The convention speeches are full of empathetic phrases underscoring our need to “take care of those who need it” and to “share” what we have.
The government's spending spree “taking care” of us has created a tax burden that is impossible to pay. There aren't enough taxpayers left in the whole country to pay for all the things we need as a nation, plus support half the nation's families. President Obama would have to take 100 percent of all income in taxes from everyone earning more than $60,000 to maintain the government's spending. (American Thinker)
All taxpayers in America earn a combined $5.6 trillion of taxable income. $4 trillion in spending represents over 71 percent of the total taxable income of U.S. taxpayers. That $4 trillion doesn't include paying down the $16 trillion in debt or covering the $25 to $70 trillion in unfunded liabilities. Even 100 percent of all taxpayer income would not cover the current spending, the debt reduction and unfunded liabilities.
The Buffett rule would pay for 11 hours of government spending in 2013.
If I give my time and money to homeless teens, that is “sharing.” If the government demands that I give more money to it so that it can create more dependency, that is confiscation, not “sharing.”
The national debt has increased by more than a trillion dollars every year Obama has been in office. By comparison, it took from George Washington to Ronald Reagan for the national debt to hit 1 trillion in the first place. Also, look at a graph of national debt as a percentage of GDP sometime. It's back up to 100+ percent, a level it hasn't been at since World War II.
Secondly. US Fiscal budgets run from October-October, so O's budget went into effect October 2010. Stimulus spending early on controlled the great recession. We were losing 780k jobs/month, early spending stabilized the economy by most analyses. It was a necessary evil. The national debt in absolute dollars is less meaningful than Debt/GDP. The US can carry more debt when it makes more money. The huge spike in the national debt is due to the Republican's lack of fiscal conservatism and responsibility. They drove up the debt, reduced revenues, and increased spending. Those things fail the math test. When Obama came in office, we were in a great recession and had our backs to the wall. The debt was high, but borrowing bridged the gap and stabilize the economy. I believe the Republicans borrowed for political expedience and Obama borrowed to stop the recession. That makes a big difference to a fiscal conservative, like me. I absolutely agree that we should use the Debt/GDP ratio at the end of WW2 as guidance. We should revisit the policies and role of government that reduced the debt AND grew the US into an economic superpower between WW2 and 1982. Historical perspective and context are very important.
There were multiple recessions in 70-80. The 81-82 Recession is considered to be caused by the Fed's severe monetary policy to squeeze out the 12+% inflation rate. Inflation-adjusted, the entire 70s was a recession. I certainly agree that in the last 20+ years, Congress (all parties) has been fiscally irresponsible. Lastly, the US, coming out of WWII, had the only viable economy in the World!!! Over the next 20 years, if it was made in the world, we made it. We paid off our debts because we had no competition. We were able to payoff our debts and expand our lifestyles because we were rolling in money. In the 60s, we lost the monopoly in Steel. In the 70s, we lost the monopoly in Autos. And so on So, I'm afraid that the policies that allowed us to pay off our debt then, probably won't be successful now. Its already evident that the solution will include a significant reduction in government services and lifestyle. Yep, 1945-1970 was the good old days. I wish everybody had been around to enjoy it.
Lastly, there are many people on the "right" who call social security an "entitlement" with a derogatory tone. SS has been a promise by us (the people/the gov't) that if you work and contribute, that the people/the gov't will provide a return in the future. It's an annuity, a promise. Many on the "right" want to break that promise. Join me in rejecting those that think of SS as welfare, those that want to break that promise.
The system was originally set up as a "pay as you go" system whereby the initial beneficiaries paid virtually zero into the system yet received benefits for decade(s). In the beginning there were 150 workers for each beneficiary and thus little was needed from each worker. Over time, that ratio has decreased to 3 to 1. The idea behind SS remains noble. It recognizes that if you worked and contributed to society that you shouldn't starve or be homeless in retirement. The issue isn't that SS is bad. The issue is how to fund SS. The funding method is broken. Easy solutions include: 1. Increasing the tax rate 2. Increasing the compensation subject to SS/Medi 3. Combination of 1 and 2 4. Decreasing the rate and subjecting all income (at least more income) to SS/Medi 5. Applying a "means" test (i.e. wealthy need not apply) 6. Breaking the promise by cutting benefits and/or eliminating the programs. My opinion...1 through 5 above. Problem solved.
Those of you who think that SS should be optional and not mandatory fail to realize one key fact...The fact that if people decide to opt out and not pay into the system, there isn't money there to pay the promised made to the existing beneficiaries. The system would run out of money very quickly and then a decision would have to be made: 1. Kill the program for all existing beneficiaries (i.e. promise broken), or 2. Roll the program into the general budget and implement general tax increases to raise revenue to fund existing beneficiaries, or 3. Simply borrow money and increase the debt to cover the costs of current beneficiaries. Under #1 above, we break our promise to the elderly and many won't be able to care for themselves or have to re-enter the workforce if they're able. Under #2 above, we remove a vital social safety net and continue to fund SS via general taxation. Under #3 above, we do exactly the opposite of what "right" is currently proposing -- we deficit spend, borrow money and increase the debt. Options 1-5 remain the best solution!
Second, "Social Security" contains a number of different things. Only one of which is the Old Age, Survivors and Disability Fund which seems to be under discussion here. It is fairly solvent and works well. The other segments...not so much. So when we discuss these matters, its important to be specific. I find Wikipedia and even the Social Security Website to be very explicit and specific. Now, Pay-As-You-Go is not what is inferred. PAYGO mean that this years liabilities will be paid out of this years inflow. But, the excess, and there is tremendous excess and has been since its inception, is invested in US Bonds which have always earned more than inflation. Politicians love to flail each other and incite the Public with Urban Myths regarding this system. They too often have effect because "We the People" don't take the 15-30 minutes to discover the facts.
Since the '60's, surpluses have been transferred to the general fund and an IOU placed in the 'trust fund' along with an IOU for the interest at treasury bond rates...as you previously noted, the interest rate peaked at 12% (very briefly) in the late '70's (when all the other interest rates peaked) but historically it is aound 6%... When SS began, there were about 16 workers per retiree...as of this year that ratio has declined to about 2.5 workers per retiree. As boomers retire in greater numbers, and live longer than previous generations, that ratio will continue to drop. Eventually, the number of retirees will outnumber the workers, and the treasury will have to start making good on those IOUs. Last I heard, that day will come in the next 20 yrs. According to Social Security, in 2012 that unfunded liability is currently about $8.6 Trillion... The only solution I can see is a phased withdrawal of the program...Anybody over 55 gets the full ride they were promised. 55 and younger get percentages less until you get to maybe 35 yrs. Those folks have enough working life in front of them to make up the difference. And yes, I fall into that age category.
The "IOUs from the Treasury" are called US Government Bonds. They are backed the same as US Dollars bills. If those bonds fail, the Dollar fails. If that happens, we're down to canned goods - really. For perspective, the National Debt is over $16 trillion (all in US Bonds). The Social Security Trust Fund is a small $2.2 trillion portion of this debt. If the US defaults on these, China and all of the other countries of the world will come to collect. So, you better gets some ammunition to go with those canned goods. The FICA deduction is a math calculation of how much money must be invested to provide an expected yield. Its a Simple Annuity. Money is paid in, its grows and subsequently is paid out. If the payout is low enough, they can continue forever. It has never been determined as a ratio of workers to payees. Finally, excess contributions have been invested in US Bonds since, day one, 1937. Its in the original law.
Trust Fund Data: http://www.socialsecurity.gov/OACT/STATS/table4a1.html Investment........: http://www.socialsecurity.gov/cgi-bin/transactions.cgi These and many more facts are available right on the website.
The above SSA page shows that the non-money earning spouse can get up to 50% of the money-earning spouses benefit upon that spouses retirement, disability or death. And, children age 18 or less get benefits. However, the most that a family (husband, wife, children) can get, in total, is 150% (may go up to 180% with disabled children). And, the children fall off at ~18. I, personally, don't have a problem with that. Except, that spreading 100% of the workers benefit (instead of 150%), in principle, makes more sense. But, did you know that every spouse (10 years of marriage of more) of that wage earner is entitled to half the wage-earners benefit amount starting when the wage-earner can/does retire. So, someone gets married/divorced every 10 years and each of those spouses can get 50%. These are some of the real issues that nibble away at SS. Good point.
It's obvious that many of us color commentators have put 100X more thought into this topic than the original cut-n-paste blogger. It's too bad we honor his shoddy blog with 140+ comments. I went digging into most of your comments. I can't find the Rosty video you speak of, and I mostly came across Rosty calling on debt/deficit reduction. I don't think you're lying, and I don't think the Democrats were in a conspiracy. So, what's the truth? Each side is good at spin and marketing. The origins of trickle down, the "win-win" of tax cuts, and "starve the beast" make me think these runaway deficits were acceptable damage on the part of the last 3 Repubs in exchange for the tax cut "win". It's possible that "starve the beast" was a short-term tactic where cutting taxes first forces spending cuts to control debt rather than a sinister long-term strategy that landed us in debt trouble. Regardless, it is clear that cutting taxes first will not force spending cuts no matter who is in Congress. Perhaps if Romney reversed the order of his approach, he would be more believable. For now, I see the same old, same old coming down the pipe. My point about WW2 was that there was a lot of government involvement and taxes which makes me think that the tax rhetoric today greatly overstates the negative effects. The tech monopolies don't convince me that government doesn't have a very useful role to play because we've replaced steel with IT, high-tech, and finance, to name a few.
First, this is not a blog. This all started with a simple, limited article by Mike Lowry. We've turned it into a blog. I'm really surprised that its not been closed-for-comment. Thanks Patch. I could not find the Rostenkowski video either. I will continue to look. I should have left it out without the hard link. But, that was not specifically my point; which was, Congress makes all laws and allocates all money - not the President. The most effective mechanism for controlling Government Finances is VOTING. As the Republican and Democratic Parties failed to produce any fiscally-responsible candidates, the "Tea Party" rose and worked to elect a number of hopefully fiscally-responsible congressman. And I hope that they are effective. (No I'm not a Tea Partier). And I agree, Governments are needed. Why else would "We the People" create them or allow them to survive. But, "We the People" need to keep watch on them so they don't get off-task.
http://www.ssa.gov/history/pdf/crs9436.pdf When you're done with that, you can go learn what the term "unfunded liability" means. While your 'trust fund' contains $2.7 Trillion in IOUs, it also has hanging over its head nearly $9 Trillion in UNFUNDED liabilities. http://www.ssa.gov/oact/TR/2012/tr2012.pdf see page 14+ for details... To save time, lets just say that 'unfunded' means THERE IS NO MONEY THERE. (Caps for emphasis, I'm not shouting at you). That means there is no vault in the basement of the SS building that is stuffed full of government bonds that can be redeemed as needed, regardless of your interpretation of the original 1937 law. There is nothing there except an IOU from the Treasury, and currently you and your family owe that trust fund some $73,000... If you want further confirmation, you can read what the US Chamber of Commerce says about it : http://www.uschamber.com/issues/retirementpension/socialsecurity/trust-fund-myth
See the section titled 'History'...
As to surviving children, the same general principle applies. The parent paid into the system and the system will help support the surviving child until age 18. This benefit was added well after the creation of SS.
For example, in a separate sub-thread, Janet noted that divorced wage-earners get 100% SS benefits and their divorced spouses get another 50%. Its even more messed up. If the wage-earner had multiple spouses (10+ year marriage) then each can receive an additional 50% of that benefit when the wage-earner retires or dies. One wage-earner could result in a 300% liability. Now, that's something specific that we can fix. And as you've learned from your reading, nothing like that was in the original law and, when it was changed, no effective adjustment in contribution or distribution - hence one of the many Unfunded Liabilities. As you read, there is page after page of this. It is not hidden. it is not obscured. It is right there in black and white. Each one needs to be reviewed and satisfactory adjustment made else that "Projected Unfunded Liability" will become "Unfunded Social Security Retirement Check". It wasn't correctly done to begin with; the time to fix it is now. So, pick something specific and tell me how you think we ought to fix it.
"The Social Security system is primarily a pay-as-you-go system, meaning that payments to current retirees come from current payments into the system." In the paragraph immediately above, it says: "The trust funds run surpluses in that the amount paid in by current workers is more than the amount paid out to current beneficiaries. These surpluses are given to the U.S. Treasury (...) in exchange for special U.S. government securities, which are deposited into the trust funds." Further, "Pay-as-you-go" is a hot link to Wikipedia's page on PAYGO which says "PAYGO is the practice in the United States of financing expenditures with funds that are currently available rather than borrowed." From SSA's page titled "Ponzi Schemes vs. Social Security" at http://www.ssa.gov/history/ponzi.htm, look down the page to Pay-As-You-Go for their explanation. Specifically, in 2011, SSA received $698+ billion. Of that, they paid $603+ billion in benefits. The difference of $95+ billion was put into the Social Security Trust Fund which then contained $2,524+ billion (ie $2.524 triilion). Almost all of which is invested in US Bonds which you call "IOUs". And they are IOUs. That's what a mortgage or a car loan is. With a country though, if they default on their bonds, their currency is destroyed also - e.g. Greece now, Germany 1920s. Lets not let it get there!
Jimmy found a history of SS at http://www.ssa.gov/history/pdf/crs9436.pdf that details its changes through time. You can search out changes for spouses, etc. that are specific to the questions at hand. And then, you can determine exactly how you would have it if you ruled the world. BTW, the 10+year requirement for a Divorced spouse is still in effect so says http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/299/~/qualifying-for-divorced-spouse-benefits. Also, prior to 1977, it was 20 years.
I think I mentioned my idea for fixing it...start pro-rating benefits according to age, eventually weaning everybody off the system. The federal government has no business in the retirement business.
1 Pay-As-You-Earn System - must be. Almost all people don't have the discipline to save first. The amount and how/who might hold/invest the funds are separate questions. 2. Old Age, Death or Disability - only available then. Its focused on this (as it is now). Funds to do other things can be established separately So far, these ideas are no different than Social Security then or now. So, help me out. What would you (anybody) add to the above list or change in the current Social Security. Here's something suggested by Janet. 3. One Account/One Amount. The value of the account is fixed by the Wage-Earner and all claimants must divide this among themselves. None of this "you get 100% of the whole, they get 50% and so do some others". If this subsequently creates hardships, then "they" need to apply to the hardship programs. Wha'cha think?