Talk:Social Security
From Pete Ashdown Campaign Collaboration Wiki
We should simply do away with the $90,000 cap. This cap simply means that those who can afford to pay social security and those who cannot afford must. So as you make more money, you pay a smaller and smaller percentage of your total income to social security. That makes no sense to me and I have yet to hear any argument for keeping the cap that is not motivated by people being selfish. If we remove this $90,000 cap, we can then reduce the percentage everyone pays to social security. After all, the total taxable income will become much greater. --Michael Paul Bailey
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[edit] What I don't half know about Social Security
I'm not sure I'm ready to try adding something to the main Social Security page, especially when I'm not an economist. Don't hit me, but I think Bush was on to something with his Social Security plan. It's just that his plan was the wrong plan.
Bear with me while I muddle through trying to explain what I hardly understand and may understand wrong anyway. OKay. I pay SS tax which goes to the SS Administration. The SS Administration spends what it needs to on current demand but the surplus is used for intra-government loans. Bush was right when he said that all there were in the SSA offices were little pieces of paper. They don't stuff it in a pillow or in a sock under the mattress.
The economy needs that money in circulation. It's an enormous amount of money. Having it stuck away wouldn't help anything. But the method to get into circulation is broken. By loaning the money to other agencies, that means someone is spending it and someone has to pay it back. That may mean SS is paying a million dollars for Mormon cricket control or buying a bridge to nowhere. That seems dumb. Why is it dumb? Because the taxpayer gets double-whammied and has to be the one to pay back the loan from SS. So you pay the social security in the first place and then when it's borrowed, you get taxed to pay it back.
Social Security should be able to invest directly in Municipal bonds. People that benefit from the investment pay for it a very low rates, and there's accountability since the investment has to turn a profit. Social Security should be able to invest a very small portion in things like renewable energy research or cutting edge technology. This might turn a profit or not, which is why it has to be done by professionals. The last thing I think Social Security should be able to do is pay for education. Jane Doe borrows against her SS and has years to pay it back. She pays a small interest rate, but has to carry an insurance policy in case she's unable to fully pay it off for some reason.
I'm sure there's something wrong with this idea, but I'd rather have some controls on how the surplus is spent than a porkbarrel free-for-all. --utahgirl
- What about sloped investment risk against age? That is, if you're in your 20's you can invest in higher-risk funds than if you're in your 60's? I am against complete privatization, but if there is a way to acquire higher gains safely, it should be considered.--pashdown 12:53, 13 January 2006 (MST)
[edit] ok, I'll use myself as an example
Obviously, I just fell off the turnip truck, yet even I've followed mutual funds for years. When I was married, I even invested a little. The problem is that they don't just go up, they go down. If you're talking about making forced changes to more conservative investments as you get older, that doesn't work all the time either.
I'm about 10 years from retirement. I can't have any going down, but because I need the gains to make up for years and years of having no retirement, I have to invest with greater risk. That's why I'm against privitization. Too many of us yokels out here don't have the savvy to invest wisely. (Like my foray into buying stocks one time... $2,000 and when I finally sold, I got less than 1% of it back! lol)
So, let's look at what I do have: Social Security at about 900.00 a month, retirement from where I work at about 750.00 a month if I make it 10 more years, and the tiniest amount of savings.
I didn't go into the workforce until 16 years ago, after my divorce. My wages for years were in the $6-8 range at jobs that offered no retirement and usually no health insurance. I had no savings. Zip. Nada. None. I got a job finally with the U. I started at 7.14 an hour. In 10 years of working there, my combined 401k, 403b, and 457 retirement savings have yet to reach $10,000.
So to address that problem, you have to insure that all individuals have their own social security accounts, whether they work or not. Figure that one out. Then there are individuals who from one cause or another have to drop out of the work force and can't return. Their contributions stop right there.
At this low a level, I think it is much much better to have a secured Social Security with a defined benefit than risk anything by privitization. You have to have SS doing the investing and again, my point is that I think that the fund investing directly into the economy is smarter than this wacko system we have now.
Thanks for your response. I'm a Kossack, by the way. utahgirl
[edit] Cap on taxed earnings
It would be wonderful if a minor tweak like raising the cap from $90,000 to $100,000 could effect a major improvement, but the numbers just don't add up. I completely agree with focusing on the cap, a regressive feature. This should be a big part of any Social Security plan, but the change would have to be more substantial. I've taken out the reference to that minor increase and substituted a couple of more serious alternatives.
[edit] Eliminate the cap
Eliminating the cap would eliminate 90% of the shortfall projected by the SSA and 100% of the shortfall projected by the CBO. [1] Any candidate advocating that alternative, however, should be prepared to deal with some genuine concerns:
- It would be a significant increase in the effective rate of taxation on high earners. Someone earning $90,000 or less would be unaffected; the tax on his or her salary would remain at 12.4% (half paid by the employer and half by the employee). An annual salary of $135,000 is now taxed at the rate of 8.27%; bringing the rate up to 12.4% by eliminating the cap would increase the tax bill by $5,580 (an extra $2,790 from the employee and the same from the employer). On an annual salary of $1 million, the current tax rate is only 1.1%. Eliminating the cap produces an increase in the tax of $112,840 per year. Some people may think these increases are too steep. (Of course, they could be phased in, by raising the cap each year for a few years before abolishing it.)
- Eliminating the cap would raise a question of how to calculate benefits. Currently, benefits are based on the employee's earnings (during the 35 years of highest earnings) that were subject to the tax. If more earnings are taxed, would they still count toward benefits?
- If yes, it would mean that high earners would, upon retirement, receive huge Social Security checks. For example, USA Today calculated that Tiger Woods would, upon retirement, get $5.9 million per year in Social Security benefits. [2]
- If no, it would mean a decoupling of benefits received from taxes paid. This alternative, like the "progressive indexation" that Bush eventually endorsed, would mean that Social Security would become strongly oriented toward transferring wealth from the rich to the poor. The system's defenders have traditionally opposed moving to this "welfare"-type model because they fear it would undermine Social Security's broad public support. The same USA Today article notes that Ted Kennedy and other liberals have consistently favored keeping Social Security as a pension system rather than a welfare system.
- I second eliminating the cap alltogether! It leaves the rich that much richer. I say to push the cap up to something closer to $500k+ because then the only exempt are the extremely wealthy. I don't want to be the generation who have to fend for ourselves because the government squandered our money away.--Projektdotnet 16:15, 2 May 2006 (MDT)
[edit] Raise the cap
One way to handle these issues is to support the less drastic reform advocated by the AARP: Raise the cap to $140,000. [3] In fact, a Republican Senator, Lindsey Graham, has gone even further, suggesting that the cap be raised to $200,000, although in the context of raising revenue to fund a transition to private accounts. [4] I think the AARP and some Democrats selected the $140,000 figure because it would bring the total wages subject to the tax from the current 85% back up to 90%, the historic level. (The percentage declined because of the increasing inequality of income distribution. The rich are getting richer, by comparison, so the proportion of exempted wages has risen even though the cap is adjusted for inflation. [5])
[edit] Privatization
There are other fixes that could help address the projected shortfall. A point worth bearing in mind is that, by the White House's own admission, the Bush plan for private accounts would have a "net neutral effect" on the system's finances. [6] In other words, it wouldn't do anything to help alleviate the projected shortfall. That's why, when Bush finally came out with a more specific plan, he had to include a reduction in the benefits that would be paid. Jim Lane 00:24, 26 March 2006 (MST)
