Cutting Social Security on the grounds of making it more "progressive"

[eridani]

http://www.truth-out.org/making-social-security-more-progressive-and-games-they-play-washington66925

The reason why CAP wants to cut the benefits of factory workers and schoolteachers is because this is where you have to go if you want to have any substantial reductions in Social Security payments. Peter Peterson, the billionaire investment banker, is fond of telling audiences that he doesn't need his Social Security check.

However true this might be, Peterson's Social Security check, along with those received by all the other millionaires and billionaires in the country, really doesn't make any difference for the program's finances. There are not many rich people, and because Social Security is a progressive program, the billionaires' Social Security checks are not much bigger than the checks received by ordinary workers.

This means it doesn't matter for the program whether or not Peterson and his wealthy friends get their Social Security checks. When they talk about cutting benefits for "affluent retirees" or making the program more "progressive," they are talking about cutting benefits for schoolteachers, firefighters and other middle-income workers.

<snip>

They have an even harder time with the politics. Social Security is enormously popular across the political spectrum from the left-wing of the Democratic Party to the devout Tea Party faithful.

In short, those who want to cut Social Security must overcome the fact that they have no argument on policy grounds and their scheme faces enormous political opposition. As a result, the Washington insiders have no choice. If they want to cut Social Security they will have to lie, cheat and steal. And the Washington insiders are very good at these tactics.

[madville]

1. There should be a means test

If someone has other substantial retirement income or hundreds of thousands or millions in assets and investments then they shouldn't receive SS. It should be there for those that truly need it. Billions could be saved cutting the top earners/asset holders out, they should still be required to pay in though of course like everyone else.

Once they have exhausted their assets down to a certain point then they can qualify for SS benefits at that time.

[bananas]

2. No

[Statistical]

3. Nope. Worst idea ever.

It would kill Social Security within a generation.

1) As the article points out there are very few billionaires and their checks aren't that big so you are cutting something like 0.1% of SS expenditures. It will do nothing to help solvency

2) It will break the universalness of SS. It will be welfare and eventually the rich will lobby against it and it will keep getting cut and cut and cut.

3) It will destroy confidence. Why should a 20 yr old trust that this won't happen to them in 50 years right before they retire. SS is based solely on a promise. You have no right to it. once confidence is broken it is done for. How do you convince people to trust it when the rules were changed in the middle of the game. You won't. The argument will be morally bankrupt.

[madville]

5. Have to have a combination of these three options:

Raise Contributions

Increase Eligibility Age

Lower Benefit

None will be popular but something has to be done since there is nothing concrete backing it. As wages don't keep up, people live longer, lower worker to retiree ratio, etc, etc, become reality something unpopular will have to be done, the question is who will be in power to jump on that grenade and commit political suicide.

[Statistical]

6. Raise contributions is the easiest.

1) Raise the cap to 90% of wages
2) Raise the rate by 0.5%.
2) Require all new employees to participate. currently some govt employees don't.

Those three things close about 73% of SSA 75 year shortfall.

Now closing the rest of the gap is trickier (I think we will need to index retirement age for younger workers). Here are some options.
http://en.wikipedia.org/wiki/Social_Security_debate_(United_States)#AARP_Study



Means testing is ineffective due to the way SS is structured. Simply put the rich only make up about 1% to 2% of the population (depending on who you want to cut off) and even someone with max SSA check is only getting about triple the median check. Thus you are looking at best on cutting expenses by <10%. The damage to SSA isn't worth it.

[eridani]

9. You don't need to do anything except to raise the cap

The worker to retiree ratio argument is sheer unmiticated bullshit. by that logic we are all starving to death because the percent of farmers has dopped from a third in 1900 to just a few percent today. Non-farm productivity has increased by a factor of FOUR.

Also, it is just nonsense that Social Security is in trouble. The only way you can force the calculations to show that is if you assume that Social Security must last until the end of the universe.

http://www.truth-out.org/joshua-holland-were-being-conned-social-security62974

According to Bruce Bartlett, in an incredibly typical scare-piece in billionaire granny-basher Pete Peterson’s Fiscal Times, that’s not true. Social Security’s problems are immense. “The 2009 report of Social Security’s trustees,” Bartlett writes, “showed a long-term actuarial deficit in that program of $15 trillion.” That is an almost unimaginably large number, given that the entire annual output of the United States was only $14 trillion last year.

But what does it really mean? Well, it turns out that Bartlett’s not even referring to the dubious 75-year projection of the Social Security “gap.” His terrifyingly big figure actually represents the program’s “shortfall” stretching out to infinity. That’s right-- it’s the program’s “unfunded liability” if everything remains as projected forever, and assuming the earth isn’t destroyed by a moon-sized meteor at some point before forever arrives. (The geeks at the American Academy of Actuaries have suggested that the “infinite horizon” measure is complete nonsense.)

According to the 2010 Social Security Trustees’ report, the 75-year gap is estimated to be $5.4 trillion -- still a big number. But there’s another way to express it: it equals just 0.7 percent of our projected economic output over that same period. That’s less than one penny on the dollar

[eridani]

8. Almost nothing could be saved. There just aren't that many rich people

If you want a spreadsheet demonstrating this, drop me a PM with your email.

If you limited monthly payouts to $2000 per month tops, out of of $30.4 billion/year paid out you'd save $2.27 million, or 0.9%

If you limited monthly payouts to $1700 per month tops, out of of $30.4 billion/year paid out you'd save $ 1.6l billion, or 5.3%. Not that there would be anything wrong with setting such upper limits--they just won't save a lot of money.

Besides which, all Social Security income for high earners is fully taxable.

You can find income by quintile for people over 65 at Reference: Economic Status of the Elderly in the United states
by Virginia P. Reno and Benjamin Veghte

National Academy of Social Insurance (NASI)
1776 Massachusetts AVe NW, Suite 615
Washington, DC 20036
[e-mail]
www.nasi.org
202-452-8097

Bottom fifth 2nd fifth Middle fifth 4th fifth Top fifth
To $12K To $19.9K To $31.3K To $55.5K >$55.5K
Assets 2% 4% 7% 8% 18%
Earnings 2% 4% 10% 19% 44%
Pensions 3% 8% 16% 26% 18%
Social Security 83% 82% 64% 44% 18%
Other 10% 3% 3% 3% 2%

Other is mainly public assistance for the lowest two quintiles. Note that retirees who have incomes of more than $55.5K achieve that status by still being in the work force. They have job earnings of more than twice what they get from assets.

[Statistical]

4. If Mr. Peterson doesn't want his SS check he can donate it to the treasury.

to reduce the national debt. Even better the SSA doesn't force you to begin drawing checks. While "full retirement" is 67 there is no requirement to draw checks then. You can wait until 70, 80, 99, 107 before you draw your check. Each year you wait the potential benefit goes up. If you die before drawing then it never costs SSA a penny. He could simply never start drawing it.

Means testing is a poison pill to turn SS into welfare and destroy it.

[unkachuck]

7. +1