6/21/2012 4:02 PM ET|
The great Social Security lie
If you think the retirement of baby boomers is the problem, perhaps you should know about the real root of the problem -- and how it needs to be addressed.
The headline machine was in overdrive earlier this year with the arrival of the latest Trustees' Report on SocialSecurity and Medicare. And while much of the media continues to herald the coming bankruptcy of Social Security, they do so at the risk of ignoring the real story -- a story that is neither difficult to explain nor hard to understand.
Technically speaking, an entity is deemed bankrupt when its obligations exceed its revenues. Therefore, if the projections are accurate, Social Security will, indeed, be deemed bankrupt in 25 years -- absent modifications to resolve the funding problems.
However, that does not mean that the money will be all gone come 2035. Nor do the headlines explain why we have the projected shortfall.
Subsequent to the projected expiration of the period where the trust can pay out 100% of the promised benefits, the fund will then be in a position to pay out 75% of promised benefits for the foreseeable future -- and that is not OK. Clearly, there need to be some changes made to Social Security so as to make up the 25% annual shortfall in benefits we anticipate will begin a quarter of a century from now.
The cause of the shortfall
But if we are to hope to make these adjustments in a sensible and realistic way, it might not be a terrible idea for the American public to actually understand the real causes of the shortfall in anticipated trust revenues.
We are consistently led to believe that it is the "aging workforce" that rests at the heart of Social Security' funding problems. Tune in to any of the media reports covering the numbers just out and this is what you are going to see and hear.
The claim, while legitimately representing a small piece of the problem, fails to explain the lion's share of the crisis we will experience in the Social Security Trust --and by lion's share, I mean a full 60% of the entitlement's funding shortages.
The "aging workforce" narrative serves to encourage and support the critics who claim that our problem is too many retirees lining up to collect their entitlements only to find that the government has failed to properly manage the Social Security Trust -- leaving the next generation of beneficiaries to be shortchanged 25 years down the line. As a result, the privatization pushers argue that Americans would be far better off looking out for their own retirement accounts so that government mismanagement will not come between hard-working citizens and their retirement money.
This is the Great American Social Security Lie.
It is a lie concocted by those seeking to fulfill Wall Street's eternal quest to get its sweaty palms on trillions of dollars of our retirement cash, allowing them to expand their casino operations beyond their wildest imaginations -- and Wall Street has a very healthy imagination.
More from Forbes.com:
VIDEO ON MSN MONEY
If we would just quit GIVING money to imigrants that were not even born here and put money into S/S they come here because their own country has no program like S/S just to get OUR $$$$$$$$$$$$$$
NO ONE who has not put onto the system should EVER get to draw from it. When will we wake up here in the USA most of these poeple do not even want to be here but for the $$$ or they would at least
learn english. My grandfather did at 50 yrs old before he came here in the late 1800's because he wanted to be an american not just take what we would give him which was nothing by the way, he EARNED everything and started a business as well and PAID TAXES because that is really the AMERIACN WAY!!!!
Wage stagnation? Dateing from and starting shortly after Nixon "opened up" China to trade (or at least cheap cooley-labor manufacturing)? And the wages didn't go up after Clinton gave us NAFTA and cheap-labor Mexican factorys in every border town on the rio grand in the early 1990's? I cant understand why we have this problem!!
Main reasons of s;s. shortfalls: 1]the s.s was started by unions. government couldn't get their greedy little fingers on it. Then took it out of unions' hands saying they were not competent to handle it. Took it over and now have their greedy big fingers in it all the time stealing money from it and NOT paying it back.
2]We have all these illegals that come here and don't pay a dime and yet congress now wants to give it to their kids....... sorry deportation is not doing their jobs for what they are paid to do.
3] All these foreign students come here for the summer months to work. They get paid cash so there is no record of them here 'working' and 'earning' money so NO s.s OR taxes get paid on these so called kids. OUR kids all get fired from the winter/fall/spring working time cause they pay taxes and s.s. so that these foreign kids can be hired. YES THIS IS HAPPENING. A neighbor of mine went to apply for a job for the summer at local store and was told 'No...we not hire you. Go work restaurant or something. These job for foreign kids."
4]We have tons of foreigners that come here to live and work and own businesses and properties. BUT because they are NOT citizens do not pay taxes or s.s. like the rest of us. YES THIS GOES ON. When they are a month short of the 7 years...they sell to spouse or child or other relative. When that month short of 7 years is up they sell to spouse or child or other relative and so on and so on. If foreigners come here to live and own properties..... I don't care who they are.... they need to start PAYING just like the rest of us. NO MORE LOOPHOLES.
5]Why should foreigners get to come here, get free loans, free health care, free autos, free homes and not pay one red cent to earn it.
6]When us workers lose a job, if we are lucky we get unemployment for 26 weeks and doing the song and dance of looking for a job every one of those weeks. Why on GOD'S green earth should all these congress people still get paid the same wage as if they were still in office when voted out? And get free health care to boot. When they lose that office.......... look for a job just like the working people in this country and NO MORE FREEBIES off of US. When out of office that is it. Or they can live in the real world and stand in line at unemployment office, the line forms at the back.
Time the government puts the big boy/girl panties on and step up to the plate.
What a pack of lies. MSDNC isn't even hiding it's worship of all things Obama. Disgusting.
It's no secret that countries which have privatized their SS have seen 2x to 5x returns. If we did the same your SS check would at least double and the fund would be solvent.
When SS started there were 17 workers/retiree and they lived only a couple of years past retirement. Now there are less than three workers/retiree and the are living a couple of decades past retirement. That makes it a ponzi scheme and like all pyramids, when there aren't enough people at the base, it collapses and the base is left holding the bag. That's what's happening now.
The idea that there should be no wage base cap on Social Security tax keeps being raised. The problem with this is that a person's ultimate benefits are based upon the highest wage base years of their working career. If a person were to be taxed for Social Security on 100% of their wage income with no cap, do we really want to have some people eligible for $50,000 per year or more in Social Security benefits because they earned $1 million per year during their highest earning years? I think not. I suppose the liberals' answer to that would be to "means test" the benefit and limit it. We already "means test" the benefits because Social Security benefits are taxed to people above a certain income level, which is quite modest. The extra income taxes paid from this should be counted as a reduction of the shortfall, and I doubt that it is.
By the way, I have noted over the years that the increase in the Social Security wage base each year has no relationship to the COLA percentage increase in benefits each year, and in fact the wage base almost always is increased by a higher percentage than the COLA.
First, this is a completely biased article. Second, the "privitization" of Social Security has never been proposed to allow individuals to invest their own funds through those greedy wall street brokers. Raher, every proposal has been for a regulated fund using class "A" government bonds and even this has never been proposed for more than 10% of the payroll deductions. Meaning that 90% would still be going into the trust fund. My suggestion is to use 20%. It would result in internalizing much of our federal debt paying any interest to our own citizens retirement accounts.
Now, why are congressmen so opposed to this option. In fact, so opposed that they have "poisoned the well". think about it, the congress consistantly redirects payroll funds toward other spending. If you reduce that by 10-20% you will be removing billions of dollars from the greedy hands of our congressmen.
Franklin Roosevelt, a Democrat, introduced the Social
Security (FICA) Program. He promised:
1.) That participation in the Program would be
No longer Voluntary
2.) That the participants would only have to pay
1% of the first $1,400 of their annual
Incomes into the Program,
Now 7.65% on the first $90,000
3.) That the money the participants elected to put
into the Program would be deductible from
their income for tax purposes each year,
No longer tax deductible
4.) That the money the participants put into the independent 'Trust Fund' rather than into the
general operating fund, and therefore, would
only be used to fund the Social Security
Retirement Program, and no other
Government program, and,
Under Johnson the money was moved to
The General Fund and Spent
5.) That the annuity payments to the retirees would never be taxed as income.
Under Clinton & Gore
Up to 85% of your Social Security can be Taxed
Since many of us have paid into FICA for years and are
now receiving a Social Security check every month --
and then finding that we are getting taxed on 85% of
the money we paid to the Federal government to 'put
away' -- you may be interested in the following:
------------ --------- --------- --------- --------- --------- ----
Q: Which Political Party took Social Security from the
independent 'Trust Fund' and put it into the
general fund so that Congress could spend it?
A: It was Lyndon Johnson and the democratically
controlled House and Senate.
------------ --------- --------- --------- --------- --------- --------- --
Q: Which Political Party eliminated the income tax
deduction for Social Security (FICA) withholding?
A: The Democratic Party.
------------ --------- --------- --------- --------- --------- --------- -----
Q: Which Political Party started taxing Social
A: The Democratic Party, with Al Gore casting the
'tie-breaking' deciding vote as President of the
Senate, while he was Vice President of the US
------------ --------- --------- --------- --------- --------- --------- -
Q: Which Political Party decided to start
giving annuity payments to immigrants?
AND MY FAVORITE:
A: That's right!
Jimmy Carter and the Democratic Party.
Immigrants moved into this country, and at age 65,
began to receive Social Security payments! The
Democratic Party gave these payments to them,
even though they never paid a dime into it!
------------ -- ------------ --------- ----- ------------ --------- ---------
Then, after violating the original contract (FICA),
the Democrats turn around and tell you that the Republicans want to take your Social Security away!
Your premise is off. Current benefits were never intened to come from current deductions. The money was supposed to be put in " a lockbox" and earn interest over the course of a workers life. Thats why SS is broke.
And my 401k is in a lot better shape than my gubment sponsored retirement fund.
The entire tone of this article bespeaks scorn for the private sector and genuflection toward government.
The existence of Social Security is closely tied to a moral issue: is it right and proper to use the government as your proxy to steal from your neighbors at the point of a gun, or is it not?
I think it is not. The key words in that last sentence are, "I think." That is why I am saving and planning for my own retirement.
Power should be devolved from the government to the sovereign individual. The necessary corollary of ultimate freedom is ultimate responsibility. Give us back our freedom and hold us responsible; we will then do amazing, innovative things once again.
THE RIVER OF MONEY (Simplistic). Part 1. In parts because of the spam filters.
Water (money) is created in the mountains of the Fed and flows down in a river to it's people as a trading unit for work and services performed. The people used this water instead of barter to buy goods and services from each other. They watered their crops and harvested and sold any excess for more water.
As some become more successful, they built storage places to store the excess water to be used in the future for any mishap that could befall them. While others used all they had because they were less successful and were not good farmers because of the soil, or terrain.
Water was taken as taxes for the economic activity and was sent back to the Fed to be sent down the mountain again.
As taxes were reduced, and the Fed didn't want to drown the countryside, the river from the Fed became smaller and smaller.
Some people who became so successful that they were able to put up dams to hold all their excess water. After a long while, as those who were successful soon had huge dams of excess water. As the amount of the flow of water used in trade for goods and services became less and less from the stockpiling of water by the successful ones, the people had less and less of the water to go around.
Without water, their crops began to fail and those who were successful were able to pay less and less for the services and goods they received because the supply of water had became so tight.
The Fed, realizing the majority of people were hurting started making more water to send down the river to keep trade going so the people would not starve and trade would not be impeded.
The problem was not that there was not enough water, but rather the water was in storage, like during the oil crisis of the (70s) that was made worse by people keeping their gas tanks full all the time and using up the available supply. If those with the stored water used it as it was intended, rather than stored, the shortage would not have occurred. To much stored water in the hands of the successful is not good for the rest of the people.
The people who were able to store the water are not to blame. They were doing what was best for them. That's the way it should be. Taxes should have keep the stored surplus from becoming too big in the first place, like in Germany. We want the people of this country to be successful. We want them to work hard and receive compensation that will let them live long productive lives. We all benefit from the work and services we produce. That was the promise of this country. We also have a trade deficit of over 1/2 trillion dollars a year. Like a river of money flowing out of this country and along with it, jobs. Our trading partners should either buy more of our goods or services or we should buy less of theirs. Trade wars are not the answer, but something should be done to nudge them to be better trading partners.
From reading this, the answer would have been to tie social security COLA increases to the increase in personal income. Ovewr the course of the twenty years sinc e thecongress "fixed" the problem, Social Securtiy cost of living adjustments have consistently been higher than the rate of personal income growth. Over the course of 20 years, you will have a shortfall.
Of course the tax rate will have to increase as the gap widens. Unfortunately for workers, their purchasing pwoer will continue to erode in a weak economy, and they will be asked to further erode their purchasing power by paying higher social security taxes to insure that retirees lose no purchasing power during poor economic times.
Tie social security increases to personal income growth, and you will balance the system.
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