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Plan announced to save Social Security

Original post made by Alfred E Newman, Atherton: Lindenwood, on Aug 25, 2011

A very simple step to save Social Security Web Link

Uses the conservative's desire for a "flat tax" (everyone pays the same tax rate) AND adds in a payroll tax free "donut-hole" for income between $106,000 to $250,000 per year, which protects high earners in an area like ours.

Bernie Sanders is proposing to "make individual income higher than $250,000 per year subject to the payroll tax—an idea he says he is lifting from President Obama's 2008 campaign for the White House.

As it stands, the payroll tax, which funds Social Security, applies to up to $106,800 of annual income. The Sanders bill would not impose the payroll tax on income between that level and $250,000.

"Unfortunately, Republicans in Congress—and too many Democrats—have been discussing harmful cuts to Social Security as part of an overall scheme to balance the budget on the backs of the elderly, the sick, the children and working families," Sanders said.[...]

According to Sanders's office, the chief actuary for Social Security says the senator's proposal to make the payroll tax applicable at higher income levels would create enough new revenue to keep the program solvent for the next 75 years."

Why cut support for our seniors?

Everyone should pay the same payroll taxes, not just the poor and middle class.

The payroll tax free "donut-hole" adds a nice compromise.

A solvent Social Security program, with no cuts for our seniors, for the next 75 years.

What is the conservative's approach? Cut, cut, cut.

75 year solvency vs benefit cuts, cuts, cuts.

Comments (29)

 +   Like this comment
Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 25, 2011 at 3:08 pm

Should have a quote before the Senator's name: "Bernie Sanders is proposing...


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Posted by POGO
a resident of Woodside: other
on Aug 25, 2011 at 3:19 pm

I remember someone stating Social Security wasn't the problem, Al.


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Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 25, 2011 at 4:03 pm

Pogo:

Excellent. Thanks for pointing that out.

I did say SS isn't the big problem, especially in comparison to other issues, such as when some lump SS and Medicare into the same argument, which have vastly different issues.

And SS frankly isn't much of a problem, at least compared to the meme that one hears the media repeat from the GOP. The GOP is screaming for austerity measures for our seniors, threatening to privatize SS and Medicare, when a plan like Sanders' shows:

a: Social Security ISN'T in as much trouble as conservatives like to portray
b: how easy the fix is - a flat tax on all income levels, not just a regressive tax on poor and middle class working families

You and I have discussed this. I used to claim that SS is solvent for 30 years (since adjusted lower because of Obama's tax cuts) with the ability to pay out most benefits after that at a reduced rate.

As someone posted a couple days ago over on PA online:

Time Period - - - - - - Financial Status Web Link

* 2010–2020 Social Security spends more than it collects in taxes during eight of these 11 years, but the trust fund grows every year because it collects interest from the federal government.

* 2021-2037 Social Security spends more than it collects in taxes, and the trust fund shrinks every year.

* 2037-2084 The Social Security program runs annual deficits that accumulate to $44 trillion, which could be covered by (a) adding $5.4 trillion to the trust fund today, or (b) increasing payroll taxes by 28% starting in 2037, rising to a 33% increase by 2084, or (c) reducing benefits by 22% starting in 2037, rising to a 25% reduction by 2084.

* 2085 and beyond The Social Security Program runs deficits that could be covered by adding $10.7 trillion to the trust fund today"

- - - - - - -

So, even if we do NOTHING now: "(c) reducing benefits by 22% starting in 2037, rising to a 25% reduction by 2084."

You planning to be around in 2084?

The easy fix, with no cuts to our seniors for the rest of the century? A flat payroll tax on all income levels, not just the poor and middle class working families.

Avoid the austerity arguments, especially when there's a much simpler and far less painful fix.


 +   Like this comment
Posted by POGO
a resident of Woodside: other
on Aug 25, 2011 at 5:06 pm

How about getting the government completely out of the retirement benefits business?

I used to run a small plant in The Netherlands. Most of the workers were in their 30's and early 40's and they all had the equivalent of a couple of hundred thousand dollars in their "portable retirement accounts." These accounts were funded in a very similar way to Social Security - 15% of their dollar one earnings went into a PRIVATE investment account.

The difference between their private accounts and our Social Security was that (i) their investment choices were regulated by the government and they could only invest in certain qualified investments, typically government bonds and diversified mutual funds, and (ii) each employee OWNED their account. Remember, it's nearly the identical amount that we fund for our retirements, but they own it. (Sounds like that "lock box" thing, doesn't it!)

If you run the math, even modest returns will produce a rather princely sum for each employee to retire on... without ever depending upon government. They can use as much or as little as they need and, unlike Social Security, these employees can even pass on unused funds to their heirs. An added benefit - no depending upon the good graces of Congress for granting cost of living increases or threatening to cut off funding.

So, just to be clear, I wouldn't propose this new plan for a single person over 50 years old (so please spare me your starving granny outrage). For better or worse, these workers are in the Social Security system and that's their plan. But for people 30 or younger - many of whom have yet to even enter the workforce - why not put them on this system? For those workers between the ages of 30 and 50, they can have a blended plan if they wish.

Think of it, in 50 years, there will be virtually no government dependence on SSI at all - think of all that money that could go to better use. And think of the new wealth that would be created and owned by individuals.

Just an idea...


 +   Like this comment
Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 25, 2011 at 5:26 pm

Pogo:

Great idea - where's the math that shows what the costs are to support our current retirees with promised support they paid into, AND make the payments to younger workers.

Has it been proposed and scored by the CBO?

Otherwise, it sounds like we're making two payments with the same dollar.

ie.. Bush's privatization ponzi scheme.

It makes Wall St VERY happy, they love getting their mitts on working folks' pensions. Of course, there's little things like the Sept 2008 meltdown.

And the wild gyrations of the market this last month when the austerity party decided to threaten to default on our obligations and the subsequent downgrade.

No austerity. No privatizing Social Security. A flat payroll tax on all, not just the poor and middle class working Americans.


 +   Like this comment
Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 25, 2011 at 5:30 pm

"How about getting the government completely out of the retirement benefits business?" No, because Americans trust Wall Street far less than the full faith and credit of the Federal Government.

The "full faith and credit" that investors the world over are flocking to in these troubled times.

Accepting record low interest rates for that full faith.


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Posted by POGO
a resident of Woodside: other
on Aug 25, 2011 at 8:45 pm

Alfred -

You have a habit of ignoring the main thesis of a proposal and resorting to canned talking points. Interesting, but if that's your best comment on a brand new proposal you're probably better off going back to your Current TV.

In your opening sentence, you ask about the math noting "AND make the payments to younger workers." Al, the whole idea of this proposal is that you no longer have to make payments to younger workers. While I have been unable to get the CBO to score this idea, I can tell you that the math is quite simple. If an employee starts their career making $50,000, a teacher for example, assuming they receive 3% average salary increases (inflation, merit raises, promotions, etc.) and a 3% return on their investment, that employee will have about $600,000 in their own account after a 30 year career. They will OWN that money, they can use it to help their kids buy a house or they can pass it on to their heirs when they die. Try doing that with your SSI payments.

Taking out 4% a year - the recommended withdrawal - would provide $25,000 a year with not a single contribution from government. And you can imagine the numbers for employees making more or a better return.

Yes, there's the Enron argument, which is why I noted the restrictions on investments present in The Netherlands. Diversified mutual funds, perhaps. But wouldn't it also be nice to use these funds to purchase treasuries instead and funneling that interest to citizens instead of the Chinese?

You seem to have a lot of faith in your government's ability and willingness to fund these benefits. You know, I never read anything in our Constitution about taking care of people's retirement income. I'd rather see people planning for and funding their own retirements.

So this is a new proposal. Try turning off the kill granny and Wall Street sucks talking points and think about making average workers rich and self sustaining. That will free up a lot of money in the government to take far better care of our truly needy.


 +   Like this comment
Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 26, 2011 at 11:18 am

"Wall Street sucks talking points"

Pointing out the reality of a near economic collapse in Sept 2008 and the recent 500 point per day drops is merely a "talking point"? Seems rather real to me (and many of my statements, unfortunately.)

Nice ideas that can't even get written up in a bill are fun to dream about. Have you talked to your elected representatives about it?

Senator Sander's bill and the companion bill in the House are a reality that can be scored and debated. Mostly, as I pointed out, it shows that Social Security is not the mess that many would have you believe.

What's new here is that you seem to be on Rick Perry's bandwagon with his claim that Social Security is unconstitutional.

Pogo: "You know, I never read anything in our Constitution about taking care of people's retirement income."

Are you with Rick in believing that SS and Medicare are unconstitutional?

I suspect many of the Almanac's fringe contributors are (Walter, Hank, Yawn, Perspective, etc..) but I didn't expect you out on that edge.




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Posted by POGO
a resident of Woodside: other
on Aug 26, 2011 at 5:26 pm

Yes, there were years that were good and bad, but the average return of the S&P 500 since 1950 is 7.0%. Web Link So it would seem that my assumption of 3.0% over a 30 year career is reasonable, to say the least. (Unless, of course, you are Calpers and expect to deliver a 7.75% return for your union pension holders.)

I didn't comment on the constitutionality of SSI. What I said was I don't recall seeing providing retirement income in the constitution. And you couldn't be more wrong about me and Governor Perry. I couldn't be more against him if I was George Bush.

As a matter of fact, I have spoken with my elected representatives about my idea. All three, in fact - face-to-face (not at the same time). Like most Democrats (and I am a registered Democrat since I was 21), they transparently have a vested interest in maintaining SSI.

You didn't challenge my math so I assume you don't disagree that people would accumulate a tremendous amount of wealth under this plan. But you didn't comment on the thesis of providing REAL wealth for the average working stiff - a nest egg of hundreds of thousands of dollars (even millions of dollars) - which would provide for their own retirement. That would be money that they and their families would OWN, which with SSI they would lose if the worker died before retirement age.

Then again, perhaps you don't trust people to take care of themselves - even with a mandated savings plan of 15% of everything they made and limited investment choices. Very revealing, big Al.


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Posted by Matty
a resident of another community
on Aug 29, 2011 at 12:21 pm

Alfred is right. social security is real. It is good for 25 years. Fix it to last the rest of this century. He shows there is legislation on the table to do so.

Some europe plan may be good talk but it only takes the debate away from making social security stronger. Republicans want to destroy social security and medicare to pay back contributions they take from wall st and insurance companies.


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Posted by POGO
a resident of Woodside: other
on Aug 29, 2011 at 7:48 pm

The plan I proposed does the following:

1. Gets government out of the retirement business.
2. Frees up government funds to do other, more productive things.
3. Provides a large and new source of funds for capital investment, including the sale of treasury bills to US citizens for their retirement accounts (instead of foreign entities).
4. Puts people in charge of their own money.
5. Allows people and families to accumulate significant amounts of wealth that they will be free to use.

And you seem to like those European style health plans. Why not emulate their retirement plans?

Feel free to ignore any of the salient points noted above and resort to talking points. Why give people real wealth when you can keep them beholden to poverty level Social Security benefits?


 +   Like this comment
Posted by Menlo Voter
a resident of Menlo Park: other
on Aug 29, 2011 at 8:21 pm

POGO:

Your proposal is a good one. The problem is the left thinks everyone is too stupid to manage their own money and that the government needs to take care of everyone. When you present the possibility that there is an alternative to socialism they can't deal with it. The liberal left is all knowing and knows what is best for all of us (the conservative right is guilty of this too, don't get me started) and none of us is smart enough to manage our own money. Even if you put limits on what they are allowed to put their money into. Sad, really.


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Posted by POGO
a resident of Woodside: other
on Aug 29, 2011 at 9:29 pm

MV -

Just wait until they run out of money.

Their proposals to fix things always remind me of sailors patching leaks in a submarine.


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Posted by Matty
a resident of another community
on Aug 30, 2011 at 1:22 pm

I am ignoring your points because as a fantasy there isn't a chance of seeing your european plan as a bill, let alone passing. Make up all the numbers you want, unitl it's graded by economists, it's a pipe dream.

So while you live in a fantastic world, others propose real solutions. He posted above a conservative solution, a flat tax equally distributed, that makes Social Security solvent for the foreseeable future.

Pardon me while I don't engage in your fantasy as a way of disparaging one of the great American ideas. As for -

"When you present the possibility that there is an alternative to socialism they can't deal with it."

Are you claiming Social Security is socialism?


 +   Like this comment
Posted by Menlo Voter
a resident of Menlo Park: other
on Aug 30, 2011 at 2:41 pm

"Are you claiming Social Security is socialism?"

Yes. It is redistribution of wealth that relies on a ponzy scheme for more money. It is not a savings account nor is it a retirement account. One does not get out what one puts in, instead what they get is based upon and reliant upon payments coming into the system NOW. Sounds like socialism to me.


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Posted by matty
a resident of another community
on Aug 30, 2011 at 3:06 pm

mv: How is it a "redistribution of wealth"?

The top 400 income earners in the country average $250 million a year in income.

They pay the same DOLLARS (not percentage, but actual dollars) as some schmoe who earns $106k a year.

How is that a "redistribution of wealth"?

Can you define socialism for us?

Do you, like Rick Perry, believe Social Security to be unconstitutional?


 +   Like this comment
Posted by Menlo Voter
a resident of Menlo Park: other
on Aug 30, 2011 at 7:47 pm

Nope, don't believe social security is unconstitutional.

Yes, it's redistribution of wealth. doesn't matter if it's some schmo making $106k or millions. they take money from people making it NOW and give it to other people that aren't making it now. they aren't distributing funds that someone put in a savings or retirement account to the people that placed those funds there. What is so hard to understand about that? That is a classic example of socialism. I suggest you look it up if you want a "definition."


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Posted by POGO
a resident of Woodside: other
on Aug 30, 2011 at 10:46 pm

So government provides healthcare and retirement benefits.

Why not provide everyone with food and clothing? They are certainly far more essential.


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Posted by matty
a resident of another community
on Aug 31, 2011 at 10:02 am

There we go: a small group think Social Security and Medicare are a bad idea. In order to achieve their goal, they make wild claims in order to chip away at America's social safety net.

In the case of Social Security, some of this small group will incorrectly claim it's a disaster, it's a Ponzi scheme, it's insolvent, etc..

The numbers above show it is not. It has been the backbone of America's social safety net (the very phrase makes the fringe shiver in disgust!) for 75 years.

The legislation above, far from being merely a dream of a brand new, not politically viable european idea discussed, is REAL and shows how close we are to making SS solvent for a lifetime and beyond.

Social Security is not insolvent and has never added a penny to the deficit. A simple fix, removing the payroll tax cap, making it a fair flat payroll tax on all levels, not just a regressive tax on the poor and middle class, makes Social Security solvent for the REST OF THE CENTURY.


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Posted by POGO
a resident of Woodside: other
on Aug 31, 2011 at 10:31 am

matty -

I said no such thing. I didn't say Social Security is insolvent, a bad idea or a Ponzi scheme. Although now that you say it, it pretty much fits the textbook definition of a Ponzi scheme.

What I have said is that it is unsustainable and that is difficult to dispute. Even you are proposing major changes - although they are little more than bandaids for a badly hemorrhaging patient. You can't keep chasing benefits.

I have suggested a way to take the EXACT SAME DOLLARS and give them to each individual to keep, invest and use for their own retirement.

I do, however, violently agree with your characterization of Social Security as "a safety net." Ironically, that is the same language that President Roosevelt used when the original legislation was enacted. Unfortunately, Social Security is no longer a safety net. It has become the primary retirement benefits package for Americans - something it was never intended to be or funded for.

And that is why it is unsustainable. Even if you fail to realize this, your children won't. I'm offering them a chance to come away with something FAR better.


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Posted by matty
a resident of another community
on Aug 31, 2011 at 10:50 am

Enact the removal of the payroll cap and it is sustainable for our children and their children, through AT LEAST the end of the century.

See?

Not difficult to dispute at all!


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Posted by Question
a resident of another community
on Aug 31, 2011 at 11:01 am

POGO: Re your idea to allow younger participants to put their Social Security tax payments into a private plan with certain government controls. But don't current (and future) Social Security recipients depend on that income for their payments? This is the Ponzi-scheme problem. If younger participant stop paying into the existing Social Security system, what are the consequences?


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Posted by Menlo Voter
a resident of Menlo Park: other
on Aug 31, 2011 at 12:20 pm

Matty:

if it's not a ponzi scheme, what is it? More and more people have to pay into the system in order to make payments to those receiving them. That's a classic ponzi scheme.


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Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 31, 2011 at 12:29 pm

Again with the Ponzi?!?

You guys want to see a Venn diagram comparison of Social Security and Ponzi?

That shows all areas on commonality? Web Link

I like this, it sums it up while y'all go off into some Rick Perry la-la land ponzi scheme, recommending the Netherlands plan that hasn't ever been discussed, even by the GOP:

"Enact the removal of the payroll cap and it <Social Security> is sustainable for our children and their children, through AT LEAST the end of the century."




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Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 31, 2011 at 12:33 pm

The original Ponzi lasted a couple hundred days. Madoff lasted a couple years.

Social Security has been around since 1935, and with the simple flat tax fix, will be around virtually forever, at the least paying FULL BENEFITS for the next 90 YEARS.

These are facts. You guys have no facts, so you call it a ponzi.

Pretty hilarious. Matty apparently has more patience with your inept ponzi references than I.


 +   Like this comment
Posted by Menlo Voter
a resident of Menlo Park: other
on Aug 31, 2011 at 3:19 pm

If it wasn't a ponzi scheme it wouldn't need to be "fixed."


 +   Like this comment
Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 31, 2011 at 3:44 pm

"Enact the removal of the payroll cap and it is sustainable for our children and their children, through AT LEAST the end of the century."

MV is right, it's not a "fix" just a mere adjustment!

It adjusts Social Security from being SOLVENT for 25 years out to the rest of the century!!

Viola!


 +   Like this comment
Posted by POGO
a resident of Woodside: other
on Aug 31, 2011 at 4:21 pm

Alfred - try defending your position without invoking the words "Rick" and "Perry." Just once. It's getting old and you're on my ignore list until then.

(to the aptly named) Question - Not a good question, a GREAT question! Finally, someone paid attention. Thank you!

To be clear to those who were not paying attention, workers currently over 50 will receive full benefits and those younger than 30 will be very capable of supporting their own retirements. So, you are correct, there would be a transitional gap for that group who are in their 50's and 60's when fewer people are contributing to their Social Security benefits.

That is precisely the gap that we need an group like the CBO (or some think tank) to assess and there is no doubt that it will be a very large number. That is the pain that we will endure to get off Social Security and provide INDIVIDUAL wealth.

Consider this gap the consideration (repayment) for all of those IOUs that the government issued to Social Security system when they "borrowed" those funds for other government programs. Because Social Security would no longer exist, all of those IOUs (bonds) will not need to be repaid. Even Steven.

Now, for those of you who will cheaply charge with having no heart, I would like to go on record as supporting a program that provides MINIMAL support for our poorest. Recognizing that not everyone is able to provide for themselves, this would provide subsistence level support for the very poor. NOT a retirement program for everyone - you can and should do that for yourself!

Alfred - don't even bother.


 +   Like this comment
Posted by Alfred E Newman
a resident of Atherton: Lindenwood
on Aug 31, 2011 at 5:14 pm

Pogo: I shan't bother. And haven't, because it's a fantasy. The CBO can't score it until it's a bill.

Even the republicans wouldn't be dumb enough to propose that in a bill form in an election year, though the Dems *are* dumb enough to entertain it and offer to have a "fair" compromise on it, say, about 90% of the way there.

So Pogo: excluding fantasy solutions, what's your real world fix?


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