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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

by 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?
- grandalf 16y ago
  The rich at the time might very well have opposed having to pay the 1% social security tax. The inception of the program was based on a variety of too good to be true premises, the 1% payroll tax being the most notable, so I interpret the cap more as a symptom of this fantasy... and possibly a consideration of the stigma attached to welfare programs in those days.
  - anamax 16y ago
    I understated things a bit - it wasn't just the originators, but SS advocates, at least until recently. If you want to remove the cap, then either you're willing to pay Ross Perot $500k/year in benefits or you're going to have uncapped taxes and capped benefits, that is, another 15% tax. Do you really think that rich people today won't object to another 15% tax?

by jbooth 16y ago

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?

grandalf 16y ago
The rich at the time might very well have opposed having to pay the 1% social security tax. The inception of the program was based on a variety of too good to be true premises, the 1% payroll tax being the most notable, so I interpret the cap more as a symptom of this fantasy... and possibly a consideration of the stigma attached to welfare programs in those days.
- anamax 16y ago
  I understated things a bit - it wasn't just the originators, but SS advocates, at least until recently. If you want to remove the cap, then either you're willing to pay Ross Perot $500k/year in benefits or you're going to have uncapped taxes and capped benefits, that is, another 15% tax. Do you really think that rich people today won't object to another 15% tax?