Let's talk about Social Security.

[Kilroy003]

I know the prevailing opinion around here is that we are all glad that Bush has so far been unable to push any of his Social Security reforms. I think this is a mistake. Something has to be done to reform the New Deal programs in light of the looming gap between what the U.S. government expects to pay and what it expects to receive over the next 25 - 50 years.

In 2015 Medicare taxes will fall short of expenditures and in 2018 Social Security payments will outweigh payroll-tax revenues. (According to Nathan Littlefield and the Congressional Budget Office)

While I don't have a solid opinion, I do think this issue is one which will come back to haunt Dems in 2008 and 2012 (when the first wave of Baby Boomers begins to retire) if we don't take a more creative and proactive stance.

I'm not saying that I have a plan or that I know what needs to be done. But it seems as though high-fiving each other for stopping the Republican plan, however flawed, is going to someday backfire when citizens look back and ask why their parents just moved in or why their taxes are rising through the roof.

So what do DU'ers think about this issue. I'm all ears.

[4morewars]

1. Raise the cap.

[malmapus]

2. Yup take that cap off for those that make 90k and up

Tax everyone equally based on what they make each year, then with the wealthy & super weathly of this country actually contributing what they should be our problems are pretty much solved.

[sadiesworld]

22. We don't have an SS problem, we have a debt problem.

Why do some dems buy into *'s framing?

John Kerry wanted to raise taxes (repeal the * cuts) for those making over $200K. Why do some dems want to raise taxes for those making less than $200K?

:shrug:

(btw, the wealthy and super wealthy would be laughing all the way to the bank--any change in SS tax will have zero impact on the elimination of the estate tax, reduction in capital gains tax, etc.)

[salin]

19. Am I incorrect, or did the cap not exist before Reagan?

if so, let's stop calling it "raising the cap" and instead refer to it as "restoring the funding forumula".

If I recall - they put on a cap while raising how much we had to pay in - in essence shoving more of the cost onto middle income folks. That is we pay a higher percentage of our income and the wealthier pay a smaller percentage of their income. Restore "fairness" to the funding of social security.

[pinto]

3. Raise the cap, it's outdated, and in effect regressive.

[thethinker]

4. I second that

Raise the cap. It solves any problems, real or imagined.

[Carolab]

5. I suggest you read what AARP & Campaign for America's Future have to say.

I think you'll be surprised.

http://socialsecurity.ourfuture.org/

http://aarp.typepad.com/socialsecurity/aarp_and_social_security/index.html

[B Calm]

6. In the disguise of tax cuts, quit giving the ss surplus to the rich!

[AirAmFan]

7. Something ALREADY was done. Workers have prepaid $2 TRILLION

in extra FICA taxes, over and above what was needed to pay beneficiaries from 1983 to date. Now all the government needs to do is not renege on the "full faith and credit" bonds SSA holds. Browse through the "Seniors and Aging" Issues Forum here at DU for links. Social Security is actuarially sound for the next 40 to 75 years.

It's not the Social Security Trust Fund that's in danger of going broke, it's the rest of the federal government, thanks to Dubya's fiscal irresponsibility.

What Dubya wants is to push out the date at which Congress has to start paying back those Trust Fund bonds. He wants to keep on using hundreds of billions in positive FICA cash flow to transfer wealth from working people to the super-rich though income "tax cuts".

[Jim Lane]

9. One correction

I agree with your post except for this sentence: "What Dubya wants is to push out the date at which Congress has to start paying back those Trust Fund bonds."

Bush talks as if that were one goal of his plan. In fact, however, privatization would reduce the current income flow available to pay the benefits owed to current retirees and those who retire in the next few years. As a result, the Social Security Administration would have to begin redeeming bonds several years earlier than under current projections.

Bush's proposed benefit cuts wouldn't kick in for a while -- not soon enough to prevent the acceleration of the redemption of the bonds.

[AirAmFan]

11. Do you have a link? I don't think you are correct about this point.

Not many details have been released about exactly how privatization would work. But there has been much talk of mandating mainly "conservative" investment. What does that mean?

I think it means investment in non-publicly-traded Treasury instruments, exactly the same Trust Fund bonds in which FICA surpluses have been invested for the past 20-some years. And, while people are supposedly going to be able to redeem their privatized accounts before retirement, that may not be allowed to happen unless their accounts already are sufficient to fund their retirements. In other words, the Trust-Fund scam would very likely continue under privatization.

[Jim Lane]

15. They talk about stocks, not just government bonds

If you want a link, here's a White House press release in which Cheney is quoted as describing the Administration's plan this way: "Each personal account would be under the individual worker's ownership and control. He or she would make regular investments in bonds or stocks throughout their working life . . . ." http://www.whitehouse.gov/news/releases/2005/01/20050113-5.html

Perhaps you want a link to a source of unsurpassed expertise on matters of prudent investing -- such as the Ohio Republican Party. Their website mentions what's also been suggested elsewhere, that the privatized accounts would be similar to the existing Thrift Savings Plan (TSP) for federal employees:

"Like TSP, personal retirement accounts could be invested in a safe government securities fund; an investment-grade corporate bond index fund; a small-cap stock index fund; a large-cap stock index fund; and an international stock index fund." http://www.ohiogop.org/News/Read.aspx?ID=813

I think the most common expectation is that this is how it would work. Employees wouldn't have unlimited discretion, or even very much discretion, about investment vehicles. I'm sure a lot of these 20- and 30-somethings who support the plan are confident they can spot the next Microsoft. Well, even if they can, they'll have to back their analysis with some other money. The most likely scenario is that the government would set up only a handful of funds, representing different mixes of stocks, corporate bonds, and public bonds, all fairly conservative.

Of course, we don't know how many people would choose to divert some of their money into the privatized accounts, or how much of that money would go into stocks, private bonds, or state and local public bonds. Every dollar of current Social Security tax receipts that's directed to one of those investment vehicles, though, is a dollar that's not available to pay benefits to current retirees. It's those diversions from the current pay-as-you-go setup that would force the Social Security Administration to begin redeeming the bonds it's holding earlier than it otherwise would.

This point may seem a little dry, but it's important. Bush is pointing to projections of a need to begin redeeming those bonds toward the end of the next decade. What's fascinating is that he then proposes a plan that makes that problem worse. Obviously, the imbalance between current revenues and current expenses is just the pretext for his plan, not the problem his plan actually tries to solve.

[AirAmFan]

18. Rescued from the WH memory hole, here's a briefing transcript

giving the most detailed technical explanation I've seen of the most probable outlines of Dubya's still-unspecified Social Security "reform". I see nothing to support your argument. But several details justify my suspicion that the "reform" is just more Trust Fund flim-flam, to enable even MORE overseas aggression and income tax cuts for the wealthy to be funded with FICA from the poor and middle class.

Apparently, the SSA would continue to hold all "retirement account" assets for "safekeeping", no one ever would be able to tap their balances before retirement age, and at retirement all but a tiny fraction of "assets" would be converted into Government annuities--presumably, with no survivor benefits. In other words, SSA would continue to accumulate paper assets that Treasury would only be forced to make good on when people retire. And Congress still could (and would) keep on pushing back Social Security retirement ages to postpone the day of reckoning indefinitely, to keep the FICA cash flow positive. In the meantime, Congress would continue to spend Trust Fund bonds SSA "bought" outright from Treasury. Presumably also, Treasury could (and would) borrow against any equity balances held in "safekeeping" for the "account owners".

When you look closely, Dubya's "Social Security reform" is pure bait and switch, and what's switched in is almost indistinguishable from what we have now--except for substantial benefit cuts, hefty retirement age hikes, and a skim off the top for Wall Street!

Note that this 2/2/05 transcript appears neither in the "Social Security" folder at http://www.whitehouse.gov nor where it should among the archived press briefing transcripts at http://www.whitehouse.gov/news/briefings . No wonder you couldn't find better URLs for official nitty-gritty details. Fortunately, truthout saved it from the "memory hole", at http://forum.truthout.org/blog/story/2005/2/5/14347/19764 :

"SENIOR ADMINISTRATION OFFICIAL: ... Participants would not be permitted, under the system, to have pre-retirement access to their personal accounts. The accounts will be held and protected to fund benefits when they hit retirement age. They would not be permitted to make loans to themselves through the accounts, nor would they be permitted to borrow against them.

Upon ... reaching retirement age, there would be some limitations on how they could withdraw money from the accounts. If an individual ... had chosen to take a personal account, they would not be able to withdraw money from their account to such a degree that by doing so they would move themselves below the poverty line. ... Now, to the extent that their personal account enables them to have total benefits that are higher than that, they would have flexibility over the disposition of those funds....

Q You said that there's a limitation on withdrawal at retirement, that they would have to take out enough to ensure themselves from combined with the regular system benefit and poverty level. What if there's insufficient funds in their personal accounts combined with the regular fund to give them a poverty-level income --

SENIOR ADMINISTRATION OFFICIAL: ... Obviously, if the overall benefit were below the poverty level, they would basically have to annuitize all of it and take it all as a monthly stream of benefits."

[Jim Lane]

31. Bush's plan exacerbates the problem

We're talking about two different issues here. I certainly agree with you that Bush's plan involves benefit cuts and doesn't give people nearly as much control over their "personal accounts" as some of his supporters seem to think.

My point was in response to your comment, "What Dubya wants is to push out the date at which Congress has to start paying back those Trust Fund bonds." All I'm saying is that the effect of privatization would be to force that repayment to begin earlier than it otherwise would.

Here's an example. It's 2015 and the Bush plan has been running for a few years. (President Obama doesn't like it, but he's had to give priority to fixing other Bush-era disasters.) I'll just make up some numbers and say that, in that year, the system takes in $1.1 trillion in FICA tax receipts and pays out $1.0 trillion in benefits. If the pre-privatization law had remained in effect, the extra $100 billion would have gone to general government purposes, being replaced by $100 billion worth of bonds held by the Social Security Administration.

Because of privatization, however, some employees chose to direct parts of their FICA tax payments into "personal accounts". In 2015, these diversions total $250 billion, of which $220 billion is invested in stocks and corporate bonds. Let's assume that the remaining $30 billion is invested in federal securities and that there is indeed some sort of bait-and-switch going on, as you suggest. It remains true that there was no accounting flim-flam on, at least, this point: $220 billion in real money went out of the system and into the pockets of the people who sold the stocks or the bonds. That's real money that's not available to pay benefits. The system took in $1.1 trillion but only $880 billion of it is available to pay the retirees, disabled people, and survivors, who are owed $1.0 billion. Therefore, the Social Security Administration has to present $120 billion in bonds and demand payment. Without privatization, the SSA would have continued to accumulate bonds (an additional $100 billion worth) instead of redeeming them.

[AirAmFan]

32. NO! There's no documentation to support your interpretation.

Should SSA invest in stocks or marketable bonds, those assets remain on SSA's books until at least the retirement date of the supposed "account holder". Even at that date, the "government annuity" the supposed "owner" must buy could be supplied by a government entity, which would STILL keep the money and dole it out to the pensioner a month at a time.

Thus, just like it does today, the government would hold idle assets for "safekeeping" for many years. It could BORROW against idle equity assets unless specific legislation prevented such a money-management technique. You're assuming the government would open only CASH accounts with Wall Street brokers. But most large investors trade equities in MARGIN accounts. SEC regulations limit the extent of margin for private investors, most often to 50 percent nowadays. But I'm not assuming any such limitation would apply to SSA "investments". A trillion dollars worth of stock in privatized accounts might be acquired at the cost of only $100 billion or less in FICA cashflow. Ten-to-one leverage or more was quite common in private accounts during the 1920s.

I'm assuming anything that's feasible and that has not specifically been prohibited in written propopsed legislation would be allowed. You're assuming a degree of fiscal prudence and caution that certainly has not been seen in past management of the "Trust Fund".

[Jim Lane]

34. No interpretation now is definitive, because of Bush's bait and switch

Bush is following a deliberate political tactic of not providing any more details than he has to. My personal guess is that his plan won't allow margin purchases or borrowing against the accounts, but until we see a specific bill, both of us are just guessing.

A side note on Bush's reluctance to spell out his proposal: The State of the Union address talked only about the privatization. A chorus of responses, even from conservatives, was that privatization wouldn't solve the long-term imbalance, and that there would have to be tax increases or benefit cuts. Nevertheless, it took a few months before Bush even admitted that he favored benefit cuts. It will probably be a while before we see a specific White House bill that will address the detailed questions you raise.

Regardless of how they handle the individual accounts, though, some money would flow out of the Social Security system and into the hands of Wall Street brokers and private investors. That outflow would accelerate the need to begin redeeming the trust fund bonds. I just think it's important to keep pointing that out. It's important because the projected gap between benefit commitments and available funds is one of the points Bush invokes in trying to create a crisis atmosphere -- yet his plan, regardless of how the details are filled in, would make that problem worse.

[Jim Lane]

8. Political accountability

You're right that, down the road, citizens will be asking why their taxes are going through the roof.

Toward the end of the next decade, it's projected that the Social Security Administration will have to begin redeeming the government securities it's been accumulating. Those redemptions will have to be funded out of general tax revenues, because the notes reflect transfers to the general fund that have been made from Social Security tax receipts since 1983.

The Social Security tax receipts have been borrowed to cover deficit spending. Furthermore, Bush has overseen hundreds of billions of dollars of additional deficit spending that's been financed in other ways, with notes and bonds that will also be coming due.

So, regardless of what's done with Social Security, taxes will be going up -- because Bush wanted to finance his imperialist adventures abroad and give huge tax cuts to his rich pals.

The question is whether anyone will be held accountable for this. Reagan said he could cut taxes, increase military spending, and balance the budget. It was "voodoo economics", of course, and it resulted in record deficits (well, they were records at the time). He never seemed to suffer any loss in popularity because of it, though. When Clinton pushed through a necessary tax increase in 1993, without a single Republican vote, the result was a backlash against the Democrats, and Newt Gingrich as House Speaker. Similarly, last year, enough voters seemed to be happy with their (piddling) tax cuts, and apparently had no problem passing the cost on to their kids.

We could see a repeat of the last cycle. In 2009, a Democratic President signs into law a tax increase. It begins the long, hard process of reversing several years of Republican fiscal irresponsibility. It also provides a potent campaign issue for the very Republicans whose misconduct made it necessary. I can't help but be pessimistic about the situation.

[HawkerHurricane]

10. Bush's plan...

is to NOT PAY BACK what is owed to Social Security by the Federal Government. His 'plan' is to default on the loan. Use that plan on your house payment, and you'll lose your house.

Lots of ways to keep it solvent, many of them listed here. Saying "We spent the money, now give us more" is not a viable option.

[0rganism]

12. Lockbox... oh wait, it's much too late for that

In 2000, it was oh-so-important to the neo-cons that we return the Social Security "surplus" to the "people" in the form of upper-income-bracket tax cuts that we can barely raise the issue of funding VA hospitals by repealing those cuts to annual incomes above $1,000,000.

The bush administration is all about an upward transfer of wealth.

[BillZBubb]

13. I think you've swallowed the Repug bullshit on Social Security

Medicare has a problem. Social Security doesn't unless the country keeps electing economically clueless boobs like any of the Bushes.

The potential SS shortfalls in the early years (2020-2030) are not a significant part of GDP. The SS admin can easily finance them by issuing agency bonds if even necessary. Later shortfalls are pure speculation based on weak assumptions about the economy. (Like I said, keep electing imbeciles like Bush and they will be true, otherwise, no worry).

The one assumption that makes the whole SS projection a joke is economic growth. This country has a history of averaging about 3% growth. We've done it for nearly two centuries. Did the right wingers running this propaganda show use a 3% growth rate in their most likely model? No way, that wouldn't give them a "crisis". They used 2.2%.

Guess what? If we average 2.8% economic growth for the next 50 years, we don't have a Social Security problem. And 2.8% is BELOW our historical average.

[brokensymmetry]

21. Exactly. Furthermore -

Their first objective was to make people believe a problem existed. The original post suggests they are meeting with some success.

After they create the perception, then they offer to fix it - according to their deplorable standards.

Tell the chimpster to keep his grubby paws off social security.

[Carolab]

14. I don't think you understand how it works.

Updated Long-Term Projections for Social Security
March 2005

The Congressional Budget Office (CBO) most recently released long-term (100-year) Social Security projections in The Outlook for Social Security (June 2004). As a result of both economic and technical revisions, those projections have changed slightly. The attached tables and figures present the updated projections. The Outlook for Social Security presented ranges of uncertainty around the market-value outcomes (previously labeled expected); the attached tables and figures include a complete update of those projections. (In late January, a partial update was posted that included only an update to the market-value projections. All of that material appears in this new update.)

CBO presents future Social Security benefits under two scenarios. In one scenario, outlays include only those benefits that the Social Security Administration has legal authority to pay under current law. That scenario assumes that all benefits are reduced annually once the trust funds are exhausted so that total outlays equal available revenues. (In the June report, this current-law scenario was described as the "trust-fund-financed" scenario.) In the second analysis, outlays include the full benefits as currently calculated. That is the "scheduled benefits" scenario.

CBO projects that under current law Social Security outlays will first exceed revenues from payroll taxes and taxation of benefits in 2020 and that the program will exhaust the trust funds in 2052. After the trust funds are exhausted, Social Security spending cannot exceed annual revenues. As a consequence, because dedicated revenues are projected to equal 78 percent of scheduled outlays in 2053, CBO projects that the benefits paid will be 22 percent lower than the scheduled benefits. After 2053, the imbalance will widen, CBO projects.

http://www.cbo.gov/showdoc.cfm?index=6064&sequence=0

[sandnsea]

16. yes it'll come back, in 2006

And we'll take back the House & Senate with it. Until then, chill.

[LightningFlash]

17. Bush's plan is nothing more than a ruse.

He will allow social security to do itself in or save itself, based on who "has" the social security.

By requiring everyone to invest in private stock investment accounts, he lines his corporate fascist friends pockets. In addition each private stock market account will either fail as a viable stock option, or succeed.

Knowing the stock market, it will always be up or down....The gamble can also allow it to go down and to fall through the floor.

Either raise the CAPS NOW, or pay for it later. These neocons don't seem to realize this simple crap....

[OrlandoGator]

20. All you have to do is raise the cap above $90,000.

Perhaps also cut benefits for the rich. It's not difficult to figure out, unless your base is the haves and the have-mores.

[sadiesworld]

23. The haves and have mores would be thrilled with raising the cap.

Do you really think some zillionnaire gives a shit if he pays a few extra bucks in SS taxes (assuming he pays any to start with), so long as he gets to keep his * income tax cuts?

Don't let * get away with blaming his fiscal mess on a perfectly good program.

[OrlandoGator]

29. SS is a safety net to keep older people out of poverty.

It's not an investment, and it is damn ludicrous that Warren Buffett (the second richest man on Earth) gets a SS check each month.

[sadiesworld]

30. We have a debt problem, not an SS problem.

We need to repeal the * tax cuts for the wealthiest and pay off the bonds underlying the debt owed SS. Why let * get away with framing this as an SS problem????

I am far less concerned about Warren Buffet getting an SS check every month than I am about the fact that not one penny will be paid on his estate when he passes on. Do the math.

[boohootwo]

24. Don't co-mingle FICA funds.

[newportdadde]

25. Bush's plan isn't to save SS its to save the fucking stock market.

Damn thing is stagnate for 5 years. Boomers getting ready to retire and no longer contribute there auto payments each month but pull out of it.

Its a powder keg and right now those on Wall-street are screaming for that money they have to have a fresh inflow of cash to keep proping up this overvalued turd.

[Kansas Wyatt]

26. There would not be a problem if Bush...

Would stop treating payroll taxes (SS taxes) as though it were revenue generated by income taxes. Nobody has called him out and corrected his ass yet, with regards to him saying there is no difference between payroll and income taxes. BULLSHIT!

Also, when jobs are lost and replaced with lower paying ones, less money is collected through payroll taxes.

The only problem is that Bush has been on a systematic destruction of the middle class, and now the upper class is faced with having to pony up their absent share and where the middle class was paying. Either the upper class pays more, or the now larger lower class does without.

[bryant69]

27. The debate is over wehther or not we should have social security

Anybody who thinks the debate, right now, with the Bush white house, is over how to fix social security is, well, wrong. The debate is over whether or not we should have a social security program.

Prsident Bush and his people think we should not have a social security program. I and most democrats think we should have a social security program.

Bryant
Check it out --> http://politicalcomment.blogspot.com

[Dora]

28. Tax the rich.

it's that simple. Reinstate the estate tax. End the scourge of too few having too much.

{whiny rich girl voice}

OHHHHH NOOOOOO! Not TAXES! Not me! But but but I DON'T WORK! No, you just can't tax me! It's not FAIR! I DON'T WORK! Do you know who my daddy is? Do you have any idea who I am? I'm rich!"

{/whiny rich girl voice}

[PsN2Wind]

33. Raise the minimum wage to reflect inflation

That would be a couple of bucks an hour, out of which, about two bits would be going into the SS fund. How many minimum, or near minimum, wage earners times hours worked. Do the math.