The right wing hasn't given up on privatizing Social Security. Here's a recent Wall Street Journal op ed calling for giving people the right to divert their FICA taxes into a private account, which would, of course, quickly destroy funding for Social Security benefits. At least, I think that's what this incoherent proposal amounts to. These proposals never go into details because their authors never bother to understand how Social Security works. They hate Social Security and want the government to funnel money to them.
Social Security's inflation-adjusted rate of return is only 1.23 percent. As a retirement investment goes, that's pretty poor performance. But, we know some of that money is diverted for other things, such as SSI. To be realistic, we need to stop separating social security taxes form income taxes when we talk about how much we are paying in taxes. If this was our money, we could invest it and do much better. But, it is a tax levied on us and then they give us a little back, if we live long enough. My dad died at 64 and never drew any social security. So, he paid that tax all his life and where is the money now? Let's be honest when we talk about what we pay in income taxes. We are paying 15.3 percent (yes, the employer pays 1/2, if you're not self-employed) before we even start to add the other income tax. Letting people who claim to live in a free society control their own money is a radical concept, isn't it? But, without such programs as social security, what would those on the left use to scare senior citizens when it comes election time? Perhaps, perhaps, instead of using social security as a political tool in the form of scaremongering for votes, the left should try to come up with solutions to make this program work better for those that who weekly have 15 percent of their hard-earned income confiscated by the government. You want to gripe about proposals from the right but where are the proposals from the left? The only idea I've heard that makes any sense is eliminating the cap and taxing all income. Doubt that will really provide a lot of additional income for retirees though because it will take 2 seconds for Congress to come up with other ways to spend that money. The other idea I've heard is increasing the taxes. Doubt that will turn into any meaningful increase in benefits but it will increase the burden on poor wage earners, the middle class and small businesses. The lack of any meaningful proposals from the left tells me they are fine with the status quo. This goes along with the socialistic thinking which has now become dominant in the democratic party which thinks it is the governments right to control/confiscate/whatever all wealth and then give it back to the citizen's in pittances, all the while pointing the finger at the opposition and blaming them and criticizing any solution they propose. I wish, for one second, the democrats could put aside politics and try to actually solve problems. But, that might distract them from their mission of gaining absolute power.
ReplyDeleteWhat happens when those funds handed over to the Wall Street gang are either swindled away or lost in the next market crash--you know the one where the Federal Reserve will be out of ammo because of the political damage from the last big swindler's bailout? Oh, Grandma will be eating from the trash dumpsters again and the disabled can beg on the streets. Everybody is a genius and all is right with the world when the market is going up. We are back in the 1920's again pal.
ReplyDelete@1:16
ReplyDeleteSocial Security pays an average rate of return at 1.23 percent according to the Heritage foundation, a right-wing think tank who has proposed privatization for years. They structured their calculations to find the worst possible rate of return in their headline, although if you actually dig into their article you can find even they admit that rates of return can be as high as 5.37% in some cases. That is lower than the return in the market, but not by much, and far greater than treasury bonds with the same high level of security.
https://www.heritage.org/social-security/report/social-securitys-rate-return
As to whether money is diverted to SSI, NO. SSI draws from the general fund, whereas disability and retirement draw from the trust funds. In fact, claimants who are eligible for both SSI and DIB/RIB are paid SSI first, REDUCING their DIB/RIB benefits, shifting the cost from the trust funds to the general fund and saving the trust funds money.
No one is paying 15.3 percent for social security. The worker pays 6.2%, and the employer pays another 6.2%. Even assuming the worker is self-employed, they do not pay 15.3%, they pay 12.4%. You are adding in the additional 1.45% (2.9% for the self-employed), that is Medicare tax. Go try proposing privatizing Medicare, or even making it voluntary. AARP would march into the halls of Congress and demand they not do this as it would, best-case scenario, separate the relatively healthy who would voluntarily leave the program, from the sick, leaving only the sick on the program, which in turn would explode costs.
As to your assertion that letting people control their own money should not be a radical concept, that's absurd as it suggests anyone would believe it is. It's an extremely old concept, one which we generally follow since the vast majority of income (and all wealth) is not taxed. What is a radical concept is allowing for individuals to directly control tax revenue. That's a bad idea since, as individuals, in the short-term we will do what is best for ourselves financially in the moment, when the whole point is that the money be available to them, decades down the road. That is contrary to human nature and the reason why the programs are not voluntary. This is also why many object to the forced nature of the programs.
Taxation is not antithetical to freedom. Go build your own roads, run your own power lines, grow your own food, hire your own police and firefighters, etc. See how much of your time and money is devoted to that, and see how much of your time and money is FREE, due to these government actions.
As to raising the tax not solving anything because Congress will just think of ways to spend the money, any perceived financial shortfall is not a result of government spending. Even if you believe the propaganda that the programs are financially insolvent, that's a result of the baby boomers reaching retirement while current wages have stagnated for the past two decades. That puts financial stress on the system because you have more benefits being sought, at the same time social security tax revenues remain at their historic levels. It's also irrelevant to your point that the rate of return on social security is bad.
As to the Dems scaremongering, not coming up with solutions, and trying to "control/confiscate/whatever all wealth," and your wish they would "put aside politics and try to actually solve problems," that's not really possible when people claim any proposed solutions are socialist, Un-American, freedom-hating, and just an attempt to gain "absolute power." It pretty much ends any debate.
Put simply, our society always has had a balance between the private and public sectors. Having all of one or the other will result in less freedom, not more. Where the balance falls is pretty much all politics is, and has ever been, about.
@3:04pm. Well said!
ReplyDeleteWorkers would be better off it their payroll tax was placed in an IRA (that they could not access until retirement age) that just bought Treasury Bills. The rate of return would be higher, and there would be no market risk. Plus if a worker died before retirement age, the money would be in his/her estate.
ReplyDeleteThe problem is that current taxes are needed to pay current beneficiaries, so I would be difficult (and costly) to convert from a pay as you go system to a forced savings system.
Do you people really think that taking the cap off is going to work? Seriously? You don't think that those wage earners will find a different way to structure their compensation so as not to lose that money to taxes? Seriously, you think they will just shrug shoulders and let it happen?
ReplyDelete@9:28
ReplyDelete3:04 here. Depending on the worker's situation, the rate of return can be higher or lower in the Social Security system than treasury bills. It varies based on the worker's income. You are correct though that reforming the system to be like an IRA would at least keep the money in the worker's estate if they died. On a systemic level, I'm not certain what portion of the current asset funds are there due to early death. If it is low, then converting to an IRA-like system would be sustainable. As to it being costly to convert from a pay as you go system to a forced savings system, I might be missing it, but I thought your proposal and the current system are both "forced savings" systems?
@9:28
Your logic applies to the current structure as well, yet plenty of workers reach the current cap. Just because people will try and avoid regulations doesn't mean regulations are useless.
@ 1:16 - Good points. But can we get a return or break in paragraphs?
ReplyDelete
ReplyDeleteI noticed one author of the article is a member of the Heritage Foundation, which would like to stick a knife in Social Security. The other is an trader who would likely profit handsomely if a lot of people could be duped into abandoning their social security benefits in favor of more risky investments in private markets. Are we surprised when they try to justify any idea that would gut Social Security and funnel vast sums of money into private markets?
"...in the short-term we will do what is best for ourselves financially in the moment, when the whole point is that the money be available to them, decades down the road. That is contrary to human nature and the reason why the programs are not voluntary. This is also why many object to the forced nature of the programs."
ReplyDeleteIn this era of IRA and 401k, when we have moved away from defined benefit plans (pensions) to defined contribution plans (401k), it takes more discipline to not invade the money in the 401k or IRA when you have a financial emergency. Without force (payroll taxes), there is a large number of workers who just will not save for their old age and will have nothing to live on, except charity and welfare benefits. Social Security has its flaws and cannot legislate fairness to all, but it has been the primary reason that seniors are not living in poverty.
Privatization would lead to a whole new set of problems and a wider distance between the haves and the have nots.
@10:03
ReplyDeleteI wasn't advocating against the forced nature of the programs, I was explaining why that force is necessary. If the system were transitioned to something like an IRA or 401K, I still think force would be necessary for the reasons you identify. In theory, I imagine the system could function with the worker having some degree of control, directing contributions be invested in a range of treasury-backed securities (as they are currently already), but not equities. I'm not suggesting that contributions would be voluntary, as they are with an IRA or 401K.