Would you reform Social Security and if so HOW?

Great Debates
21

Are you suggesting that the U.S. Government should default on its treasury bonds? I’m sure the Chinese will be interested in this news.

There is no crisis. Social Security is good for another 50 years even with pessimistic projections of economic growth. Apply the same growth projections to private accounts and their performance is worse.

The Republicans have three reasons for pushing this dim idea:

  1. Ideological Purity. They KNOW in their heart of hearts that the Gummint ALWAYS screws things up, even when all evidence points to the contrary.

  2. More money for Wall Street.

  3. Permanently raiding the SS trust fund for general operating expenses for the federal government. SS taxes are regressive, income taxes are progressive. So if you use SS taxes to pay for stuff that you should be paying for with income taxes you’re essentially giving the rich a big tax cut on the backs of the middle class and poor.

Here’s what I’d do to “fix” SS: NOTHING. Let it sit for another ten years as it is, then reassess.

22

Oh, BTW Roland. The Bush administration is now admitting that private accounts will do nothing to improve the stability of SS:

“A Bush aide, briefing reporters on the condition of anonymity, was more explicit, saying that the individual accounts would do nothing to solve the system’s long-term financial problems.”

Just as with tax cuts and the Iraq war, this White House decides what it wants to do first on purely ideological grounds, then starts scrounging around for rationalizations. If one rationalization falls apart (“we must return the surplus to the people”, “we must protect ourselves against WMDs”), another is trotted out to replace it (“we need tax cuts to stimulate the economy”.“we’re liberating the Iraqi people”).

How long will you people continue to fall for this nonsense?

23

If Social Security is privatizes, it would no longer be a Social Security System, but a Personal Investment System. So no matter what the Republicans claim, Bush is trying to destroy the SS System.

There are two easy solutions to keep SS running forever.

Raise the tax cap (currently at $87,000, rising to $90,000 next year). Of course, you’ll get an outcry from the rich, basically the top 10% of the population, so don’t expect Republicans to go for this.

Raise the retriement age. As people become healthier at older ages, they’ll be able to work longer. Just raising it a year or two (sometime in the future) would make a big difference in senior to worker ratio, and could keep the system running indefinitely.

And there is a huge problem that Privatize advocates fail to address. What happens when someone lives a lot longer than expected or they are disabled early in life? If their Personal Investment runs dry, where will they get money? Welfare? Just another burden on the taxpayers. Privatization is a horrible idea.

24

I can get completely behind point 2. Probably behind point 1 as well, but we’d need some more discussion about it. Specifically, I would still like to do the partial privatization. Which would mean, for point 1, you don’t get the other checks, just what was in your personal account.

25

I support Bush’s plan but I think we should be able to contribute way more than a crummy 4%. And it should be tax-free.

And you should be able to leave your money to WHOEVER you want. If you’re 20 now and you never marry and get killed in a car crash when you’re 52, you should be able to put in your will that you want your Social Security (all of it, not just the privatized account) given to your best friend, your roomie, your favorite charity, your Aunt Tilly, your cat, your boyfriend, etc.

I have a childless uncle that was single for years before he remarried. Had he died, every penny he was forced to pay into SS would have been a freebie for Uncle Sam. Unmarried people with no heirs are getting totally shafted, IMHO.

And, since it ties in with retirement, absolutely NO limits on IRA contributions per year.

Why do people want to keep trusting in a system that is so shitty that Congress refuses to use it?

26

A couple of things you have wrong.

You currently contribute 12.4 %. 6.2 % yourself and 6.2 % by your employer.If you want to contribute more please do so. You can call it anything you want. Pention,Ira,whatever you want. If you want no limits on IRAs then please contact George Walker Bush.

Your childless uncles contributions go to someone else. Maybe even" WHOEVER you want " will get it.

Where did you get the idea that SS is so shitty Congress refuses to use it?

27

I like this one myself. SS as a floor, as a last resort type of thing. It should be considered to be a retirement in and of itself.

CJ

28

I’d add a fourth. Adding to the debt, and doing nothing to really repair the system means that eventually the general fund would have to be used to pay benefits (or else whoever is in power would be in big trouble.) This would cause cuts in other federal programs,. and help the Republicans continue to dismantle useful federal programs. Corporate welfare would stay, no doubt. I think it is an extension of starving the beast.

29

Abbie Carmichael: *I support Bush’s plan but I think we should be able to contribute way more than a crummy 4%. And it should be tax-free.
And you should be able to leave your money to WHOEVER you want. If you’re 20 now and you never marry and get killed in a car crash when you’re 52, you should be able to put in your will that you want your Social Security (all of it, not just the privatized account) given to your best friend, your roomie, your favorite charity, your Aunt Tilly, your cat, your boyfriend, etc. *

Again, we can’t go arse-out in support of radical restructuring proposals like this one without thinking it through. Yes, we all think it would be nifty if we could magically treat our Social Security contributions like our own personal retirement savings and do whatever we wanted with them. But in a real-world scenario, what would be the consequences?

Most notably—huge transition costs. (Gee, is there an echo in here?) If the magical SS pixies suddenly change the system so that you can will away your entire amount of SS contributions if you die before retirement age, where is that money going to come from?

Currently (as in the case of my own father who died at age 55), you have no personal control over your contributions once you’ve paid them; they fund benefits for current retirees. If the government suddenly had to find additional large sums for “restitution” to the estates of deceased workers, how would we pay for it? Should we all contribute thousands of dollars more annually in payroll tax so that the early-deceasers can leave a windfall for their cat or their Aunt Tilly?

30

I would like to add a significant concern I have that has not been discussed, but that I believe is a hidden reason for this whole SS issue. Currently, your SS contribution is made up of 2 parts: the deduction from your wages (you see it on your check stub), plus an equal amount contributed by your employer (you might not see that on your check stub). I believe that the “personal accounts” story is a trojan horse, the ultimate goal for the Republicans is to eliminate the employer contribution portion. ('Cause that’s what Republicans do, help the business owners and screw the workers.)

Once they get the great majority of americans to accept the “Personal Account” feature, they will then tell them that these accounts will be funded by “your money” (the deduction you are used to seeing on your paycheck stub). Now you might ask, “What happened to my employer portion?” Huh, it was here a minute ago…huh, funny that…oh well…

That’s the real story here.

31

More corporate welfare. Seems reasonable.

32

Hallo?

Dont we have them now? Are we forgeting Individual Retirement Accounts (IRA). Last time I checked, if you have earned income, you can set up your own IRA. Then here are the 401(k) plans, providing your employer has them.

33

Yes, but if Social Security is abolish^H^H^H^H^H^H^H reformed, that means more of money goes to the investment bankers and corporations! It’s a win-win for everybody!(*)

(* = Except you, if the stock goes down. Which it’ll never do…)

34

As I said in this thread, I would favor adjustments to the retirement age, raising the SS Tax, and possibly some amount of means testing. (I mean, is Bill Gates really going to need his Social Security check when he turns 67 ?) However, reading comments here I agree part of the success of SS has been due to the fact that everyone collects- It’s a political hot potato to change that.

I do think privitization might work if you did it verrrrry slowly. I mean reallll slow, and if you let the SSA tax decide how much could be diverted to private accounts and how much to take to keep paying current benfeciaries, so the system stays solvent. Give them autonomy for doing this much the same way the Fed gets to choose interest rates. You then gradually wean people from a pay as you go system to a “invest yourself” system, by gradually increasing the amount of their FICA tax that can be diverted to personal investments. I’m still not convinced privitization is still the way to go (for many of the reasons ** Kimtsu ** points out), but this might be a more palatable way to transition then to suddenly say people can suddenly start “investing” 4% of their salary (Is that right? That would mean 2.2% would go to the trust fund and 4% to their “personal accounts”? Or is that 4% of their salary outside of the 6.2% FICA tax? Is that everyone? People under 55? Is Bush out of his mind?).
Of course my plan would never sell because (a) the % allowed would have to apply to everyone in order to keep the Trust Fund solvent and (b) it doesn’t have the instant gratification Bush’s plan has (at least to Wall Street and to the twenty somethings who can watch their government managed mutual funds grow).

And this deal where you can pick one of the plans the government manages for you? Horseshit. The Republicans didn’t like Clinton’s “Managed Health Care” , why are they now going for “Managed Investing”? If your going to let people invest some of their SS tax, let them invest it.

35

For those of you who are all hot to introduce some form of means testing, I should point out that SS benefits are already means-tested. How, you say? Well, take a look at the worksheet in your 1040 instructions, page 25 to be precise. If you make a fair amount of money from your other investments, your SS benefits are taxed. In other words, if you have the means, you have to give some of your SS benefits back.

36

Yes, but that money doesn’t go back into the SS Trust fund, it goes to Treasury’s general fund. I think when people talk about means testing they mean a test on getting any benefits in the first place , so more is available for other beneficiaries. Rethinking my position, it’s probably not a good idea, though.

37

Mike H: I mean reallll slow, and if you let the SSA tax decide how much could be diverted to private accounts and how much to take to keep paying current benfeciaries, so the system stays solvent. Give them autonomy for doing this much the same way the Fed gets to choose interest rates. You then gradually wean people from a pay as you go system to a “invest yourself” system, by gradually increasing the amount of their FICA tax that can be diverted to personal investments.

I got no problem with this myself, assuming that we had restrictions on the investment options so as not to increase risk or overhead unacceptably, and still maintained a safety net to support the disabled/survivors and those who outlived their savings.

In fact, we wouldn’t necessarily even have to move these accounts into the stock market; just keep them in the special high-interest T-bills as they are now, with the only difference being that you’re saving for yourself and you can will away any leftovers (perhaps minus a certain percentage to help fund the safety net). In the end, it would simply be as though we’d originally picked a “fully funded” (i.e., save-for-yourself) social insurance plan instead of the current “pay-as-you-go” one.

However, there would still be some non-negligible transition costs, so we’d have to be willing to bite that bullet. And in order to transition slowly enough to keep the transition costs at a tolerable level, we’d have to do it over many decades.

In short, this is not a plan to fix the projected SS shortfall 35–45 years down the road; this is a fundamental long-term policy shift to make the system more innately appealing to workers, although more expensive. The ideology fits Bush’s rhetoric of “ownership”, but it doesn’t do jack to repair a “crisis” in the medium term.

For that purpose, Bush will have to cling to his projected benefit cuts via wage-indexing. Which I must admit is a rather elegantly diabolical approach to a vexing fiscal problem: “Mr. President, Social Security is losing solvency and eventually will only be able to pay about 75% of benefits! What shall we do?” “Um, let’s see… I know! We’ll restructure the system to reduce the scheduled benefits below the current 75% level! Then we’ll be meeting our obligations in full!”

Genius, of a sort. Wish I could do that with bus fare: “Well look, I know the fare’s $1.25 but I’ve only got a dollar on me. Why don’t we just agree that now the fare is $1.00, and then I’ll be able to pay for the bus ride? … What? Why not? Hey, that hurt! Oh, if only I were President…”