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If fixing Social Security were easy, it would already be done

OldGaffer

Governor
You were the poster that discounted Stigler and Krugman as bad economists. Good luck with your fringe attack against Social Security. You have no credibility.
 

Joe Economist

Council Member
You were the poster that discounted Stigler and Krugman as bad economists. Good luck with your fringe attack against Social Security. You have no credibility.
You continue to confuse personal remarks with thoughtful debate. So I am going to guess that you have no idea why Bernie's promises are coming in so rapidly.

I think that I gave Krugman credit for calling for a housing bubble. If you think that is discounting... Here is the problem with all economists. It is a soft science where every 2 economists create 3 opinions.

I don't tell you that Social Security is good or bad. I give you facts, and you don't like them.
 

EatTheRich

President
It would have to come from taxes, and frankly if that is the source I would rather pay down the debt.
This is your opinion, not a fact. It is an anti-Social Security opinion. As is the opinion that Social Security is an individual form of "old age insurance" and not a social anti-poverty program--regardless of whether you share that opinion with the people who (under pressure from the labor movement) designed the system.
 

ARMCX1

Mayor
Joe Economist wrote: ...If we are going to increase revenue, we have to understand that there are three kinds of revenue in Social Security. The Social Security Trust Fund is funded money. Contributions are revenue financed with the promise of future benefits. Finally there are taxes, or the part of the part of payroll taxes on which there is no economic return. In terms of a house, the word ‘funded’ means that you own the house. Financed revenue is the loan from the bank. Tax revenue means that the bank bought the house for you out of the goodness of its heart....
I'm not following your distinctions between 3 kinds of Social Security revenue. You listed funded money, revenue financed contributions for benefits and taxes.

Aren't these all just the same thing -- revenues produced by taxes?

This raises a second question. If all of the SS funds are from FICA taxes, how do you reconcile your statement that, "The only other type of money in the system is taxes which is a dangerous game for old-age insurance because taxes are subject to political priorities. FDR rejected any model for Social Security based on taxes."

Last, who is the author of the proposed social security fix, opined by the media as easy, that you deny is a fix?

I'm getting the impression that you don't think FICA is a good way to fund Social Security. People tip toeing around the inadequacies of a FICA based pension usually want to privatize SS by permitting future retirees to invest their FICA taxes rather than pay them.
 

Joe Economist

Council Member
I'm getting the impression that you don't think FICA is a good way to fund Social Security. People tip toeing around the inadequacies of a FICA based pension usually want to privatize SS by permitting future retirees to invest their FICA taxes rather than pay them.
You have to ask what is the point of Social Security. If it has anything to do with alleviating poverty, taxing jobs has to be the dumbest idea in the history of man. If you look at Social Security as old-age insurance, it makes sense. I like the concept of insurance, but think that the way the government has implemented the system is one that will collapse.

The problem is that our contributions are used to pay legacy costs. Those are the retirement costs of the first 40 years of workers who didn't pay the full-cost of their benefits. In 1983, Social Security was insolvent - not a penny to its name - but it has made promises of future benefits to about 40 years of workers. Those are legacy costs.
 

Joe Economist

Council Member
I'm not following your distinctions between 3 kinds of Social Security revenue. You listed funded money, revenue financed contributions for benefits and taxes. Aren't these all just the same thing -- revenues produced by taxes?
While all of the money is collected as a tax, the money is very different.

Between 1983 and 2009, money collected was in excess of what was paid-out. This enabled the money to be invested, and held for future benefits. This money is actual cash that you can use to pay benefits. The Trust Fund earned $100 billion or so last year. It in effect acts a worker who produces cash for the system.

You will see people say that immigration reform will cure Social Security. It is factually wrong. Every time we take in money, it comes with a price of future payments. Unless the system generates a negative return, more workers will only change the day on which it crashes.

I do not call FICA taxes a tax when they come with the promise of future benefits. It is like me building a driveway for myself and calling the building cost a tax. The driveway is mine, and no one else can use it. It isn't a tax. If you feel that FICA is a tax, then vote to cancel all of the benefits associated with the tax - then it is a tax. Millions of Americans aren't in Social Security.
 

Joe Economist

Council Member
Last, who is the author of the proposed social security fix, opined by the media as easy, that you deny is a fix?
Here is an example :

http://www.mysanantonio.com/business/fool/article/How-These-6-Social-Security-Fixes-Will-Affect-You-4432088.php

But it is found in the Washington Post, New York Times, The Atlantic. Let me know which flavor of easy you want to see.

The most common is "Lift The Cap, Problem Solved". It is urban myth, but people still publish it.
 

EatTheRich

President
You have to ask what is the point of Social Security. If it has anything to do with alleviating poverty, taxing jobs has to be the dumbest idea in the history of man.
You can't argue with success. The poverty rate in 1935 (including people of all ages) was 65%. Today, it's 16% ... that is, it's been cut by more than 75% of its 1935 value. Now, I agree that funding Social Security solely through income taxes and not payroll taxes would do even more to alleviate poverty, but that's a different argument.
 

Joe Economist

Council Member
Last, who is the author of the proposed social security fix, opined by the media as easy, that you deny is a fix?
Here is another story where Social Security could be fixed in five minutes. http://articles.philly.com/2013-05-12/business/39205793_1_social-security-retirement-train-wreck

Becareful of any 'fix' which uses solvent and fixed as the same thing. Fixed means you have no problem. Solvent is the cost to make our problem a problem for our kids. In terms of fixed I treat all implosions the same whether it is today or in 30 years.

You can't fix Social Security with more contributions. Contributions come with the promise of future benefits. If we reform immigration, and more revenue flows into the system, the long-term picture gets worse because every dollar promises more future dollars.

The people who tell you that you can 'raise the cap, problem solved' are lying to you. You will note that they never have a current source for this statement. The research that I have looked at says that there is no behavioral response to higher taxes. That is a joke. The AEI covered research that says that if higher taxes generate a 1/2 cent change in behavior the system gains nothing. At that level of research, it is a who-knows guess. The one thing that I can tell you is that higher taxes do generate responses whether it is a 1/2 cent or not is debatable.

What solution do you want to see?
 
The fix is easy, raise the limits on taxable income and raise the average income of the middle class. The rest follows right along.
 

OldGaffer

Governor
The fix is easy, raise the limits on taxable income and raise the average income of the middle class. The rest follows right along.
Joe does not want the ss income increased, he says any tax money that could be generated is better to reduce the national debt than feed seniors. He is a Rand Cultist under a sheepskin.

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Joe Economist

Council Member
The fix is easy, raise the limits on taxable income and raise the average income of the middle class. The rest follows right along.
My guess is that you didn't read the original post. As you increase revenue, you increase the promises associated with the system. The only thing that you change is the day of collapse. Increasing the income of the middle class does not help because past contributions are indexed to wages. When wages increase, it makes the contributions of the past get higher weighting.

To many postponing the problem if fine - even if it makes the problem bigger. I don't agree with that concept.
 

EatTheRich

President
When I said social security was a right, you said that no one had a "right" to social security benefits as per Flemming v. Nestor. But now you're saying that "contributions are revenue financed with the promise of future benefits." Which is it?
 

Joe Economist

Council Member
When I said social security was a right, you said that no one had a "right" to social security benefits as per Flemming v. Nestor. But now you're saying that "contributions are revenue financed with the promise of future benefits." Which is it?
It is a promise which isn't a legal obligation. You don't have a right to collect the promise. You may get paid, and you may not.

Payroll taxes are collected, and promises made. My guess is that many of these promises will be broken. A frat boy telling you he loves you on Friday night, doesn't mean that you will get married Saturday morning.
 

EatTheRich

President
So your point about social security not being a legal right was totally irrelevant to the question I raised, which is whether it was a social right of the working class.
 

Joe Economist

Council Member
So your point about social security not being a legal right was totally irrelevant to the question I raised, which is whether it was a social right of the working class.

Social Security isn't a right of anyone rich or poor - that is the Supreme Court's ruling.

I am not convinced that you have a question at all. You would like to rewrite the concept of Social Security entirely. You don't like the concept of contributions or benefits based on contributions. So what the Supreme Court says isn't of great importance to you.

This is what isn't a right of any class, to endenture a future generation which has no vote in the matter. We are making promises today based on revenue to be collected from future workers without their consent. Taxation without representation is wrong.

You will say that the promises are going to be kept, and as I pointed-out originally it isn't. But you don't really care because you don't like the system in the first place.
 

Joe Economist

Council Member
I don't like the system? You're the one who keeps saying it needs to be "reformed."
You're the one who wants to change the system to something it never was or was intended to be.

I give you facts from the Trustees. You infer from those facts that I think that the system needs to be reformed. So you also must believe that the system needs to be reformed.

People just retiring now have earned about 2% real on the largest investment that they make in retirement planning. The source for that is the Urban Institute and SSA. For people just entering the system, the return is negative. These figures do not include a means-test which affects up to 1/3rd of retirees. It should surprise no one that when you make your largest investment in a crappy return, you will be poor in old age.

You don't see Social Security as an investment in retirement planning. You want it to be a welfare program for people who couldn't save (see above). This is a death spiral of higher costs lead to worse returns which leads to more dependence on the system which leads to higher costs.

I don't care whether it is reformed or not. I just want an honest debate where we don't say solvent is fixed. We don't say that financed revenue is funded. Up is down. White is orange. I don't want people who are my friends that have little saved to wind-up saying that the government stole my retirement.
 

ARMCX1

Mayor
Just as I suspected, your Social Security fix is to take the FICA contributions and permit the individual to invest the FICA tax as the individual sees fit.

Your social security fix is to privatize social security.

That's the gist of your argument, isn't it?
 
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