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

[Az]

But you're a dirty commie.

[Kidlicious]

Originally posted by Azazel
But you're a dirty commie.

I just got out of the shower

[Az]

[MichaeltheGreat]

Originally posted by Kidicious

You might be suprized to know how many hardworking thrifty people there are who don't have enough savings to retire with when they get to be that age.

I'm a southern Democrat by origin, remember? I have kin scattered all over western Virginia, Kentucky, and even some, God pity the wretches, in West Virginia. Some of them are fairly prosperous, at least by local standards, some most definitely are not.

There problem with that as a counterargument is that SS benefits are based on the maximum 40 years of contributions - so if you have two people who are lifelong minimum wage earners, of course they won't have a pot to pee in come retirement time. But they won't get enough from SS to make much difference, either. If their income goes up, so do their private savings opportunities, as fast or faster than their SS benefits.

I'm still waiting for you to tell me how the transition costs will be funded in such times of crisis.

Only one time of crisis - the exit from the system. Figure it'll take three decades (since you're going to cover current beneficiaries and anyone within a decade of eligibility for benefits) to pay most people out of the system based on actuarial tables, and that transitional costs will initially be more or less linear (varies with population pool at benefit age and income distro) for those three decades, then trend downward on a curve. In the intermediate cases (people more than a decade from benefit eligibility, less than a decade from having started work subject to SS holdings) you'll need some funds for one time buyouts.

Make the initial payouts of the system funded in the short term by a series of tax-exempt treasury bonds, as well as the benefits for the current folks and those within a decade of initial eligibility. The ongoing payouts for those intermediate folks will be less (as they'll have lower SS benefits and higher private benefits the younger they are), but will be paid out of the general treasury - but whatever combination of taxes, spending cuts and borrowing the Congress would authorize as part of the transition.

The largest part of the transition costs in order would be the initial buyout/tax refund for transfer into qualified private accounts, then the ongoing benefits for the 52 and over crowd, then finally the transition costs for the ~26-52 year old crowd.

[Japher]

Sounds good to me MtG... Especially with many tax defered investment vehicles having existed for the past X or so years.

As I stated earlier, I think the government could also benefit for allowing for opt outs in return for said tax breaks. That way they need not pull up large amounts of money, just not collect on money that they would other wise get. I know some ppl, my folks included, that don't need the SS. I am sure there are many wealthy ppl out there who, despite having paid SS for their whole lives, have still managed to accumulate large sums of wealth. Yet, in comparison to what they have earned or amassed that SS ain't going to amount to a hill of beans. Instead give 'em a 20-25 years of SS credit that they can apply to various tax right offs or reductions... traditional roll overs of personal retirement accounts, tax free trusts, or a reduction in income tax for those continuing to work once the are able to collect SS. This would be much better than offering all these people one time buyouts, and in a sense would cost the government nothing. In the end it would actually free up money that could be taxed on afterwards.

[Kidlicious]

Originally posted by MichaeltheGreat
Only one time of crisis - the exit from the system. Figure it'll take three decades (since you're going to cover current beneficiaries and anyone within a decade of eligibility for benefits) to pay most people out of the system based on actuarial tables, and that transitional costs will initially be more or less linear (varies with population pool at benefit age and income distro) for those three decades, then trend downward on a curve. In the intermediate cases (people more than a decade from benefit eligibility, less than a decade from having started work subject to SS holdings) you'll need some funds for one time buyouts.

Make the initial payouts of the system funded in the short term by a series of tax-exempt treasury bonds, as well as the benefits for the current folks and those within a decade of initial eligibility. The ongoing payouts for those intermediate folks will be less (as they'll have lower SS benefits and higher private benefits the younger they are), but will be paid out of the general treasury - but whatever combination of taxes, spending cuts and borrowing the Congress would authorize as part of the transition.

The largest part of the transition costs in order would be the initial buyout/tax refund for transfer into qualified private accounts, then the ongoing benefits for the 52 and over crowd, then finally the transition costs for the ~26-52 year old crowd.

The transition costs will last for at least 60 years. Who is going to pay for the old system when the total benefits max out in 2040 or so? You're still going to have people and employers paying into the new system too.

Remember of course that all these costs count. Who would support this? This would be the biggest disaster in history. It's bad enough with the current costs. There's no way we could afford this.

Even if there were long term benefits to privitazation, and there's not, we couldn't even break even for 200 years at least. No way is this worth adding additional costs during a financial crisis.

[Kidlicious]

Originally posted by Japher
Sounds good to me MtG... Especially with many tax defered investment vehicles having existed for the past X or so years.

As I stated earlier, I think the government could also benefit for allowing for opt outs in return for said tax breaks. That way they need not pull up large amounts of money, just not collect on money that they would other wise get. I know some ppl, my folks included, that don't need the SS. I am sure there are many wealthy ppl out there who, despite having paid SS for their whole lives, have still managed to accumulate large sums of wealth. Yet, in comparison to what they have earned or amassed that SS ain't going to amount to a hill of beans. Instead give 'em a 20-25 years of SS credit that they can apply to various tax right offs or reductions... traditional roll overs of personal retirement accounts, tax free trusts, or a reduction in income tax for those continuing to work once the are able to collect SS. This would be much better than offering all these people one time buyouts, and in a sense would cost the government nothing. In the end it would actually free up money that could be taxed on afterwards.

Tax breaks when we're running deficits are no tax break at all. We end up paying more taxes because of the borrowing costs.

[HershOstropoler]

Taking a look at that SSA handbook, I have to say congrats - that's even worse a mess than our rules.

I gather the following: standard age 65, early retirement 62 with reduced benefits, the basis is averaged over 35 years. As to the actual benefit, they refer to tables that "are not included in this Handbook because it is not possible to keep them current."

But if that results in say an average contribution base of 50.000$, I don't see how much pension you'd get after 40 years of work.

[Kidlicious]

It took you a while to figure out that you can't figure it out.

[HershOstropoler]

Took me about 10 minutes to see it's hopeless. But I had guests in the meantime, and I really didn't tell them "Hey look, I found that fascinating stuff about US social security, let's discuss it..."

[Drake Tungsten]

The first thing I thought of when I saw this thread title was "please god, let them cut Social Security." I barreled in here all ready to make my case, only to find that MtG had already done so in a fashion I couldn't hope to match. God bless you, Michael the Great.

To deal with another topic that came up in this lengthy thread, Warren Buffet is indeed a genius, like all Nebraskans. Bob Kerrey is another typical Nebraska savant, which is probably why he spent much of his career in the Senate pushing for entitlement reform. It's really too bad that the man left; we need more people like him if we ever want to kill the Social Security beast.

[MichaeltheGreat]

Originally posted by Kidicious
The transition costs will last for at least 60 years. Who is going to pay for the old system when the total benefits max out in 2040 or so? You're still going to have people and employers paying into the new system too.

As opposed to the ongoing system, which just keeps losing payer to beneficiary ratio ad infinitum? Yes, I'm just sure we'll return to the days of average five kid families and lots of new workers every generation, and lifespans will decline back to 1940's levels as well.

Remember of course that all these costs count. Who would support this? This would be the biggest disaster in history. It's bad enough with the current costs. There's no way we could afford this.

We can't afford the present system, except by ****ing with it to make it meaningless. "if we push the mininum benefit age back another five years, and average the top 50 years earnings instead of forty, and tax all income, but means test benefits, and give CPI - 1.5 COLAs instead of CPI - 1, and add lots of double plus good newspeak..."

Even if there were long term benefits to privitazation, and there's not, we couldn't even break even for 200 years at least. No way is this worth adding additional costs during a financial crisis.

Just because you've adopted "all privatization is bad, all government is good" as a mantra doesn't make it reality. Some privatization is bad, some is not. SS is nothing but a regressive income tax disguised as a retirement benefit, to dupe an ignorant public into paying more taxes without complaint.

Tell you what, if you have so much faith in SS, I'll sell you my contributions for 40 cents on the dollar - each year, you reimburse me 40% of what I pay in, from this point forward, and when I'm old enough to collect, I'll deposit the benefits to your account straight away. You pay for only 40% of what I contribute from age 43 on, but you get the 100% of the benefits. I'll come out ahead by a country mile, guaranteed.

[MichaeltheGreat]

Originally posted by HershOstropoler
As to the actual benefit, they refer to tables that "are not included in this Handbook because it is not possible to keep them current."

The translation of that is "we're so constantly ****ing with them that we have no clue how bad they'll be next week."

Another point is that showing the exact amounts would make it easier for people to see how badly they're being shafted. And that's never good policy.

[MichaeltheGreat]

Originally posted by Kidicious


There aren't THAT many baby boomers. True, they are a larger generation, but they aren't as big as people are making them out to be. The histeria in here is absurd. There have been no serious projections that have predicted that the current system can not be maintained with some minor adjustments.

Hell, the SSA tells you that itself. Census data tells you about the generational shift, and there are a huge number of sources for actuarial projections, etc.

The only absurdity is your head in the sand denial that there's a problem, when the people running the system say there's one.

[Kidlicious]

Originally posted by MichaeltheGreat
Just because you've adopted "all privatization is bad, all government is good" as a mantra doesn't make it reality. Some privatization is bad, some is not. SS is nothing but a regressive income tax disguised as a retirement benefit, to dupe an ignorant public into paying more taxes without complaint.

All of us forget reason and are blinded by our prejudice occasionally, but I think in this case it's you. Just use cost\benefit analysis. With your privatized system you have huge additional costs for many many years, and then you MAY, again MAY, have an extra 1 or 2% more return on a riskier investment. At that rate it will take you forever to break even. It's just not worth it.

I know it's going to be tough with the current system, but there is no better alternative.