. If I put $1,000 into a private account and face $1,500 in high income taxes. You would say that I am $1,000 ahead. The fact is that I am $500 in the hole.

Unless you bail on legacy costs, private accounts will do no better than an IRA.
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