I think that the biggest problem in resolving the future of Social Security is to first determine the philosophical underpinnings of the program. IMHO, there are basically two different philosophies. (1) Welfare Program for the Elderly Poor This means that SS is viewed as exactly that, a welfare program or safety net to prevent elderly, retired people who can no longer work for a living to be able to subsist and not have to be living on the street in adject poverty. (2) Pension Plan This means that SS is meant to be a pension plan that provides income upon retirement. Note that (1) and (2) are NOT exactly the same thing. It is my understanding that SS was originally envisioned to be type (1) not type (2). Now the Bush regime is trying to change SS to be type (2), especially with the idea of essentially converting part of SS into an IRA-type plan with private accounts. The idea seems to be to move in a direction where everyone is eventually supposed to just save-up and plan one's own retirement. But is this a good thing or a bad thing? If everyone is eventually supposed to just save up for retirement, then what happens if you are poor or just had bad luck or things happened beyond your control that wiped out your retirement plans. What if you have a family and would otherwise have difficulty amassing any kind of savings to adequately live off of upon retirement? The thing is that before SS reform can be implemented, we must first decide what SS is supposed to be. Is it a type (1) social welfare program or type (2) govt pension plan. Most people erroneous believe it is type (2) and was type (2) all along. This is not so and figuring this out is the key to making any progress on this issue.
I don't think you can pin changing SS's scope on Bush. It's been changing (evolving as some would say) for years. For example, if your disabled you get SS, if your wealthy and have plenty of savings you get SS, if your parents die you get SS so it's not been a "Welfare program for the elderly poor" in a long time. As a matter of fact, there are many who would cringe at calling SS a "welfare program" even if that's in fact what it is. So, what you have today is the result of politicians over the years who have modifed SS from it's original purpose (providing income for retired folks) to providing money to all sorts of people for all sorts of things (probably one of the reasons SS is in trouble). Why did the program change? Because some politicians 1) wanted to help more people and 2) because some politicians wanted to buy votes from certain classes of society. Actually for most politicians it was probably a mixture of both. Actually, I think SS was more envisioned to be your No. 2 more than No. 1. It was NEVER envisioned to be welfare.
This is a huge misconception that we should clear up right now. People are infact entitled to receive SS. It is, by definition, an entitlement program. If you pay in, you are entitled to receive benefits back out. If you DON'T pay in, you don't receive benefits. Welfare is NOT an entitlement program. You must apply for it and be approved based upon certain requirements. If you don't meet the requirements, you will not receive the benefits. Too many conservatives are running around equating SS to welfare. That is a huge mistake. SS recipients contribute money. Welfare recipients do not...at least not directly.
Which supports my point that krosfyah's Point #2 is the more accurate portrayal of SS than is Point #1 (which he believes was its original intent). However, you could argue that SS is welfare in that you don't choose whether to participate (i.e. SS is a tax you pay regardless) and you get money out regardless of what you paid in(sort of like welfare). So, it is not "welfare" per se but if it walks like a duck and talks like a duck....
You DO have a choice. Don't get a job that requires a W2. SS doesn't "walk like a duck" because you ARE entitled to the money you paid into SS. SS doesn't "talk like a duck" either. SS was created to help ALL Americans. Welfare was created to help only poor Americans. ...that is unless W circumvents the system.
Social security is a ponzi scheme officially run by the federal government. Nothing more, nothing less.
Yea, just like ponzi... Except SS is not trying to turn a profit...as Ponzi did. Oh, and SS has worked flawlessly for 6 decades and poised to continue to work for another 4-5 decades. Minor adjustments to the system would likely get get us over the baby-boomer hump and it would continue to be a good system thereafter. So other than that, it is just like a Ponzi scheme. (Ponzi's scheme worked for 6 months and put a man in jail.)
Like a ponzi scheme, those who were first in line for social security received more than they'd put in, based on the contributions of people buying into the system at a later date. At some point, when social security ends, or benefits are reduced, there will be alot of people who've paid into the system for years who won't see their money again.
What kind of job can you get where you don't (legally) have to pay into the system? I have worked for an employer where they paid part of my SS and I've worked for myself (contract labor) where I had to pay my own SS (self-employment tax) but I don't know of any jobs where you don't have to pay SS. There are probably jobs where you can get away with not paying into SS when you are supposed to (i.e. don't report your income or whatever) but I don't know of any jobs that you can escape it completely. People call it welfare because you pay into whether you want to or not (it's not elective) - if you earn money you pay into SS and what you get out of it is not proportional to what you put into it. You might get more money per month if you pay more over your lifetime but you are not entitled get back out of it what you put into it. So it may be envisioned as an entitlement but it's really welfare.
This is what I mean when I say that it was meant to be and still is largely a welfare program rather than a pension plan. There are no individual pension accounts just the promise of retirement welfare payments for those who paid SS taxes in the past. True these "welfare" payments are made whether you are Bill Gates or John Doe as long as you contributed to SS but the program was envisioned to help all the John Does who were destitute, homeless and starving because of lack of displicine, means and factors beyond their control to have adequate retirement income. It was to prevent that IOW. Like other welfare programs, current benefits are funded by current taxes, your SS tax is NOT set aside for you like money put into a 401k, IRA, etc. If the SS tax were simply folded into regular income tax, it would be much more clear that SS is a welfare program whose current benefits are paid for by current taxes. So Bush is trying to shift SS from its original welfare vision and evolving SS to become an IRA type system.
SS will continue on ad infinitum. The only effect that we will see in 15 years or so is that instead of borrowing from the SS trust fund for other expeditures we will be borrowing from the general revenues to pay for SS expeditures.
I agree that it isn't a pension plan. It is social security. However, W's personal retirement accounts are even worse. Did you know you can only earn 3% on your investments? Anything earned above that goes back to the government? Also did you know once you retire, all the money in the account immediately goes back into SS where you'll be taxed on it. You'll then receive payments just like you would in SS. So you won't be better off than you are now but a bunch of fund managers will become extremely rich. If we just raise the SS cap from those who earn greater than $90k/year, that would be enough to carry us over the baby boom. Problem solved...next question. BTW, this whole SS conversation is going on in the "State of the Union" thread.
So your solution is raise the cap of SS, for those people contributing the max SS (i.e. 90K and above) they already won't get all the money they put in SS when they retire. Now you want to take more money from them? How is this different then a new tax? As long as SS funds are earning its pathetic 1% return, you are going to need to raise more money to keep up with the cost of living and more retired population. Oh yeah, if a fund manager is well paid, usually means he/she is doing a good job and giving investors a nice return on the capital. If only part of the SS is invested in the market, imagine the amount of capital investment this creates, and that helps create jobs, increases liquidity, in general positively effect our economy.
If people were <b>required</b> to participate in Ponzi schemes they would not peter out and no one would be in jail...
Question:"Is it possible that the privatization tax could entirely eliminate the value of one's privatized account?" Answer: A Privatized Account that Earns the CBO-Projected Rate of Return Would Have its Entire Value Eliminated By the Privatization Tax. According to the Congressional Budget Office, the privatized accounts are, in fact, expected to produce a risk-adjusted rate of return of 3% above the inflation rate. Therefore, the automatic reduction of Social Security benefits would equal the entire value of the privatized accounts. In effect, the automatic benefit reduction would constitute a 100 percent tax on the retirement savings in those accounts. ------------------ From the Center on Budget and Policy Priorities HOW THE INDIVIDUAL ACCOUNTS IN THE PRESIDENT’S NEW PLAN WOULD WORK Plan Would Allow Individuals to Mortgage Half of Their Social Security Benefit http://www.cbpp.org/2-3-05socsec2.htm
Social security was always intended as a supplement to one's own retirement plan. Not intended to be the "only" retirement plan. I think I'd rather have my social security benefits, my state and federal retirement benefits, and an IRA. Hmmm...an IRA?
