5 ms·

Well, if it was a private company, let's posit it's set to go broke in 40 years, it'd be trading up for the next 39 years and 364 days. RE: Your views on SS in

by jbooth 16y ago

Well, if it was a private company, let's posit it's set to go broke in 40 years, it'd be trading up for the next 39 years and 364 days. RE: Your views on SS in general, is that a populist argument for stronger SS and a more progressive income tax?

grandalf 16y ago
If Social Security were a private company it would be considered a pyramid scheme and shut down. Imagine someone published a Fidelity internal memo to Wikileaks stating that all shareholders under age 40 were required to keep investing 12.5% of their salary every month, could not sell, and would receive a negative return upon reaching retirement age. It's so fafetched it's laughable. I don't have a problem with the government requiring a 12.5% retirement fund outlay from workers. It's paternalistic but probably pragmatic. I do think it should be an investment based program rather than a pyramid scheme, and I do think workers should be guaranteed at least the rate of return of a very conservative market investment (such as a precious metal or a certificate of deposit would yield). The original genius behind Social Security was that it was not a welfare program, it was sold as an investment program. However the books were cooked from day 1 because it achieved that only due to very skewed demographics (far more young workers than old workers/retirees), just as Madoff's fund was able to pay out returns only on the basis of having far more new investors than investors expecting returns. So I'm opposed to the regressive nature of the Social Security tax mainly because the program is broken and thus it's only a regressive tax and not an investment program. Obama ran on a campaign promise of turning social security into a welfare program which simply means preventing the program from going bankrupt by deciding that only those who are deemed poor get the funds promised them. Imagine if Madoff had tried to avoid jail by saying that he'd refund the money of all the poor people who invested with him. That's equally laughable. Sadly, turning it into a welfare program is probably the most pragmatic approach, but if we're going to do that we should immediately do away with the payroll tax and allow the scheme to end so that those who don't aspire to be poor can start investing their 12.5% into an actual IRA. It would be fine with me if income tax rates had to rise a bit to cover the cost of Soc Sec as welfare.
- jbooth 16y ago
  Well, for the record, SS is a very conservative market investment -- the surplus is invested in government T-bills every year, that's as conservative as you can get. Of course then people turn around and say it's the government writing itself checks or they're worthless IOUs or something. As far as the finances, as I understand things, simply raising the cap on income would extend things out a bit, FICA doesn't get collected past 105k or something. That's also redistributive and you could say unfair, but the fact is that we have a big population bump retiring and no system to pay for their retirement is going to be fair to us. EDIT: Also, I suspect any other mandated market investment that the government enforced would have even worse problems than SS. What happens when all of the baby boomers put daily selling pressure on the stock (or gold) market for 30 years? That might wind up being a way worse investment when it comes to the market prices at sell time, no matter how well the economy does.
  - grandalf 16y ago
    There's nothing wrong with using T-Bills, the problem is that the T-Bills are not owned by the worker for 12.5% of his lifetime earnings. And, if any money is saved it's just a temporary measure b/c the program is designed as a pay-as-you-go program, where the taxes paid by current workers are sent to current retirees. So it's really not investment that is going on, merely a very temporary surplus. I don't approve of raising the income cap because that fails to address the regressive nature of the tax. It also fails to address the larger issue, which is the vulnerability of the program to demographic shifts and congress's whims, including the oft-used whim of spending the current surplus on other things to avoid having to raise taxes now for current spending. I think the best solution would be to give workers below a certain age the option of opting out of the pay-go program and instead choosing an investment based program curated by the government but with an ownership component. The missing revenue should just be paid for via our progressive income tax regime.
  - anamax 16y ago
    > As far as the finances, as I understand things, simply raising the cap on income would extend things out a bit, FICA doesn't get collected past 105k or something. Since benefits are roughly related to FICA, extending the cap doesn't help much. It helps some, because the benefits system is progressive, in that folks who contribute a lot get less return on their contributions than folks who contribute just a little, but .... The folks who designed SS thought that the cap was essential. Their argument was that SS wouldn't survive if it paid folks like Ross Perot $500k/year in benefits or if it was a tax with no benefits to folks like Ross Perot. The cap means that Perot doesn't get $500k/year but don't care because he didn't put much in. Are they wrong?

by jbooth 16y ago

grandalf 16y ago

If Social Security were a private company it would be considered a pyramid scheme and shut down. Imagine someone published a Fidelity internal memo to Wikileaks stating that all shareholders under age 40 were required to keep investing 12.5% of their salary every month, could not sell, and would receive a negative return upon reaching retirement age. It's so fafetched it's laughable. I don't have a problem with the government requiring a 12.5% retirement fund outlay from workers. It's paternalistic but probably pragmatic. I do think it should be an investment based program rather than a pyramid scheme, and I do think workers should be guaranteed at least the rate of return of a very conservative market investment (such as a precious metal or a certificate of deposit would yield). The original genius behind Social Security was that it was not a welfare program, it was sold as an investment program. However the books were cooked from day 1 because it achieved that only due to very skewed demographics (far more young workers than old workers/retirees), just as Madoff's fund was able to pay out returns only on the basis of having far more new investors than investors expecting returns. So I'm opposed to the regressive nature of the Social Security tax mainly because the program is broken and thus it's only a regressive tax and not an investment program. Obama ran on a campaign promise of turning social security into a welfare program which simply means preventing the program from going bankrupt by deciding that only those who are deemed poor get the funds promised them. Imagine if Madoff had tried to avoid jail by saying that he'd refund the money of all the poor people who invested with him. That's equally laughable. Sadly, turning it into a welfare program is probably the most pragmatic approach, but if we're going to do that we should immediately do away with the payroll tax and allow the scheme to end so that those who don't aspire to be poor can start investing their 12.5% into an actual IRA. It would be fine with me if income tax rates had to rise a bit to cover the cost of Soc Sec as welfare.

jbooth 16y ago
Well, for the record, SS is a very conservative market investment -- the surplus is invested in government T-bills every year, that's as conservative as you can get. Of course then people turn around and say it's the government writing itself checks or they're worthless IOUs or something. As far as the finances, as I understand things, simply raising the cap on income would extend things out a bit, FICA doesn't get collected past 105k or something. That's also redistributive and you could say unfair, but the fact is that we have a big population bump retiring and no system to pay for their retirement is going to be fair to us. EDIT: Also, I suspect any other mandated market investment that the government enforced would have even worse problems than SS. What happens when all of the baby boomers put daily selling pressure on the stock (or gold) market for 30 years? That might wind up being a way worse investment when it comes to the market prices at sell time, no matter how well the economy does.
- grandalf 16y ago
  There's nothing wrong with using T-Bills, the problem is that the T-Bills are not owned by the worker for 12.5% of his lifetime earnings. And, if any money is saved it's just a temporary measure b/c the program is designed as a pay-as-you-go program, where the taxes paid by current workers are sent to current retirees. So it's really not investment that is going on, merely a very temporary surplus. I don't approve of raising the income cap because that fails to address the regressive nature of the tax. It also fails to address the larger issue, which is the vulnerability of the program to demographic shifts and congress's whims, including the oft-used whim of spending the current surplus on other things to avoid having to raise taxes now for current spending. I think the best solution would be to give workers below a certain age the option of opting out of the pay-go program and instead choosing an investment based program curated by the government but with an ownership component. The missing revenue should just be paid for via our progressive income tax regime.
- anamax 16y ago
  > As far as the finances, as I understand things, simply raising the cap on income would extend things out a bit, FICA doesn't get collected past 105k or something. Since benefits are roughly related to FICA, extending the cap doesn't help much. It helps some, because the benefits system is progressive, in that folks who contribute a lot get less return on their contributions than folks who contribute just a little, but .... The folks who designed SS thought that the cap was essential. Their argument was that SS wouldn't survive if it paid folks like Ross Perot $500k/year in benefits or if it was a tax with no benefits to folks like Ross Perot. The cap means that Perot doesn't get $500k/year but don't care because he didn't put much in. Are they wrong?