How To Fix Social Security: A 4-Point Plan That Faces the Brutal Realities

[Karmadillo]

http://www.oftwominds.com/blogjan11/Social-Security-fixes01-11.html

How To Fix Social Security: A 4-Point Plan That Faces the Brutal Realities
by Charles Hugh Smith
January 19, 2011

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All of these factors have reduced taxable wages and income, cutting Social Security's tax receipts by $66 billion just from 2009 to 2010. As noted yesterday, The End of (Paying) Work (January 21, 2009) is not cyclical, it is structural, and the decline is far from playing out. SSA payroll tax receipts will not recover to 2009 levels, they will continue to decline.

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1. Jettison the illusory "Trust Fund" and remove the SSA from the unified Federal budget. Social Security is a "pay as you go" system in which current workers' payroll taxes are distributed to current beneficiaries, with a surplus that accumlates to fund future shortfalls. Unfortunately, the surpluses accumulated over the past 27 years have already been squandered, and the Treasury will have to fund any shortfalls between Social Security outlays and income with 1) tax increases or 2) additional borrowing.

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2. Replenish the squandered surplus in two ways: eliminate the $106,000 cap on wages and impose a 5% Noblesse Oblige tax on all households with incomes (from any source) above $1 million. If you're pulling down $1 million annually, you're already paying a lot of taxes--but then your tax burden was lowered tremendously by the Bush-era cuts. You can afford a $50,000 Noblesse Oblige payment to Social Security, with the explicit understanding that the money is for those in the bottom tier who have no other pension.

Why should earnings above $106,000 be except from the 7.65% FICA tax? If you're making $156,000, please don't claim you can't afford to pay 7.65% on the last $50,000. Anyone claiming that means they don't want to forego some consumption they desire. Come on, the 7.65% on the $50,000 is a modest $3,825.

3. Reduce the benefits for everyone with another fixed-benefit pension. According to the SSA, the average benefit is about $1,100 per month. All beneficiaries with other fixed-benefit pensions will forfeit their Social Security above a total monthly gross pension/retirement income of $3,000 a month.

Again, the idea here is to recognize income disparity as a reality and to protect the most vulnerable citizens who have worked and paid into the system. The idea that "everyone who paid in should get their share" is gone, triaged out of existence.

more...

[Statistical]

1. Worst idea ever.

The long term unfunded liability in Social Security over next 75 years is $5.4 trillion however that is only roughly 0.6% of GDP a token amount. We spend roughly 7% (excluding the wars) on Defense. While SS needs support it only needs a relatively small increase in revenue to achieve infinite solvency. Making all employees participate, raising the cap, and raising contribution rate 0.5% closes 80% of the gap.


The "Solution" above would:
a) erase the general fund obligation (which is paid by progrssive income taxes) which benefits millionaires and billionaires.
b) turn SS into welfare
c) undermine confidence in the system by changing the rules at the last minute (cutting SSA benefits for those with pensions, maybe people made plans for 30 years on pension + SSA. They "played the game" acording to the rules in place. It shouldn't be changed at the last minute.

[doc03]

2. I worked 46 years to earn a pension from my employer.

I even went on strike for over a year to protect that pension and now you want to take my SS away because I have a DB pension. That's real fucking Democratic!

[msongs]

3. quit wasting half our resources on war and the welfare military nt

[hollowdweller]

4. Amen. That's awful

First walking away from the trust fund because it's not real is BS and only reinforces the right wings talking points. If that's the case hell lets just default on all our T bills and declare the National Debt to be zero. Ha!


Second of all my friends and relatives I know I can only think of 1 that currently has a retirement income combined with SS over 3000 bucks. And THAT'S older people who HAVE a damn pension. Better than 75% of the people I know are ONLY going to have SS. No pension of any kind so that idea as any sort of cost savings is BS.

[ProSense]

5. "Reduce the benefits for everyone with another fixed-benefit pension. "

So does this plan reduce their contribution?

Social Security isn't in crisis. Simply raising the income cap (the limit can be determined) will strengthen the program.

[doc03]

6. Who the hell determined an income of $36000 a year is

too wealthy?

[ProSense]

9. Do you think it was someone progressive? n/t

[doc03]

12. Well I did make many posts a few weeks ago arguing that very

thing with another DUer. So yes there are some calling themselves progressives that think (any) income from a pension or an IRA should be deducted from SS. They believe everyone else over retirement age should live in poverty since they didn't have a company pension or any savings themselves.

[Hannah Bell]

7. the "solution" proferred is like using a nuclear bomb to remove a splinter.

and the author is careless with facts, e.g. 7.65% is employees' portion only, & includes medicare taxes.

employees' portion of SS taxes = 6.2%.

the unified budget thing is a red herring, the "brutal" realities the author speaks of are a business-created myth.

[doc03]

8. Here's my four point plan: Take that four point plan, 1 roll

it up into a ball. 2. pull pants down 3. bend over 4. shove it up their ass.

[sabrina 1]

10. First of all, there is no crisis in SS. The shortfall in

taxes is only because of the current job situation. But, SS has other sources of income, and even with that shortfall, still had a surplus this year.

Do these people get paid for what they write? And if so, is it too much to ask them to just got to the SS site and read the latest report on the fund which states clearly that the SS fund had a surplus this year despite the shortfall.

And does this writer know that shortfalls like this have happened before and SS has never failed to meet its obligations?

All the predictions for SS this year are based on the worst case scenario, meaning they are based on this period of high unemployment. As soon as employment figures to up, so will the revenue to the SS fund.

To fix the shortfall:

The Bush Tax Cuts should have been allowed to expire and any tax cuts given to Corps should be given only to those Corps THAT CREATE JOBS.

Corps that send jobs overseas should be taxed highly.

Raise the cap on those who actually do pay SS taxes from their income.

Create a jobs program putting more people to work which will increase the amt going into the fund.

Legalize or give temporary work permits to undocumented workers. They are here working anyhow and this way they can contribute to the fund.

Cut the military budget

End the wars.

Close military bases around the world.

No more bailouts to failed Corps

The last four would help reduce the deficit and the FEDERAL BUDGET which is completely separate from the SS Fund. With those savings, the Federal Government could repay what it owes to the SS Fund.

But even if nothing is done right now, the SS system is solvent for up to and beyond 2037 depending on which report you rely on. The Congressional Budget office says up to 20042. That will be extended if there is an increase in employment.

Right now, they should be focusing on the Federal Government's Budget. I don't know why anyone is worried about SS at this point. It is the Federal Budget that is in trouble. But there are many, many cuts that can be made to fix that and taxes that can and should be raised.

Once that is done, SS will be automatically more sound.

But this author is putting the cart before the horse.

[FreakinDJ]

11. Raise the Cap and be done with it

all these lies so millionaires won't have to pay

[Warren Stupidity]

13. 1-3 sucked ass. WTF was 4?

[doc03]

14. It's in the link and it really sucks, encourage people to work

past 62 and encourage disabled people to make whatever they can (that would be like begging I guess)