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Mon Jan 7, 2013, 03:04 PM

Elementary Social Security.

If we were to maintain a workforce of 100 million workers who paid $20 per week in FICA taxes (contributions) out of each paycheck, that would mean $2 billion dollars per week would go into the Social Security Trust Fund. (I am only using this as an example because the numbers are quite a bit higher)

So, if we were paying $2 billion per week, that would equal $104 billion dollars per year into the Social Security Trust Fund. That is a lot of money. It is not going to go broke so long as the workers continue to pay into it. The worst scenario would be that the benefits would have to be cut if it ran into a shortfall. Or it would need to be changed in some small way to meet its needs.

The point being that Social Security is not going broke and cannot go broke so long as workers pay into it. The only way it could go broke is if we stop paying those taxes and say that we are going to pay for it out of the "general fund". The "general fund" is always at the discretion of the politicians in power. They can spend it on whatever they desire. This is the danger in the "payroll tax cut".

Bottom line, Social Security is one of the greatest programs ever created and gives workers and citizens an independence from the capitalists and the conservatives in government that despise the program. We should protect it at all costs.


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Reply Elementary Social Security. (Original post)
kentuck Jan 2013 OP
LisaLynne Jan 2013 #1
dkf Jan 2013 #2
Romulox Jan 2013 #4
dkf Jan 2013 #6
democrattotheend Jan 2013 #24
kentuck Jan 2013 #39
dkf Jan 2013 #55
democrattotheend Jan 2013 #58
JDPriestly Jan 2013 #54
kentuck Jan 2013 #5
dkf Jan 2013 #8
kentuck Jan 2013 #11
dkf Jan 2013 #22
kentuck Jan 2013 #25
dkf Jan 2013 #31
kentuck Jan 2013 #34
dkf Jan 2013 #37
kentuck Jan 2013 #41
dkf Jan 2013 #47
kentuck Jan 2013 #49
dkf Jan 2013 #56
JDPriestly Jan 2013 #63
JDPriestly Jan 2013 #60
JDPriestly Jan 2013 #59
dkf Jan 2013 #61
JDPriestly Jan 2013 #69
democrattotheend Jan 2013 #27
dkf Jan 2013 #33
democrattotheend Jan 2013 #35
dkf Jan 2013 #40
JDPriestly Jan 2013 #57
dkf Jan 2013 #72
JDPriestly Jan 2013 #73
dkf Jan 2013 #75
kentuck Jan 2013 #7
dkf Jan 2013 #10
kentuck Jan 2013 #13
dkf Jan 2013 #18
kentuck Jan 2013 #26
dkf Jan 2013 #44
JDPriestly Jan 2013 #64
democrattotheend Jan 2013 #36
dkf Jan 2013 #45
JDPriestly Jan 2013 #65
dkf Jan 2013 #70
JDPriestly Jan 2013 #74
Romulox Jan 2013 #14
kentuck Jan 2013 #19
democrattotheend Jan 2013 #32
kentuck Jan 2013 #38
democrattotheend Jan 2013 #42
kentuck Jan 2013 #43
democrattotheend Jan 2013 #53
JDPriestly Jan 2013 #66
kentuck Jan 2013 #67
former9thward Jan 2013 #76
JDPriestly Jan 2013 #77
JDPriestly Jan 2013 #52
Mojorabbit Jan 2013 #62
truebluegreen Jan 2013 #71
Romulox Jan 2013 #3
kentuck Jan 2013 #9
Romulox Jan 2013 #12
kentuck Jan 2013 #16
JDPriestly Jan 2013 #68
dkf Jan 2013 #15
kentuck Jan 2013 #17
dkf Jan 2013 #20
kentuck Jan 2013 #21
dkf Jan 2013 #23
kentuck Jan 2013 #29
liberal N proud Jan 2013 #28
kentuck Jan 2013 #30
dkf Jan 2013 #46
kentuck Jan 2013 #48
alberg Jan 2013 #50
liberal N proud Jan 2013 #51

Response to kentuck (Original post)

Mon Jan 7, 2013, 03:10 PM

1. That's it, isn't it? That's why they hate it.

It is another thing that lessens our dependence on them (them being the 1% or whatever you want to call them). It's one of the things that stops us from being de facto slave labor for them (another thing would be UNIONS). That's why they hate it. They don't even care as much about getting their greedy hands on the money as that it gives people some amount of freedom from them.

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Response to kentuck (Original post)

Mon Jan 7, 2013, 03:10 PM

2. Maybe you need to re-read a definition of insolvency.

 

a (1) : unable to pay debts as they fall due in the usual course of business (2) : having liabilities in excess of a reasonable market value of assets held
b : insufficient to pay all debts <an insolvent estate>

http://www.merriam-webster.com/dictionary/insolvent

Even now the funds coming in are insufficient to meet the funds going out. What keeps things working is the trust fund. Once that trust fund is gone, really Social Security is insolvent.

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Response to dkf (Reply #2)

Mon Jan 7, 2013, 03:14 PM

4. The argument is that it is "no big deal" that younger workers won't collect in full.

It's a bad argument, but it's one that's being made.

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Response to Romulox (Reply #4)

Mon Jan 7, 2013, 03:16 PM

6. Well if a 25% cut is fine, then sure.

 

But if that were a true debt, a 25% haircut is in default and recovery territory.

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Response to Romulox (Reply #4)

Mon Jan 7, 2013, 03:56 PM

24. Bingo

That is the argument I see a lot, and I appreciate you calling it what it is. It's people who are already receiving SS or close enough to receiving it not to be affected by a shortfall saying that they don't care what's left for us as long as they get theirs.

Obviously this is not all seniors/pre-seniors or even most. But it is an attitude I see too often from supposed progressives. I thought being a progressive was about thinking beyond your self-interest when advocating or opposing policies toward the greater good. It is disappointing to me to see some supposed progressives be so indifferent to the long-term solvency of Social Security and Medicare as long as their piece of the pie is not affected.

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Response to democrattotheend (Reply #24)

Mon Jan 7, 2013, 04:24 PM

39. I don't see people saying they "don't care"...

I see people saying we need to fix it if we want it for your generation and beyond. We can spend our taxes on a defense industry or tax breaks for billionaires or we can spend just a small amount to fix Social Security. That is the argument I hear.

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Response to kentuck (Reply #39)

Mon Jan 7, 2013, 05:12 PM

55. Which Democrats are advocating for even a small change in social security?

 

I see the opposite.

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Response to kentuck (Reply #39)

Mon Jan 7, 2013, 05:19 PM

58. From some people, yes

From others, the argument is that nothing needs to be done because the system is solvent for another 20 years. Which as a millenial I find offensive, because it implies a lack of care about whether I get any benefits from SS or even whether my parents get what they were promised until they die.

I rarely hear anyone say that they are concerned about whether SS will be there for their children. Ditto with the disregard for the debt.

I really hope this doesn't come across as heartless or indifferent to seniors, because I certainly am not. I began volunteering with seniors when I was in middle school and was very close with my grandmother who passed away last year. I worry constantly about my grandfather, who is suffering from severe depression since her death.

That said, I am concerned about entitlements/earned benefits, along with interest on the growing debt, eating up a bigger and bigger share of the domestic spending budget as the Boomers age, leaving too little room for investment in education, infrastructure, and even such "luxuries" as making sure poor children get a healthy lunch. It has always bothered me that Democrats have fought so much harder to protect Social Security from any changes than they have fought to preserve spending for low-income programs and investment in the future. Children as a group are more likely to be poor than the elderly, yet we spend a fraction on children of what we spend on the elderly.

Obviously, in an ideal world, we could take care of children and seniors and spend less on the military industrial complex. However, it has never worked that way, and within the limited pie of domestic spending, the more expensive entitlements become as Boomers retire, the less is left for any kind of investment in the future. And it bothers me that Democrats and progressives have always fought tooth and nail against any changes to SS and Medicare while being far more willing to cut other domestic programs.

That is why, even though I may not agree with how he is going about it, I am glad we have a young president with two young daughters who shares my concern about investing in the future and is willing to challenge Democratic orthodoxy to prevent SS, Medicare and interest on the debt from swallowing funding for other domestic programs in the future.

I agree with you that cutting the bloated military industrial complex would prevent us from having to divide a too-small pie between seniors, children, veterans, the poor, the disabled, infrastructure investment, medical research, education, and other important domestic priorities. But the reality of the situation is that at least until Democrats take back Congress, which is unlikely before 2022, we will have to choose what domestic programs to prioritize, and I don't necessarily think that SS and Medicare should be prioritized above all else by progressive activists.

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Response to democrattotheend (Reply #24)

Mon Jan 7, 2013, 05:09 PM

54. There will be plenty in the trust fund if we increase the amount of income subject to payroll taxes.

We should do that just to keep up with inflation. It hasn't been done in many years. Don't worry. There will be plenty for you when your time comes.

I am just a bit older than the baby boomer generation. In 1985 we were told there would be a crisis one day because the baby boomer generation is so much larger than its children. That is when we all accepted a hike in our payroll taxes to cover our retirement. The baby boom has been accounted for in the higher tax rates.

Those who claim that Social Security will run out of money are banking on a depressed economy in the US for forever. That will not happen. Our economy will improve as will revenue for Social Security.

The Trust Fund is a specific reserve built up to cover baby boomers.

When the baby boomer generation dies, the revenue from payroll taxes will cover the benefit costs of those of you who are younger. Don't worry about this. You are being fed a bunch of lies by people who never read history and certainly did not live through it.

In, must have been the late 1940s or 1950s, my grandmother, a farmer's wife, told me with terror on her face what happened before Social Security to elderly poor people when they could no longer work. They went to the "poorhouse." That was a "charitable" institution maintained at public expense by the county government. It was apparently a fate next-worse-to-death to have to go to the poor house. But especially during the 1930s that was the only hope.

Your generation should try to get the cap on the amount of income subject to Social Security taxes raised now. It is time that be done. As I said, the value of money has declined as it always does in a growing economy. People earning over $106,000 should be paying the payroll taxes on every cent they earn. If we did that, we might be able to lower the payroll taxes for everyone just a tiny bit and still have a solvent system.

Right now, a lot of seniors who are on Social Security would be working, but the jobs aren't there. Hopefully that will change.

Raising the Social Security age is not feasible until employers are ready to hire a lot of older workers.

The Social Security benefits average somewhere around $1200--1300 per month, barely enough to live, not enough to be an incentive to someone to retire if they could continue to work.

So there you have it. Don't worry. You are falling for a lot of hype.

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Response to dkf (Reply #2)

Mon Jan 7, 2013, 03:15 PM

5. Indeed...

IF we are unable to pay the SS Trust Fund, then we are unable to pay the Chinese and Japanese and Canadians that hold the same Treasury Notes. In either instance, the money was borrowed by the government. Do the people that paid into the SS Trust Fund stand second in line to the Chinese and Japanese. I don't think so.

Even if we declared insolvency, the trust fund would still have money coming into it. All other creditors would have to bite the bullet.

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Response to kentuck (Reply #5)

Mon Jan 7, 2013, 03:19 PM

8. The fund would have whatever the FICA tax can generate.

 

So it can exist, but not at any level a person thinks they were promised.

Chained CPI is insignificant compared to equalizing the payout based on FICA contributions.

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Response to dkf (Reply #8)

Mon Jan 7, 2013, 03:24 PM

11. It has never been a savings plan...

It was created as an insurance program and may return to that same origin unless we increase the limit on wages?

Since a large percentage of people making up to $400,000 dollars per year just got a huge tax cut, I think that might be a good place to start looking...?

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Response to kentuck (Reply #11)

Mon Jan 7, 2013, 03:44 PM

22. It was created as an insurance plan that had hardly any paid beneficiaries at the time.

 

And paid pretty minimal amounts in the beginning with no cost of living adjustments.

We've turned it into a much more substantial program that so many people have turned into their sole support, way beyond what it was intended to do.

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Response to dkf (Reply #22)

Mon Jan 7, 2013, 03:57 PM

25. That may be true...

But it is not beyond the bounds of support. It's a matter of priorities. Do we think it is worth keeping and paying for? Or would we prefer people take their money and put it into the stock market? That would be a catastrophe, in my opinion. This is all that many people have to live on and it provides a degree of dignity to millions of people who have worked their entire lives. That is why it is so disturbing when we have some politicians talk about putting it on the "bargaining" table.

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Response to kentuck (Reply #25)

Mon Jan 7, 2013, 04:04 PM

31. They are supposed to put their money into the stock market or some other type of

 

Investment and savings vehicle.

That's the whole point!

SS is the bare minimum and that's how they planned it. Anything above surviving is supposed to be provided through the initiative of the individual through savings and investment.

""It is impossible under any social insurance system to provide ideal security for every individual. The practical objective is to pay benefits that provide a minimum degree of social security—as a basis upon which the worker, through his own efforts, will have a better chance to provide adequately for his individual security." -- From the Report of the Social Security Board recommending the changes which were embodied in the 1939 Amendments."

http://www.ssa.gov/history/briefhistory3.html

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Response to dkf (Reply #31)

Mon Jan 7, 2013, 04:14 PM

34. This is an illusion...

There are millions and millions of people with no savings and no investment.

The "individual security" that Roosevelt or whomever was speaking of was minimal food and shelter, not extra income to pay the gardener or chauffeur.

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Response to kentuck (Reply #34)

Mon Jan 7, 2013, 04:18 PM

37. Again, you are kind of making the point why you might want to change it.

 

It's not set up to provide a comfortable lifestyle. That would require much healthier contributions.

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Response to dkf (Reply #37)

Mon Jan 7, 2013, 04:27 PM

41. If you have ever been without food or shelter...

50% of the present benefits would seem like a fortune.

It should provide for the basic necessities. Anything above that is gravy.

I say it is a matter of priorities. What do we want to invest in? Our people or our bombs? Or tax breaks for billionaires, the job creators?

On edit: I would say that no change would be better than the "change" that some folks are proposing. At least, 75% would be guaranteed. The marketplace guarantees nothing. The changes that I would like and would support would be to increase the present income limit from $110,000 to $400,000, since those folks just got a nice income tax cut and could afford it. That would save Social Security. For other spending by our government, let Congress decide what they want and raise taxes on all those above $400,000 to pay for it. That would include the bloated defense budget.

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Response to kentuck (Reply #41)

Mon Jan 7, 2013, 04:44 PM

47. If we want to talk about investment how's that $4 spent for the elderly and disabled for $1 for kids

 

Now that is a travesty if you ask me.

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Response to dkf (Reply #47)

Mon Jan 7, 2013, 04:47 PM

49. What are you talking about?

Are you referring to healthcare? That is another problem entirely.

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Response to kentuck (Reply #49)

Mon Jan 7, 2013, 05:18 PM

56. Our priorities are that the elderly and disabled are 4x as important as our kids as evidenced by our

 

Spending. And yes it's largely because of the healthcare system. But then they cry "don't touch my medicare"!

Sane progressives should want to reform all of those programs, to make SS solvent, to reform medicare by controlling healthcare costs, and to invest in our children and our future.

Preserving these programs as is will lead to big problems in our future. It's funny that the progressives want to conserve the system we have and the conservatives are the ones who want change.

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Response to kentuck (Reply #41)

Mon Jan 7, 2013, 05:41 PM

63. Good idea on raising the cap. I oppose a chained CPI.

How much do you think people now receive as the "present benefits"?

A lot of people think the benefits are much higher than they are. The average is around $1200-1300 per month. Depending where you live, that is just barely above the poverty level. In LA that is not a lot much money. In La. it probably is a good living.

In NYC, it is probably barely enough to rent a room. Half that amount would be enough to eat on if you live with family. Might make you eligible for Medicaid supplements and food stamps. I don't know.

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Response to dkf (Reply #31)

Mon Jan 7, 2013, 05:35 PM

60. dkf, many of the baby boomers have 401(K)s and other pension plans that invest in the

stock market.

But the economic clout of the baby boomers that built our economy between 1950 and today will have the same effect on the stock market as you fear it will have on Social Security.

If baby boomers start to take their savings out of the stock market to live on their savings, the stock market will have to find money from somewhere to keep it going.

Conservatives ridicule Social Security as a Ponzi scheme. But the stock market is more of a Ponzi scheme than Social Security. Especially now because the stock market or much of it has been reduced to a game of craps. Under which stock is the money being hidden today. There seems to be little connection between productivity and the value of a stock.

Baby boomers increasingly are leaving the workplace and living off their savings whether in Social Security, bank accounts or the stock market.

It makes no difference where their money is, they are going to be spending more than they are producing. Unless you want to start killing older people, you are going to have to live with that reality: baby boomers will take money out of the economy, live on it and not be able to work.

Right now a lot of seniors would still be working if the jobs were there. But frankly there is not much demand for workers right now.

Go to your local supermarket. You will see a check-out that is automatic with maybe six check-out "counters" that are computerized. Recently we went to a store that appeared to have only one human employee. All the check-outs were computers.

The world is changing. We all need to accept that change. Social Security will be just fine. As baby boomers retire, the demand for labor will increase. We are just seeing the first wave of baby-boomer retirees. Hold on. A lot of your preconceptions are about to be proved false.

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Response to dkf (Reply #22)

Mon Jan 7, 2013, 05:25 PM

59. It not only had fewer paid beneficiaries, it had fewer paying into it.

Originally, farmers and self-employed people were not a party of it. They were included because, first, many of them chose to join the system and second, because it worked so well.

The Social Security system is a way to pay for social welfare expenses that the government would have to pay in any event for most of the people in the system.

Especially today, people simply do not earn enough to save adequately for retirement. The baby boomers who were promised private work-related pensions have been cheated out of them very often by people like a very prominent Republican who recently ran for a very prominent office and other corporate take-over artists. In addition, a lot of people invested in their homes and then were foreclosed. I'm thinking of people who are older and took second mortgages to finance home improvements or to keep a business solvent as we began to go into a recession.

So, your "concerns" are really not very relevant and your facts are not very accurate.

We had fewer beneficiaries in the early years of Social Security because it was not a very comprehensive program. It also had fewer workers paying in and the percentages paid in were smaller. Please get the facts right and complete.

Please stop repeating the misinformation out there.

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Response to JDPriestly (Reply #59)

Mon Jan 7, 2013, 05:35 PM

61. Here is a more complete picture.

 

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Response to dkf (Reply #61)

Mon Jan 7, 2013, 06:56 PM

69. Major changes were made during the Eisenhower administration.

From a speech by Eisenhower:

Under the attached plan, approximately 10 1/2 million individuals would be offered social security protection for the first time. About 6 1/2 million of these would be brought into the system; the remaining 4 million would be eligible for coverage under voluntary group arrangements. New groups to be covered would include self-employed farmers; many more farm workers and domestic workers than are now covered; doctors, dentists, lawyers, architects, accounts and other professional people; members of many state and local retirement systems on a voluntary group basis; clergymen on a voluntary group basis and several other smaller groups.

As the Committee on Ways and Means of the House of Representatives proceeds with its studies to improve the Social Security Act, I strongly commend to this plan for the extension of coverage to most of the major groups now covered by any social insurance or public retirement system. This is a specific plan for a specific purpose--the extension of coverage. Other important improvements in the Social Security Act are now under study and will be subject of further recommendation.

There are two points about these proposals which I cannot stress too strongly. One is my belief that they would add immeasurably to the peace of mind and security of the individual citizens who would be covered for the first time under this plan; the second is my belief that they would add greatly to the national sense of domestic security. The systematic practice of setting aside funds during the productive years are over--or to one's survivors in the event of death--is important to the strength of our traditions and our economy. We must not only preserve this systematic practice, but extend it at every desirable opportunity. We now have both such an opportunity and a definite plan. I commend it to the Congress for its consideration.

http://www.ssa.gov/history/ikestmts.html

There were other expansions of the program. And they were always paid for with new revenues including sometimes lifting the cape of raising the rate of the tax itself.

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Response to dkf (Reply #8)

Mon Jan 7, 2013, 03:59 PM

27. What do you mean by equalizing the payout based on FICA contributions?

Are you saying that SS should merely refund what people paid in rather than paying out the way it currently does?

I tend to agree with you on a lot of issues when it comes to entitlements, but if that is what you are proposing it doesn't make sense. SS is designed as an annuity program...the point is you pay a certain amount now to get a certain benefit later. If we merely refunded what people paid in they would get much less than what they deserve because of the time value of money and the opportunity cost of having that money held in SS instead of being able to invest it privately.

I could be misunderstanding what you are saying...can you clarify?

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Response to democrattotheend (Reply #27)

Mon Jan 7, 2013, 04:10 PM

33. That is how the program actually works.

 

It is only supposed to pay out what it receives in FICA. We over funded it early on, but when the trust funds deplete, by law, it pays out what it receives in contributions. Thus the mismatch and the projected 25% cut.

General funds can be budgeted, like how we did the payroll tax holiday, but it's not automatic.

Right now the medicare part B and D systems automatically take whatever general funds are needed. This matches up general fund contributions to whatever the costs are. Social security has a mechanism that specifically does not work this way.


Oh and you are misunderstanding me. This would actually disconnect the amount you paid from the amount you get because there wouldn't be enough contributions to cover what you expect to receive. What you receive is a function of the payroll tax receipts.

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Response to dkf (Reply #33)

Mon Jan 7, 2013, 04:17 PM

35. Not sure I follow

What you are saying is that if payouts were tied to what is presently coming in instead of what each person paid in, current beneficiaries would get a lot less than they do now, and less even that what they would get with chained CPI?

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Response to democrattotheend (Reply #35)

Mon Jan 7, 2013, 04:25 PM

40. Yes you got it.

 

By the time the social security trust fund depletes, FICA receipts will only cover 75% of what was promised.

Extending the life of the trust funds moves that day further back, but it will come eventually if things are left as is.

It's the fiscal cliff redux based on the date of depletion of the trust funds.


I'm not sure how they would decide who gets the cuts though. That isn't written into law.

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Response to dkf (Reply #8)

Mon Jan 7, 2013, 05:18 PM

57. What level of benefit do you think you were promised, dkf?

Because the average benefit now is somewhere between $1200 and $1300 per month. That is not a lot of money, especially when the medical things like hearing aids, glasses, dental care, etc. that seniors have to buy increase in cost constantly.

My friends tell me they pay $3000 per ear for a hearing aid. Yes. three thousand dollars -- on Social Security.

So you do need to save beyond Social Security. But don't count on your savings producing any income. They don't. The banks are not paying interest now, and seniors are not advised to invest in growth stocks because they are too risky.

So, young people need to be doing what they can to raise the cap on the income subject to Social Security. It hasn't been raised for a long time. Time to do something about that before talking about the chained CPI.

If the economy were better, more seniors would be working and would wait to take Social Security. But, seniors can't change that reality and should not have to pay the price for the crimes of the bankers.

No one is worried about the solvency of the US government except the Republicans. That is because other countries invest in our bonds because of the stability of our government. If you look at other countries, their governments go through enormous upheavals quite frequently. Here in the US, we are very tranquil compared to the rest of the world. That is why the Chinese and others want to buy our bonds. We have never defaulted. We have always had faith in our people, in our system and our way of life. It's only the Republicans now who have no faith.

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Response to JDPriestly (Reply #57)

Tue Jan 8, 2013, 12:14 PM

72. I don't think you understand the significance of the solvency of the SS fund.

 

By law SS gets paid with FICA payroll funds and is not paid with general funds. It can be paid with general funds if it is budgeted similar to how we funded the payroll tax holiday.

The day the funds are depleted, payments are estimated to decrease 75% because that is what the receipts will cover. Bringing it up to 100% will then become a general budget issue subject to annual squabbles over funding or may not be covered at all. Moreover the receipts are estimated to be able to cover less and less of promised payments over time.

Too many retirees compared to workers...either payroll taxes need to be increased or benefits cut.

Chained CPI and other efforts to contain SS outlays extends the period until the SS cliff is hit.


So the solvency of the SS fund is not necessarily the solvency of the US Govt. Of course if the US is insolvent then all bets are off.

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Response to dkf (Reply #72)

Wed Jan 9, 2013, 07:41 PM

73. You did not answer my question.

What promise do you think was or is being made to you?

Raising the cap will take care of any gap. And the cap should be raised to include a lot of money that goes into the very highest paid in our country. That would make up for the fact that CEOs are overpaid and others underpaid.

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Response to JDPriestly (Reply #73)

Wed Jan 9, 2013, 08:01 PM

75. You can check online for the estimate. But really SS isn't guaranteed.

 

I don't believe I am promised anything, at least not by court ruling.



Background to the Case:

The fact that workers contribute to the Social Security program's funding through a dedicated payroll tax establishes a unique connection between those tax payments and future benefits. More so than general federal income taxes can be said to establish "rights" to certain government services. This is often expressed in the idea that Social Security benefits are "an earned right." This is true enough in a moral and political sense. But like all federal entitlement programs, Congress can change the rules regarding eligibility--and it has done so many times over the years. The rules can be made more generous, or they can be made more restrictive. Benefits which are granted at one time can be withdrawn, as for example with student benefits, which were substantially scaled-back in the 1983 Amendments.

There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor.

In this 1960 Supreme Court decision Nestor's denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor's benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.

http://www.ssa.gov/history/nestor.html

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Response to dkf (Reply #2)

Mon Jan 7, 2013, 03:18 PM

7. Also, as I stated...

" The worst scenario would be that the benefits would have to be cut if it ran into a shortfall. Or it would need to be changed in some small way to meet its needs."

Because enough funds are coming in today to meet 75% of the present payouts 25 years from now.

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Response to kentuck (Reply #7)

Mon Jan 7, 2013, 03:22 PM

10. You really want to argue a 25% cut is insignificant when people are devastated by 2% payroll taxes?

 

Serious congress people think that is worth fixing now so that it doesn't happen overnight after the fund depletes.

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Response to dkf (Reply #10)

Mon Jan 7, 2013, 03:25 PM

13. I did not say it was insignificant but...

75% is better than 0% when that is all that you have to live on.

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Response to kentuck (Reply #13)

Mon Jan 7, 2013, 03:31 PM

18. And it gets worse every year.

 

No cost of living adjustments up, only cuts as the projected incoming funds become more and more inadequate compared to the promises made.

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Response to dkf (Reply #18)

Mon Jan 7, 2013, 03:58 PM

26. What promises made??

Are those in writing? Or assumed?

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Response to kentuck (Reply #26)

Mon Jan 7, 2013, 04:34 PM

44. In writing based on the formulas used to calculate benefits.

 

Of course they can always be changed. SS isn't guaranteed.

But what good is a projected calculation to receive $100 if there is only $75 available? Do they prorate it? Recalculate the bend points? I don't think any provisions have been made.

Just like with the debt ceiling...if we run out of money who gets paid? First come first served? Based on a list of priorities? We don't have that set up for the treasury either. Some States and municipalities stipulate that bond servicing comes first, but we don't for the Federal Government.

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Response to dkf (Reply #44)

Mon Jan 7, 2013, 06:01 PM

64. How would they fund minimal living expenses for the elderly if they did not have the Social Security

system? From the general fund.

The projections now are based on continuing depressed economic conditions. They tend to be pessimistic.

And if you calculate returns on stock market investments based on the same assumptions about depressed economic conditions, your returns are just as bad, maybe worse and far less certain for the individual investor.

Social Security is an absolutely necessary program. If the decision has to be made one day, we will cut military spending and eliminate corporate tax breaks rather than cut Social Security. The will of the people strongly supports Social Security. That won't change. It's the best program the government has, that and Medicare.

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Response to kentuck (Reply #13)

Mon Jan 7, 2013, 04:18 PM

36. Who is proposing cutting it to 0%?

Like the chained CPI or hate it, it would not cut anyone's benefits to $0. The way Jack Lew told the president back in 2011 that it could be structured, it could actually provide a slight increase in benefits for the poorest recipients.

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Response to democrattotheend (Reply #36)

Mon Jan 7, 2013, 04:36 PM

45. Simpson Bowles proposed changing the bend points to make it more progressive.

 

There's a lot that could be done with social security if Democrats didn't have a "cold dead hands" approach.

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Response to dkf (Reply #45)

Mon Jan 7, 2013, 06:04 PM

65. "if Democrats didn't have a 'cold dead hands' approach."

Do you include yourself as a Democrat, DKF?

Without wanting to insult you, the way you phrased that, it sounded like you do not include yourself among those Democrats who have a "cold dead hands" approach.

Interesting turn of phrase. if Democrats. --- If those other people, those Democrats?

Am I misunderstanding the gist of the message? Please forgive me if I am, but . . . . .

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Response to JDPriestly (Reply #65)

Tue Jan 8, 2013, 01:25 AM

70. I'm talking about Democratic politicians.

 

They are all reciting the "don't touch medicare or social security" spiel in unison from what I see.

We are creating fiscal cliff situations for each entitlement at the depletion of their trust funds.

So be it.

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Response to dkf (Reply #70)

Wed Jan 9, 2013, 07:57 PM

74. When the economy improves as it will, more money will flow into the trust fund.

What is the alternative?

Do you just want to let seniors die?

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Response to kentuck (Reply #7)

Mon Jan 7, 2013, 03:25 PM

14. Yikes. This is a BAD argument. "Only" a 25% cut for me is no large matter? Really? nt

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Response to Romulox (Reply #14)

Mon Jan 7, 2013, 03:31 PM

19. Would you prefer a 100% cut?

Would that be preferable? Or would you prefer we try to fix it? It's really not that big of a problem.

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Response to kentuck (Reply #7)

Mon Jan 7, 2013, 04:05 PM

32. As a millenial, that gives me little comfort

Why should I only get 75% of what I paid in? I thought the whole point of SS was for everyone to get the benefits they have earned.

My mother will be 80 years old in 25 years. Having her benefits suddenly cut by 25% would probably be a much more painful cut than chained CPI, which does not actually cut benefits in the sense that it does not cause anyone to get less one year than they got the previous year.

I don't necessarily support chained CPI - I think the devil is in the details of how the president plans to cushion poorer recipients. I am watching Tom Harkin for cues on this, since he said something similar recently.

However, I think chained CPI is a much less painful change than having the system lack the funds to pay out 25% of what beneficiaries are owed.

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Response to democrattotheend (Reply #32)

Mon Jan 7, 2013, 04:21 PM

38. I hope your mother lives to be 105.

Because that is when benefits would be cut to 75% if nothing is done.

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Response to kentuck (Reply #38)

Mon Jan 7, 2013, 04:27 PM

42. I think it would be cut 14% in 2036 if nothing is done

At which time my mother will be 78 and my dad will be 84 if he lives that long.

You said in your previous post that in 25 years the system will be able to pay out 75%. How did you go from 25 years to 60 years?

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Response to democrattotheend (Reply #42)

Mon Jan 7, 2013, 04:30 PM

43. "How did you go from 25 years to 60 years?"

What do you mean?? I'm sorry. I thought your Mom was 80 years old now? I rush read your post, I guess?

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Response to kentuck (Reply #43)

Mon Jan 7, 2013, 04:59 PM

53. My mom is 55 now

She will be 80 in 25 years.

Sorry, I might not have been clear enough.

My concern is that if nothing is done for 25 years, my mom would face a steep benefit cut when she is 80, which would be worse than the gradual slowing of benefit increases from chained CPI.

On the other hand, I don't think chained CPI is the best solution, since benefits are already pretty modest and arguably the CPI already undermeasures inflation for seniors because they spend more on health care.

I think a better solution would be a) raising the cap, and b) raising the age at which people can collect if they choose to keep working. SS was designed to provide retirement security, and I see no reason it needs to be given to those who are not retired, except those in lower income brackets. I have not heard this discussed much, but I think a compromise that could be acceptable to both sides is one that requires people to wait longer to collect benefits if they continue working and earning at least $75,000 (or have unearned income that high, or some combined total of earned and unearned income). That way, you don't force anyone to wait longer to retire, but those who choose to keep working at high paying jobs don't get benefits until they retire. I am just throwing the figures out there and the caps could be higher or lower. But the idea is that you can work or get SS, but those earning higher salaries or with a large amount of unearned income don't need both. Those earning less than $75,000 should be able to keep working without penalty in order to build a bigger nest egg for retirement. The $75,000 floor would also enable most seniors to keep working part time or pick up a little income on the side without losing their SS benefits. And then at 75, everyone becomes eligible to collect benefits no matter how much they are making.

I am thinking this could be a reasonable compromise that could combine Republicans' desire to means test and raise the retirement age while preserving the structure of the program as one that eventually benefits everyone and ensuring that people are not forced to work into old age if they are unable to or don't want to. It would also potentially incentivize some people to retire and free up a job for someone younger, although that would have to be weighed against the possibility of exacerbating the shortfall because the longer people work, the more they pay in. I think a system that delayed benefits until 75 for high earners who keep working would also be more fair, because upper income people, especially those who are healthy enough to work until 75, are likely to be the ones who live longer and thus receive more benefits.

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Response to democrattotheend (Reply #32)

Mon Jan 7, 2013, 06:05 PM

66. Don't worry. There is no crisis in Social Security. This is just Republican wishful thinking.

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Response to JDPriestly (Reply #66)

Mon Jan 7, 2013, 06:17 PM

67. Thanks for your comments, JDP..

It seems to be the younger generation that have been the most brainwashed by the Republican propaganda on this matter. So long as we continue to pay into the program, we will be alright.

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Response to JDPriestly (Reply #66)

Wed Jan 9, 2013, 08:12 PM

76. That is not what the SS trustees say.

They are all Democrats.

Projected long-range costs for both Medicare and Social Security are not sustainable under currently scheduled financing and will require legislative action to avoid disruptive consequences for beneficiaries and taxpayers. If lawmakers act sooner rather than later, they can consider more options and more time will be available to phase in the changes, giving the public adequate time to prepare. Earlier action would also help avoid adverse impacts on vulnerable populations, including lower-income workers and people dependent on program benefits. http://www.ssa.gov/oact/TRSUM/index.html

Timothy F. Geithner,
Secretary of the Treasury,
and Managing Trustee

Kathleen Sebelius,
Secretary of Health
and Human Services,
and Trustee

Charles P. Blahous III,
Trustee

Hilda L. Solis,
Secretary of Labor,
and Trustee

Michael J. Astrue,
Commissioner of
Social Security,
and Trustee

Robert D. Reischauer,
Trustee

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Response to former9thward (Reply #76)

Fri Jan 11, 2013, 03:10 PM

77. Long-term, we need to raise the cap.

We should. Minimum wage rates have been raised in, for instance, California. But the payroll tax cap has remained at the same dollar amount. That is the adjustment that needs to be made. Other tax rates are changed to keep up with inflation. The cap on earnings subject to the payroll tax should also change with inflation.

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Response to dkf (Reply #2)

Mon Jan 7, 2013, 04:59 PM

52. So raise the cap and the trust fund balloons.

But that is not really necessary now. It's a fake crisis. It is distracting us from the real crisis which is the fascist takeover of our government by powerful corporations who buy seats in Congress for themselves and then inundate our news media with non-stories like the fiscal cliff.

If corporations paid a fair share of their profits in taxes, we could lower everyone's tax rates a bit.

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Response to dkf (Reply #2)

Mon Jan 7, 2013, 05:39 PM

62. It thought the extra funds were for the baby boomers

of which I am one. Was it not calculated out to last till they are gone and the number of seniors decreases? Was there an error in the calculations when they set up the extra fund?

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Response to dkf (Reply #2)


Response to kentuck (Original post)

Mon Jan 7, 2013, 03:13 PM

3. Wages have been *stagnant* for over 30 years. People keep on talking about cases for SS that

require 3% growth of the economy per year, ad infinitum, based on the "historic norm". We all understand now that such growth isn't possible.

The point being that Social Security is not going broke and cannot go broke so long as workers pay into it. The only way it could go broke is if we stop paying those taxes and say that we are going to pay for it out of the "general fund". The "general fund" is always at the discretion of the politicians in power. They can spend it on whatever they desire. This is the danger in the "payroll tax cut".


Not so. If there's no work, there's less SS contributions. It happened in the Great Ressession we just passed through (hopefully.)

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Response to Romulox (Reply #3)

Mon Jan 7, 2013, 03:21 PM

9. If you have 120 million people paying into the fund, instead of 130 million...?

Naturally, there is less going into the Fund. However, the 120 million are still paying FICA taxes at the same rate. And that is no small amount. Payments may decrease because of that but it cannot go broke so long as the workers are paying into it.

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Response to kentuck (Reply #9)

Mon Jan 7, 2013, 03:24 PM

12. Right, but what we used to define as "full employment" may not be again achieved any time soon.

Those reduced contributions due to un and under employed people may represent "the new normal", with as stagnant as our economy has been now for thirty plus years. In addition, younger workers have never known boom-time America, remember, and their lifetime earning potential will be negatively affected.

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Response to Romulox (Reply #12)

Mon Jan 7, 2013, 03:27 PM

16. Yes, we will need to adapt to new economic realities.

And we cannot assume that the benefits of today will last forever. But we should never scrap the program, even if it had to pay less in benefits.

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Response to Romulox (Reply #12)

Mon Jan 7, 2013, 06:37 PM

68. You are very pessimistic. Just wait. Those of us who have lived a long time

know that the economy gets horrible but does improve.

We have gone through a period of great technological innovation and the introduction of time-saving, labor-saving technology into the workplace. We went through that in the 1920s and to a lesser extent in periods since then. After a surge of technological change, say from the horse and buggy to the tractor, during which the economy "grows" and expands, we generally experience a period of consolidation. Labor is not needed to the extent that it was before the technological innovation period.

The current economic stagnation will change. We will have growth again provided we keep investing in research and education.

But, we may never return to needing as much labor as we needed prior to computers. That's good for the smaller, post-baby-boomer generations. You will still live well even if there are fewer of you. Think. A gall bladder operation used to mean quite a number of days perhaps weeks in a hospital and then recovery. Now, they just take out what ails you in almost no time. This is true of a lot of surgeries. And the improvements and less expensive medical procedures seem endless at this time.

At the same time, the new technology, in our time, computers, has brought with it increased productivity as well as reduced demand for labor. The challenge now is to distribute the benefits of that increased productivity throughout the population.

Republicans recoil with fright at the thought of redistributing the benefits of technological advancement or increased productivity because they see that process as detrimental to the interests of capital and wealth. They are very wrong about this. Unless those benefits are shared by all Americans, the technology itself will not be adequately used and profits will be lower. In that case, your pessimism might be justified. But that is not how Americans have dealt with hard times in the past. The rich can only use a certain amount of that stuff and then it brings no benefit even to them. So the benefits will be redistributed and the economy will grow again.

Your pessimism is actually the result of a rather narrow, short-sighted view of life. Our economy is quite robust. We are open to change and as long as we stay open to change and do not adopt rigid ideas about adhering to free market economics or any other rigid ideology but allow change to occur, allow the natural redistribution of profit and wealth, and not permit hoarding by the very rich, our economy will grow.

Right now, we need to tax corporations to insure adequate tax revenue to fund research, development. And yes, redistributing some of the benefits of innovation will minimize the social disruption that is typical in a period following a surge of technological improvements and increased productivity.

It is typical that the benefits of a technological revolution first benefit only the very rich. Whether the benefits are permitted to "trickle down" and benefit all of society decides the future of that society.

We are at a very important time in our history as a nation. We can petrify our social classes, become a caste system in which very wealthy people benefit from the increased productivity that technology promises and the rest of society grovels for the bare necessities of life or we can become a society that is just and fair and has a growing, flexible economy.

It is not about socialism or capitalism. It is about whether we become hopelessly mired in class differences and revert to a kind of feudalism or whether we can continue to be a democracy that provides opportunities and not repression either by a government or by a wealthy class.

Social Security is one of the ways that we insure that the fabric of our society holds together. I know a young couple who has to bear the burden not only of working to raise their own family but to pay the costs of parents who cannot get jobs now but are not yet eligible for Social Security. That is really hard. They can't wait until their parents qualify for Social Security and Medicare. The situation is depressing and difficult for all concerned.

Republicans have this idea that they can sell cuts to Social Security and Medicare by scaring younger people into thinking that older people are grabbing benefits now that should go to the younger generation later. That is not how money works. And if you cut the Social Security and Medicare benefits of the current generation, young people will have to help out their own parents.

The baby boomer bulge is simply a reality that has to be dealt with. Fortunately, we have greatly increased productivity in recent years thanks to computers and other technology. It's a matter of using the increased productivity well and realistically. We should not allow ourselves to be driven by ideology rather than common sense. The world is what we make it. Pessimism makes it worse. Realism is the approach that succeeds.

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Response to kentuck (Reply #9)

Mon Jan 7, 2013, 03:26 PM

15. What do you think "broke" means?

 

If I was living off my wages plus my savings and now my savings are gone and my wages can't pay my bills am I not "broke"?

You are saying I wouldn't be broke because I still have income to pay some of my bills.

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Response to dkf (Reply #15)

Mon Jan 7, 2013, 03:29 PM

17. If you were to be overcome by the outcome of your income...?

Then you would obviously need to make some life changes. There are no guarantees in life that everything you have today will be guaranteed to you for the rest of your life.

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Response to kentuck (Reply #17)

Mon Jan 7, 2013, 03:34 PM

20. And you have just made the argument for why Social Security needs to be changed.

 

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Response to dkf (Reply #20)

Mon Jan 7, 2013, 03:42 PM

21. It depends on your definition of "changed"...

I'm not sure we would agree on that?

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Response to kentuck (Reply #21)

Mon Jan 7, 2013, 03:48 PM

23. Anything with the word "change" is different from "leave it alone".

 

It's actually impossible to leave it alone anyway. The depletion of the funds makes change the default.

It's the fiscal cliff in spades.

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Response to dkf (Reply #23)

Mon Jan 7, 2013, 04:02 PM

29. Many of us baby boomers are going to die off sooner than most peope think..

Everybody is not going to live to be 90 years old. As my brother used to say: "All great men are dead and I'm not feeling too good myself..."

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Response to kentuck (Original post)

Mon Jan 7, 2013, 04:01 PM

28. The only thing wrong with Social Security is that the Republicans didn't create it

and have spent the last 70 years trying to kill it. They think that tying it to the deficit/debt is the ticket to finally achieve what they have been trying to do for all these years.

Keep your fucking congressional hands off my Social Security!

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Response to liberal N proud (Reply #28)

Mon Jan 7, 2013, 04:03 PM

30. Well said!

And their little scheme to drive us so far into debt that we would not be able to afford any social programs at all does not apply to Social Security because, we the People, pay for it. Unlike the other spending that they choose to put on the credit card.

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Response to liberal N proud (Reply #28)

Mon Jan 7, 2013, 04:40 PM

46. Well as long as you are not around when the trust funds deplete you may get your wish.

 

But for the rest of us, it's a huge SS cliff.

Today's seniors will get the goodies, but hey they vote so of course their own interests are paramount.

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Response to dkf (Reply #46)

Mon Jan 7, 2013, 04:45 PM

48. It's lasted for 75 years.

Why couldn't it last for another 75 years. The people specifically pay for it. A lot of money is paid into this fund. There is enough to take care of all our people when they retire. Maybe not a retirement home in Florida but enough so they do not have to beg their children and relatives for food and a place to lay their head, as they did in the past.

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Response to dkf (Reply #46)

Mon Jan 7, 2013, 04:53 PM

50. Yep, that's part of the rethug plan.

Get the generations fighting with each other while they run off with the loot.

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Response to dkf (Reply #46)

Mon Jan 7, 2013, 04:57 PM

51. You pay into the fund, I pay into the fund

We should expect the money to be there when we retire. BUT Congress keeps running off with Surplus Funds while crying that it will go broke.

Stop Congress from stealing our Social Security and it will be fine!


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