Comments for Projected Social Security Shortfall Dwarfed by Wage Growth at http://www.cepr.net , comment 1 to 25 out of 20 comments http://www.cepr.net Fri, 24 May 2013 10:49:06 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18137 maybe what threw you was "we paid for it ourselves" includes "we paid for the insurance." if i get a hundred thousand dollar insurance settlement from my accident, even though i only paid a hundred dollars in premiums... i still "paid for it." this is different from getting a hundred thousand dollars from the government just because we have decided, as a nation, to force rich people to pay for the needs of the poor. but it is also true that when i put money in the bank, and leave it in long enough at a high enough interest, and withdraw twice as much as i put in.... i still paid for it. - coberly Tue, 14 Aug 2012 13:24:08 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18136 what you put into social security essentially earns "interest" automatically because pay as you go means the taxes that pay for your benefit are on a higher wage than the wage you paid the taxes on. i am too fed up at the moment to try to explain this to you if you can't explain it to yourself. i know about the "insurance" function of Social Security. what that means, essentially is that "the richer wageearner" gets a return of about 2% on his "investment" and the poorer wageearner gets abotu 10%, but it is all very situation dependent and meaningless to calculate an "average" since, as you point out, the whole point of SS is to provide insurance for the "less than average." only, as it turns out, the "average worker" would be in poverty without his SS benefit because for some reason average workers never earn those average returns on the market. - coberly Tue, 14 Aug 2012 13:18:03 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18114 Matic: This may come as a shock to you (it did to me). There are 4 levels of obligations the federal government has, ranging from strongest to weakest. The strongest is known as Explicit Liabilities. The weakest is known as Implicit Promises or Implicit Exposures. These are covered in 2 papers published by the GAO. Do you (or others) want the page numbers and links? Don Levit - Don Levit Tue, 14 Aug 2012 05:56:29 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18099 no coberly There was never a point where everyone got out of SS exactly what they put in. Some people always got more than their input worth and some always got less, this is basically true by definition since the payout is in no way based on the value of your inputs but rather on the inputs of the people paying in when you are no longer working. So the "rich" always got soaked so to say (if it is possible to find a more loaded phrase to describe this i have not seen it). There is no problem with some people paying more than they will get out or with some people paying less than they will get out. That is the whole point of the damn insurance against the bad times. If the "rich" do not happen to fall on bad times later in their lives and do not really require SS to survive then no problem, but if they do then the insurance is there for them. - Matic Mon, 13 Aug 2012 21:57:59 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18098 The "debt promises" are government bonds. It is simply not an option that government would not cash them in should the fund require them to do it. It would be beyond ridiculous. Millions of people, corporations and countries buy US bonds and they buy them precisely because they are as close as you can get to guaranteed payout. Sure the government might choose to default on its debt but investing literally anywhere else has a higher degree of risk. Also most US bonds are held by rich people on account of them having the money to buy them so they would never ever let the government default on them. Another option is that government chooses to cash in the bonds to anyone and everyone except SS ones which would be beyond ridiculous. - Matic Mon, 13 Aug 2012 21:50:00 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18085 Folks: Currently, there is a cash flow shortfall. It has been that way since 2010, and is projected to remain a shortfall until trust exhaustion. You may say, like Bernie Sanders, "Well, we have nothing to worry about for 22 years." The present cash shortfall will be the same cash shortfall at trust fund exhaustion - only larger. Each dollar of interest and then principal redeemed, until trust fund exhaustion is funded the same way the 25% shortfall at trust fund exhaustion will be funded: with general revenues if a budget surplus and increased debt held by the public if a budget deficit. The cash flow problem is now! The trust fund has no cash, only debt promises to repay which will require new cash or new debt to make good on. From a trust fund perspective, the trust is loaded. From a cash perspective, the trust fund is empty. Which perspective is more relevant? Don Levit - Don Levit Mon, 13 Aug 2012 07:52:25 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18067 no Matic. There was always a cap exactly so that SS would not be "the dole." When a person has paid enough for the insurance value of Social Security,making him pay more turns it into welfare. Which FDR was smart enough to not let his "experts" do. The cap has not stopped rising. What has happened is that the high earners are earning even more relative to the rest of us than they used to. This puts more of their income above the cap. But there never was any magic to "90%" of income, or any other number. The point of insurance is a reasonable premium, not "soak the rich." It is short sighted and greedy to demand the rich pay for your retirement. Do you demand they pay for your groceries today? Welfare is fine for those who need it. It is not a good way to plan to spend one third of your adult life. The reason for the projected shortfall is mostly that you will be living longer and having fewer children. Better wages would help. And better income "equality" would help.... but that is NOT the job of Social Security. SS is there to provide insurance against the bad times. Try to fix in your mind that the cost of having Social Security double the real value of benefits and pay for a 25% longer life expectancy amounts to raising your tax an average of forty cents per week... and most workers would only pay half of that. So to save yourself twenty cents per week, you think it's a good idea to go hat in hand to the rich man and say, please, sir, can i have some more? There is nothing mythical about "we have paid for this ourseleves." It's the whole goddam point of Social Security. The reason it is not welfare. The reason it has lasted 75 years. The reason you can collect it when you are 65, or 62, without having to go to the government proctologist to prove you don't have any hidden assets. Just making up fairly tales is not the same as knowing what you are talking about. - coberly Sun, 12 Aug 2012 16:56:24 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18066 is a valid solution. There is no mythical "we have always paid for ourselves" situation and never was. There was always a cap and the cap was intended to increase and did increase as wages go up because if it did not then the benefits would begin to lag. But decades ago the cap stopped rising so the upper income people started contributing less. It is in no way revolutionary thinking to suggest to solve the problem by suggesting that the cap should be raised to where it should be as originally planned nor would that turn the program into something new. It would simply do what it was intended to do in the way it was originally intended to do it. - Matic Sun, 12 Aug 2012 16:02:40 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18065 that extra 4% would apply to both the old and the new thousand dollars of wages. That would mean that out of your extra thousand dollars in wages you would only get to "keep" 920 dollars of it.... but wait... that 80 dollars you will get back, with interest (it works out to more than 250 dollars by the time it comes back to you as a benefit) when you need it most. So sit down and try to think. Are you going to shoot yourself in the foot because you can't stand the idea of paying an extra 4% for your own retirement, which is going to be about 25% longer than your grandfather's? - coberly Sun, 12 Aug 2012 14:05:21 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18064 If you are the sort of person who worries about your great grandchildren.. by the time the tax rate increases that 4%... if it is done "as needed" one tenth of a percent at a time... projected to be about 2070... wages will have increased, in real value over 100%... that is, doubled. So for every thousand dollars you are making today, your great grandchildren will be making two thousand... and out of that extra thousand they will have to pay an extra tax of 40 dollars. leaving them 960 dollars ahead. Like I said, if you can't think about math, you become a victim of those who do... and lie about it. The extra 40 dollars is needed to pay for the longer life expectancy that your great grandchildren will have. One more time... if you are going to live longer, you are going to have to pay more. Or beg the rich man "please, sir, can we have some more?" Those are exactly the terms the rich man is hoping for. - coberly Sun, 12 Aug 2012 13:51:05 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18063 Alan your numbers are essentially correct, but you do not seem to understand the point about phasing in that 2% one tenth of one percent at a time (each year). nor, i would guess, do you understad that that 13% benefit cut is a hell of a lot harder on someone getting 1000 dollars a month, than a 2% tax raise is on someone making 3 or 4 thousand a month. If you are going to retire at all, SOMEONE has to pay for it. FDR understood that it was much safer for the workers if they paid for it themselves. That 2% increase would arrive at about the same time that wages will have increased about 25% in real value. This means that for every 100 dollars you are making today, you will be making 125 dollars then. Out of that 125 dollars you would pay an extra Two dollars in tax. So that leaves you 23 dollars ahead of where you are today... for every hundred dollars you make. Yes. I would rather pay the extra two dollars than "campaign to raise the cap" and give the bastards an excuse to destroy the program entirely. There is a point where greedy become stupid. - coberly Sun, 12 Aug 2012 13:43:56 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18062 Coberly, I don't know where your numbers come from but the CBO estimated that a 2% tax increase would essentially eliminate the 75 year shortfall. I no longer contribute so I'm am happy if you want to pay this extra 2% of your salary rather than campaign for higher caps. The cap has been frozen since 2009 but will start increasing again but not fast enough I think. Even with higher caps I believe the tax rate will need to be increased. To quote wikipedia citing a CBO study - "raising the payroll tax rate to about 14.4% during 2009 (from the current 12.4%) or cutting benefits by 13.3% would address the program's budgetary concerns indefinitely,these amounts increase to around 16% and 24% if no changes are made until 2037." - AlanInAZ Sun, 12 Aug 2012 13:33:53 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18061 Alan do you understand that if the payroll tax is raised one tenth of one percent per year for a few years, there is no need to raise the cap, raise the retirement age, means test, cut benefits... I don't know how much solidarity it takes for workers to realize that FDR gave them the best deal they have ever gotten. putting it at risk to save themselves 80 cents per week each year seems pretty short sighted to me. You go ahead and get the solidarity you are looking for. Create new and better welfare programs for those Social Security does not help enough. Defeat the Republicans and the sold-out Democrats. And whatever else you have to do. But meanwhile... raise the damn tax one tenth of one percent... just to shut up the Petersons if nothing else. Social Security does not cause the deficit... unless you try to pay for it by taxing the rich. Social Security is not going broke... and you can show the people that is true with either NO change at all, or a raise in their own tax of eighty cents per week. But you have to show them. It does no good to sit around and talk about "after the revolution" when the workers will join in solidarity and force the rich to pay for their retirements. - coberly Sun, 12 Aug 2012 12:19:52 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18060 Coberly, I understand your concern but the truth is that unless caps are raised (and preferably eliminated) there will be some combination of benefit cuts, delayed retirement and higher marginal tax rates on middle/lower income groups. If the low/middle income groups cannot find enough solidarity to support and defend this then they will be the economic losers. I also think that the trend of concentrating wealth at the top will likely continue without the solidarity I mentioned and make the problem worse. - AlanInAZ Sun, 12 Aug 2012 11:54:25 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18059 Alan i don't know enough about Switzerland to say anything about what they do and why it works for them. But in America, worker paid, with cap, Social Security has worked for 75 years. American workers like to be able to say "I paid for it myself." And here we have a political party (or two) bent on destroying Social Security by calling it "welfare", or turning it into welfare first, then destroying it. I am sorry, but next to the Peterson Billions, those who want "the rich" to pay for their retirement are the biggest danger that Social Security faces. - coberly Sun, 12 Aug 2012 10:46:53 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18058 To coberly, Of course the rich would try to kill the program, however, so many would benefit from lower marginal rates that any competent political party could turn it to their advantage. The problem is the misplaced loyalty of our political parties. By the way, Switzerland is hardly a socialist haven and they do not cap the salary subject to contributions. - AlanInAZ Sun, 12 Aug 2012 10:00:18 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18057 John Wright you are right. climate change could change everything. But the beauty of Social Security is that it will work under almost any conceivable circumstances. What it does is take about ten percent of your wages and save them for you in a way that protects them from inflation and investment losses. It earns "interest" by the magic of "pay as you go financing" in a growing economy. While it is holding your money it uses it to pay the benefits of those who paid the tax in their turn. This is essentially the way all investments and banking works, though the big financial brains pretend it is "really" you paying for someonte's greedy granny. That is a lie. The thing is that if the economy goes bad, we all live on less... both while we are working and while we are retired. Not what we want, but not much worse than living on the incomes people had in the fifties... and i can tell you we knew how to be happy then. On the other hand when the economy grows we can afford to save a little more... say 15% of our incomes... in order to have a much more generous retirement over a longer life expectancy. It is win win win all the way around for workers. IF they don't let the Big Liars steal it from them. Sadly, it looks like that is exactly what is going to happen. - coberly Sun, 12 Aug 2012 09:58:59 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18056 Alan in Ariz The reason raising the cap is not a no brainer is because the rich don't want to pay for something they are not going to see the benefit of. Even if you could get the cap raised, in a couple of years you would find them trying even harder to kill Social Security. SS was created "worker paid" for exactly that reason. Since workers can pay for their own Social Security forever with a tiny... pennies per week... increase in the payroll tax, why give the politicians exactly the ammo they need to kill the program entirely? - coberly Sun, 12 Aug 2012 09:52:29 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18055 Maryellen I have been telling Dean for years that most people can't understand him. But he is right. Here is my simplified version: With NO changes whatsoever, workers will continue to be able to pay for their own Social Security as they always have. If they want to keep up with the rising standard of living and their own longer life expectancy they ought to choose to raise their own payroll tax one tenth of one percent per year until the PROJECTED shortfall disappears. This would mean about eighty cents per week increased tax per year, while their wages are expected to go up about eight dollars per week each year. At the end of the day they will have more than twice as much money AFTER paying the tax as they have today, AND they will have paid for a longer, more comfortable retirement. - coberly Sun, 12 Aug 2012 09:47:59 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/projected-social-security-shortfall-dwarfed-by-wage-growth#comment-18054 Why focus on the Globe? This is part 2 of 4 of Stephen Ohlemacher's AP series running in over 700 papers. Part 1 was much worse. http://downpuppy.blogspot.com/2012/08/asspress-hack-vs-social-security-part.html - Downpuppy Sun, 12 Aug 2012 09:29:38 +0100