Cato.com: Social Security in the Red (today)

[twa]

All higher taxes are gonna do is tick off the wealthy and slow the economy down even more.

A good suggestion would be to not give Social Security checks to those who don't need it. It's a waste of money otherwise and is only bankrupting America even more. As soon as other countries with huge markets agree with China and don't want to buy our bonds anymore, we will collapse on ourselves.

And where would you set the bar for 'needing' money back from a system you paid into for 50+ yrs?

Keeping in mind these people will still pay taxes on income and investments.

[Larry]

Don't think the life expectancy is going up that fast a rate. I could see 70 if the LE was around 90 overall.

People want to enjoy and do stuff upon retirement. 70 would not go over well with the public.

Just going from memory, but I think I've read that when the retirement age was raised to 65, average life expectancy was like 66 1/2.

Now it's more like 82.

We've gone from a situation where people collect SS for 2 years, to where they collect for 20. But they still pay in the same number of years.

[ACW]

You mean like this guy ?

http://newsblaze.com/story/20100303082005j112.nb/topstory.html

:yikes:

CATO FTW

I like their plan:

Current workers could be free to choose either the private option or Social Security. For those who choose the private plan, workers and employers will each pay 5 percent of wages, instead of the current Social Security payroll tax of 6.2 percent for each, into private investment accounts, resulting in an eventual payroll tax cut of 20 percent. Besides supporting retirement benefits, the accounts would finance private life and disability insurance, thus replacing Social Security survivors and disability benefits.

Workers who opt out of the current Social Security system would receive recognition bonds from the federal government that would pay them a proportion of future Social Security benefits equal to the proportion of lifetime taxes they had already paid.

Benefits promised to current retirees would be paid in full, with no reduction of any kind.

[twa]

But they still pay in the same number of years.

No they don't,nor do they contribute equal amounts.

[Larry]

I don't believe that raising the age of SS from 67 to 70 is a very good option. First of all, I think that if you do this, then you have to figure out a way to allow for Seniors to continue to support themselves for those additional years. It's difficult enough now to help Seniors stay actively employed beyond 60.

There's some valid points in there.

For one thing, when discussing raising the retirement age, you have to consider that you don't necessarily want to do that for everybody.

Do we really want 70 year old people driving tractor trailers on the interstate?

Now the good news is that many of the "youthful man's" professions, plan for the fact that they don't want senior citizens in these jobs, and they've taken steps to plan for their own retirement. (Cops, firefighters, military, airline pilots.)

But yeah, if you raise the retirement age, I do think there would have to be exceptions for some professions.

[ABQCOWBOY]

Just going from memory, but I think I've read that when the retirement age was raised to 65, average life expectancy was like 66 1/2.

Now it's more like 82.

We've gone from a situation where people collect SS for 2 years, to where they collect for 20. But they still pay in the same number of years.

This is correct. I saw a study that said todays Seniors are getting back twice what they have paid in in benefits. I don't care what you do to the system, that sort of model can not sustain. Either more people have to be productively paying into the system without significantly increasing the pool of existing benefactors or you have to discontinue the system. I don't think there is any other way to make a real fix to it.

[ABQCOWBOY]

There's some valid points in there.

For one thing, when discussing raising the retirement age, you have to consider that you don't necessarily want to do that for everybody.

Do we really want 70 year old people driving tractor trailers on the interstate?

Now the good news is that many of the "youthful man's" professions, plan for the fact that they don't want senior citizens in these jobs, and they've taken steps to plan for their own retirement. (Cops, firefighters, military, airline pilots.)

But yeah, if you raise the retirement age, I do think there would have to be exceptions for some professions.

You almost have to figure out how older citizens can continue to be productive in the Private Sector. You have to effectively bridge a gap of about 12 years now, assuming 55 to 67 and even now, many Seniors are still working in some capacity beyond that because they have to. If you increase to 70, that number would realistically become a 20 year span or so. That's difficult to do. You have younger workers competing directly with Seniors and the loser on either end of that model is not a good thing.

[Larry]

Actually, one of the things I'd like to see, when it comes to SS, would be

Right now, as I understand it, when you send your money to SS, something like 98% of it goes right back out the door to pay somebody else's benefit.

There isn't a retirement plan in the world where "you send in your money, and we take 98% of what you send in, and then we invest the remaining 2%, for you to use when you retire."

I'd like to see SS migrate to a system where the money comes in, stays in, and gets invested, and paid back out to the person who sent it in.

But, the only way to get to that system would be for all of the payouts for benefits to come from general revenue. For 40 years. We're talking serious money.

Wondering: How much would it cost to transition SS to a fully funded, "pay in advance" system? And if they did, how would the payouts look like, after we spent the big bucks to get to that mythical world?

(Freely admitting that it's a purely hypothetical thought exercise.)

[ABQCOWBOY]

Actually, one of the things I'd like to see, when it comes to SS, would be

Right now, as I understand it, when you send your money to SS, something like 98% of it goes right back out the door to pay somebody else's benefit.

There isn't a retirement plan in the world where "you send in your money, and we take 98% of what you send in, and then we invest the remaining 2%, for you to use when you retire."

I'd like to see SS migrate to a system where the money comes in, stays in, and gets invested, and paid back out to the person who sent it in.

But, the only way to get to that system would be for all of the payouts for benefits to come from general revenue. For 40 years. We're talking serious money.

Wondering: How much would it cost to transition SS to a fully funded, "pay in advance" system? And if they did, how would the payouts look like, after we spent the big bucks to get to that mythical world?

(Freely admitting that it's a purely hypothetical thought exercise.)

That is essentially what GWBush Proposed. Same basic concept.

[helptheSKINS]

Social Security today kicks in at 67.... up from 65 in the 1930's. I could see it jumping to 70 in the coming three or four decades..... Life expentancy is going up, and uping the retirement age is one of the best ways to control the ratio of folks in and folks contirbuting.

I'd rather do that than depend on raising taxes alone.

First, I disagree that SS can be saved. Again, we're somewhere around 4/1 on the input and output right now. SS cannot work with those figures. There simply aren't enough putting it to support those taking out. To make things worse, the ratio is only going to get worse as baby boomers start collecting and people live longer. Raising the age may add a few years but for most young Americans, they will spend their working years paying into a program that will not help them. They will be forced to invest into a program that guarantees a VERY negative return. I'll take my chances on investing in the market which averages double digit returns. I'm saying no thanks to a deal that guarantees I lose my money.

Second, your plan of raising the age is going to be a disadvantage to the poor. They will be paying in just like everyone else but will receive less benefits due to thier shorter life expectancy. You also run into an issue with race. Here are the average life expectancies for white and black men as of 2007. Your plan is saying the average white man will get nearly 6 years of payments while a black man will pay in for essentially no return.

Average life expectancy from birth:

white male: 75.8

black male: 70.2

Again JMS, I understand your point about SS being a great program for so many for so long. Unfortunately, you have to make a decision to go in a different direction. It cannot be fixed, continuing to put bandaides on a stab wound may hide the injury but the patient is still going to bleed out.

[J.Campbell17]

And where would you set the bar for 'needing' money back from a system you paid into for 50+ yrs?

Keeping in mind these people will still pay taxes on income and investments.

That's a good question. I was thinking more along the lines of the really wealthy. Such as those over 67 that make more than $100,000 a year. I doubt that those over 67 are likely to live in such a big house. Covering apartment/town house/ small house costs might not be so bad for them. However, if they are in absolute need of money, they should definitely get Social Security checks.

If you are giving money to people who have no absolute need for it, it's a waste and is a reason why Medicare and other entitlement programs are going bankrupt. However, I think life expectancy and the fact Americans are living longer is the main reason why these programs are going bankrupt.

[Larry]

First, I disagree that SS can be saved.

Then you are wrong. You and everybody else making that claim.

There are literally dozens of ways it can be saved. Several of them have been pointed out in this very thread.

The three biggest are:

1) Remove the ceiling on SS taxes.

2) Increase SS taxes by, I think, 3%

3) Raise the retirement age to 70

The "it can't be saved" is a talking point, being pushed by people who want to destroy it, for reasons which they won't reveal.

Their "support" for the claim, is that there is no simple, cheap, method which is guaranteed to cause SS to generate a profit forever, without any rate increases whatsoever.

There also is no other retirement system which can make that claim, either.

However, any one of the three options I've listed, above, will keep the system in the black for 75 years.

No, 75 years isn't forever.

And nothing else, in the government or the private sector, is, either.

Second, your plan of raising the age is going to be a disadvantage to the poor.

You've made some excellent points about life expectancy. (I thought US life expectancies were considerably longer than those listed.)

But I will point out that SS payouts are grossly distorted in favor of those with low incomes. Poor people get much more money out (compared to what they put in) than rich people do.

(The cynical part of me says that this is why the Republican Party has made it part of their platform to eliminate it.)

[ABQCOWBOY]

That's a good question. I was thinking more along the lines of the really wealthy. Such as those over 67 that make more than $100,000 a year. I doubt that those over 67 are likely to live in such a big house. Covering apartment/town house/ small house costs might not be so bad for them. However, if they are in absolute need of money, they should definitely get Social Security checks.

If you are giving money to people who have no absolute need for it, it's a waste and is a reason why Medicare and other entitlement programs are going bankrupt. However, I think life expectancy and the fact Americans are living longer is the main reason why these programs are going bankrupt.

I don't see how you could really do this. If a person pays in, they have to be entitled to get back. If they voluntarily gave it up, that would be one thing but I don't think you can say to a citizen that he must contribute but if you are making too much money at age 67 or whatever, you do not get paid back. That's not right.

[Larry]

I don't see how you could really do this. If a person pays in, they have to be entitled to get back. If they voluntarily gave it up, that would be one thing but I don't think you can say to a citizen that he must contribute but if you are making too much money at age 67 or whatever, you do not get paid back. That's not right.

I, also, have a "fairness" problem with the "just remove the cap on the taxes" solution.

What you're talking about is a tax hike of 12%, of all income beyond, I think, $100K. For the million dollar and above crowd, you're talking about a 12% tax hike, with zero benefit back to them.

I'll also observe that the million dollars and above crowd already devote considerable effort into making sure that their income isn't earned income, just so that they can take advantage of the (inexplicable, IMO) fact that our tax code gives rich people incredible tax breaks if they don't earn their huge incomes. And implementing this proposal would simply encourage that already-existing trend.

[Predicto]

I agree with the people who say that it is not fair to deny Social Security to the wealthy. The whole point of Social Security was that it was NOT simple welfare. It was a compact - everyone pays in at the front end, and everyone collects at the back end, if they make it there. Breaking that compact after 80 years would be outrageous. Likewise, I do not think that raising the pay-in for the wealthy is fair either, for the reasons stated by Larry.

On the other hand, I think that raising the eligibility age to reflect modern demographics is perfectly fair. The point of SS is not to ensure that you get a nice comforatable retirement. The point is to ensure that everyone has a little bit of income to prop them up when they can no longer work.

[Peeping Wizard]

This is correct. I saw a study that said todays Seniors are getting back twice what they have paid in in benefits. I don't care what you do to the system, that sort of model can not sustain. Either more people have to be productively paying into the system without significantly increasing the pool of existing benefactors or you have to discontinue the system. I don't think there is any other way to make a real fix to it.

That looks like the state and municipal worker pensions in many places. The models put in place are insane. A little bit of supplemental income is one thing but people cannot expect these kinds of deals to fully support them. They need to either save more, cut their costs or work longer. Maybe all three. Having millions and millions of people basking in the sun for years and years just because they "did their part" while they bleed the system dry is not fair.

[Special K]

You are wrong.... Social Security can be tweeked indefinitely to keep us in the black. They've been doing so for decades, they can continue to do so. There is no reason for it to fail if folks don't loose their heads.

JMS, you are seriously delusional about the problems we are facing right now. This point in history is NOT the same as all the other times in history where the government could just "tweak" things with SSI and be back in the black. At no other time in history have we had a HUGE generation of people entering retirement age (baby boomers) and drawing off of Social Security like what we are seeing now.

How you can say this type of system is sustainable with a few tweaks here and there is absolutely unbelievable and signifies to me that you are in an extreme state of denial about this whole mess. Our system IS NOT SUSTAINABLE...unless of course, our government decides to ramp up taxes even more on the "wealthy" in this country...which in our economic state is just stupid IMO. The "wealthy" can't keep shouldering increasing portions of the burden of these types of entitlement programs, like, say this new healthcare bill. It's the old "straw that broke the camel's back" saying. If our leaders in Washington keep spending like drunken fools and expecting they can just continually incrementally increase taxes on the rich to pay for everything and we'll be fine and dandy, well, they are obviously in the same delusional state about this cluster**** as you.

[Prosperity]

So how much immediate suffering would there be if SS was cut off with short notice?

[Larry]

JMS, you are seriously delusional about the problems we are facing right now. This point in history is NOT the same as all the other times in history where the government could just "tweak" things with SSI and be back in the black. At no other time in history have we had a HUGE generation of people entering retirement age (baby boomers) and drawing off of Social Security like what we are seeing now.

How you can say this type of system is sustainable with a few tweaks here and there is absolutely unbelievable and signifies to me that you are in an extreme state of denial about this whole mess. Our system IS NOT SUSTAINABLE...unless of course, our government decides to ramp up taxes even more on the "wealthy" in this country...which in our economic state is just stupid IMO. The "wealthy" can't keep shouldering increasing portions of the burden of these types of entitlement programs, like, say this new healthcare bill. It's the old "straw that broke the camel's back" saying. If our leaders in Washington keep spending like drunken fools and expecting they can just continually incrementally increase taxes on the rich to pay for everything and we'll be fine and dandy, well, they are obviously in the same delusional state about this cluster**** as you.

She said, while ignoring the fact that at least three ways of solving this problem have been pointed out, in this very thread.

[helptheSKINS]

Then you are wrong. You and everybody else making that claim.

There are literally dozens of ways it can be saved. Several of them have been pointed out in this very thread.

The three biggest are:

1) Remove the ceiling on SS taxes.

2) Increase SS taxes by, I think, 3%

3) Raise the retirement age to 70

The "it can't be saved" is a talking point, being pushed by people who want to destroy it, for reasons which they won't reveal.

Their "support" for the claim, is that there is no simple, cheap, method which is guaranteed to cause SS to generate a profit forever, without any rate increases whatsoever.

There also is no other retirement system which can make that claim, either.

However, any one of the three options I've listed, above, will keep the system in the black for 75 years.

No, 75 years isn't forever.

And nothing else, in the government or the private sector, is, either.

You've made some excellent points about life expectancy. (I thought US life expectancies were considerably longer than those listed.)

But I will point out that SS payouts are grossly distorted in favor of those with low incomes. Poor people get much more money out (compared to what they put in) than rich people do.

(The cynical part of me says that this is why the Republican Party has made it part of their platform to eliminate it.)

Larry, please provide some data to support your 75 years claim. I think all 3 are bad options but I'd love to see some data on it.

[Skins24]

She said, while ignoring the fact that at least three ways of solving this problem have been pointed out, in this very thread.

Who's going to be That Guy that raises taxes and costs his party politically?

Raising the retirement age isn't supported by anyone....

What was #3?

Yeah there are "solutions" (mostly short term) but....who's going to do them?

[Special K]

She said, while ignoring the fact that at least three ways of solving this problem have been pointed out, in this very thread.

Observing the fact that the 3 solutions that have been pointed out, in this very thread, are unreasonable (IMO) and will not fix the problem long-term.

Observing the fact that, in this very thread, some solutions being thrown out there involve raising taxes, which I don't think is a good idea in light of our current economic situation and foolish spending by those in Washington.

[ABQCOWBOY]

That looks like the state and municipal worker pensions in many places. The models put in place are insane. A little bit of supplemental income is one thing but people cannot expect these kinds of deals to fully support them. They need to either save more, cut their costs or work longer. Maybe all three. Having millions and millions of people basking in the sun for years and years just because they "did their part" while they bleed the system dry is not fair.

I agree. It's not fair at all. In fact, if I had to describe it, I would describe it as Greece.

[twa]

So how much immediate suffering would there be if SS was cut off with short notice?

A bunch

It is unthinkable unless you wish to expand the welfare rolls

[Larry]

Larry, please provide some data to support your 75 years claim. I think all 3 are bad options but I'd love to see some data on it.

The CBO evaluated all three options, back, I think, when Bush was pushing his plan to scrap the whole thing.

I didn't think I could find something so quickly, but here's a PDF from CBO, dated 5/25/05. It's not the plainest English I've seen. (Just as an example, WTF does "Eliminate NRA hiatus to 67" mean?)

But I think that scenario 3.3, on page 5 of the PDF, says that if they gradually raise the retirement age to age 70, phased in between now and 2029, then SS generates a profit every year until '23, and the trust fund is good till '87.

I think that scenario 5.4 says that if you raise the ceiling on SS taxes from it's current approx $100K, to $250K, then the trust fund is good forever.

(I didn't think they ever said something would work forever. Maybe "forever" is government-speak for "we only ran the numbers for 100 years", or something.)