Now that we Amis have a nice tax cut, how to reduce spending to cover it?

[Kidlicious]

Originally posted by Imran Siddiqui
Because of this thing called the baby boomers. There is no way that a small number of wage earners will be able to support a larger number of baby-boomer retirees. The only way to MAKE it work is to take money from the rest of the budget (and it's not going to be small). SS will be used up in a flash and won't even be close to enough to cover the rest.

Do you know what the deficits are projected to be when the trust fund runs out some time in the 2030s? Do you think you know what the tax base will be in 2030s? No you don't. This is the biggest Chicken Little bull ever. Even under reasonable forcasts there is know way a knowledgable person would make such a projection.

[MichaeltheGreat]

So what's the magic wand, if not tax increases and/or benefit cuts, that cures a declining tax payer/beneficiary ratio and longer beneficiary lifespan?

There's a lot of situations where I don't advocate privatization at all, but SSA isn't one of them.

As long as you have the same rules for the amounts that get paid in, and analogous rules for monthly benefits, any process that earns a superior return on investment will produce a higher benefit level for the input cost. Since the government's contrived formula is in essence a modeled low-interest loan at favorable rates to the government, it's pretty tough not to beat that crap rate of return.

One of the alternatives I suggested was simply privatizing the trust fund management, and allowing the money to be invested in qualifying types of real world investments.

As far as people falling through the cracks, they do anyway - if you're a low wage earner your whole life (say an Arkansas housewife who works WalMart after the kids move to their own doublewides, and your retired hubby (who made more money and worked longer - he was the assistant night shift supervisor at WalMart ) croaks from sunstroke while bass fishing two years into his retirement, you're SOL. His remaining benefits aren't transferable to you to combine with your own, you don't have a right of survivorship or inheritance, and the total amount you get is crapola.

If you privatize, once you hit retirement age under the IRS regs, there's nothing in the world that prevents you from taking the principle amount of your retirement and buying an annuity or combination of annuities that will pay out over ten years, twenty, or forever - it's just a matter of figuring how much present income you want vs. how much principle you want to diminish over time.

There's no reason that a properly structured privatized plan, working with the same contribution levels, shouldn't give you at least a 50% greater return, with superior survivorship and heritability rights.

[JohnT]

This thread is all over the place...

Kidicious, when SS was first enacted the retirement age was set to 65... at a time when the average US lifespan was 61. Why? Because it was never designed to pay out in the first place - FDR and the New Dealers, looking back at Bismark, thought of using the idea of Social Security as a low-cost (political cost that is) means of raising taxes.

And I doubt that Odin really has any idea of just how "regressive" the Social Security tax is for some people. If you are a black male, you can expect to pay into SS for 40 years, and collect for 3... which was better than 1991 when you had a 50/50 chance to pay for 39.6 years and collect never.

What is the annual rate of return for Social Security for a child born in 1997? -1.5% - and it's getting worse (and has been declining ever since Ida Mae Fuller received her first check - she herself made $20,000+ in SS payments after contributing a whopping $22.00.)

Life expectency stats at (PDF document): http://www.cdc.gov/nchs/fastats/pdf/nvsr51_03tb12.pdf

[MichaeltheGreat]

Originally posted by Kidicious


Do you know what the deficits are projected to be when the trust fund runs out some time in the 2030s? Do you think you know what the tax base will be in 2030s? No you don't. This is the biggest Chicken Little bull ever. Even under reasonable forcasts there is know way a knowledgable person would make such a projection.

It's a basic forecasting problem. Of course, nobody knows anything of what will happen tomorrow, much beyond the sun rising in the east.

But you can forecast a range of scenarios, try to put some objectivity in it, and compare it against present growth and demographic trends. You solve for a range of reasonable answers, in other words.

[MichaeltheGreat]

Originally posted by JohnT
This thread is all over the place...

It's one of the unwritten rules of the OT that no thread survives subject drift beyond Page 2.

What is the annual rate of return for Social Security for a child born in 1997? -1.5% - and it's getting worse (and has been declining ever since Ida Mae Fuller received her first check - she herself made $20,000+ in SS payments after contributing a whopping $22.00.)

Life expectency stats at (PDF document): http://www.cdc.gov/nchs/fastats/pdf/nvsr51_03tb12.pdf

My grandfather on my mom's side had that beat - he never paid in a dime, never even got a card or number, and buffaloed them into benefits over a decade. They just probably wanted to get that obstinate kraut out of their office.

[JohnT]

Anything to collapse the Ponzi scheme faster!

[Dinner]

Originally posted by Kidicious
Do you know what the deficits are projected to be when the trust fund runs out some time in the 2030s?

There is no trust fund. Seriously, all that's in it is a bunch of IOUs which the government pretends is a trust fund as a way to hoodwink voters. If SS going to get paid for then the money is going to come out of the General Fund.

[MichaeltheGreat]

Originally posted by JohnT
This thread is all over the place...

Kidicious, when SS was first enacted the retirement age was set to 65... at a time when the average US lifespan was 61. Why? Because it was never designed to pay out in the first place - FDR and the New Dealers, looking back at Bismark, thought of using the idea of Social Security as a low-cost (political cost that is) means of raising taxes.

And I doubt that Odin really has any idea of just how "regressive" the Social Security tax is for some people. If you are a black male, you can expect to pay into SS for 40 years, and collect for 3... which was better than 1991 when you had a 50/50 chance to pay for 39.6 years and collect never.

That's also why survivor's benefits have always been so screwed - women live longer, but have lower average earning histories, so if the husband kicks off earlier, it's more profitable to the government to be able to terminate that "benefit" and pay off on the widow's reduced benefit.

In a private plan, it's your money, so when the husband dies, the money passes on by survivorship to the widow. (or vice versa, but demographic reality is that men make more on average and die earlier on average)

Social Security, as set up in the US, is the biggest single con job of all time.

[Dinner]

How should we fix SS? How about push back the retirement age to reflect the longer life span, if people want to retire at the same age then they can but they'll have to agree to reduced benifets, stop indexing SS to inflation so we can slowly inflate our way out of it, cut spending so we can afford to pay for the coming retirees, and lastly partially privatize the system for young people but charge them an "opt-out fee" to help pay for grandpa and his parents who most certainly will be recieving a SS check.

[MichaeltheGreat]

I figure mild corrective surgery (which may not work adequately) is just as politically volatile as euthanizing Dr. FDRankenstein's monster, so considering the damage it can do, we may as well just get the job done and finish it off as painlessly as possible.

[Kidlicious]

Mtg,

You are proposing adding risk to get more return. That's not the same as adding return with the same risk.

Oerdin,

Check this out.

SSA FAQs

[MichaeltheGreat]

Not necessarily. If you just invested in guaranteed fixed rate money market funds or 13 week Treasuries, in the same amounts and the same contribution rates, you'd get a far higher lifetime return, AND have full legal title to the principle, so you could sell it for an annuity payment stream, etc.

My whole point about restricting the type of qualifying investments is that you'd have a set of regulations that prohibited an unscrupulous fund manager from taking your entire retirement and doing a coffee-futures against Starbucks put options straddle.

[JohnT]

Originally posted by Oerdin
How should we fix SS? How about push back the retirement age to reflect the longer life span..

If you want to push back the retirement age to the same proportions vis-a-vis the life expectency rate so that they are the same as when the scam was enacted (1934), we would need to raise it to 81.8 years of age.

Try getting elected on that plank!

[JohnT]

Originally posted by MichaeltheGreat
...doing a coffee-futures against Starbucks put options straddle.

Hey! I'd like a piece of that action! Where can I sign up?

[Kidlicious]

Originally posted by MichaeltheGreat
Not necessarily. If you just invested in guaranteed fixed rate money market funds or 13 week Treasuries, in the same amounts and the same contribution rates, you'd get a far higher lifetime return

Nah