Putting the Secure back into Social Security.

[Mr Skeptic]

So, our Social Security program seems to be heading full speed toward disaster. From what I hear, actually fixing that is necessarily going to piss a bunch of people off, so that no politician will dare try. As a young person, I am concerned that I will never get back what I am forced to pay into that system.

 

Is there any way that we could fix Social Security? I mean, some way that has a possibility of actually happening?

 

My idea: pass a law requiring that the financial security of Social Security be ensured, within a certain timeframe. This should be popular, as everyone wants S.S. to be secure. A possible way to put teeth into this would be that if they can't fix S.S. then they would have to abandon it, which would really encourage politicians to fix the problem, albeit that would make it harder to pass. Toward the end of the timeframe, the politicians can then pass whatever laws need be passed, and can blame the previous politicians for having made them do it.

[jackson33]

Skeptic; You should be concerned, even mad, you and another two people, are paying me 1200.00 per month for doing nothing and I have long ago received everything I put in, including interest. Think by 2020 or so you'll be paying all of my entire cost (if still living).

 

The problem you and those your age have, it could all be in vain, as the system fails long before you retire, while paying as one tax or another for those already obligated to.

As for securing the funds, keep in mind between your payroll taxes, it's all gone to those obligation the day they receive payment. What you might be thinking are personal accounts, which many think SS and Medical Care should be based on, that is what you send in not used belongs to you, but so long as their is an annual deficit or in fact an a cumulative National deficit, your money is in that. You really don't think all 12.4T$ borrowed as come from volunteer lenders, do you?

[bascule]

I have a 401k. It's my retirement plan. Not Social Security. Social Security was a bad idea. I say this as a bleeding heart liberal.

[iNow]

What happens when decisions made by those in power cause the market to collapse... such as when your government fails to properly regulate banks and mortgages, or when investment funds are over leveraged and risk remains systemic... and your 401K goes away on the same day you need to pay your electric bill, buy prescriptions, and buy food to survive? I ask this as a fellow moonbat.

Edited February 9, 2010 by iNow

[bascule]

What happens when decisions made by those in power cause the market to collapse... such as when your government fails to properly regulate banks and mortgages, or when investment funds are over leveraged and risk remains systemic... and your 401K goes away on the same day you need to pay your electric bill, buy prescriptions, and buy food to survive? I ask this as a fellow moonbat.

 

When my retirement (at the time a roth IRA invested at Wachovia) went away I went damn, and learned why "roth" is a terrible idea (did you know they offer roth 401ks now? WTF???). I paid taxes on an investment that went into money markets ("money markets never go down, no really!") via Wachovia (now Wells Fargo, hello new Wells Fargo customer!) and is now worth far less than it used to be.

 

However, I still have a savings account, full of cash! Actually, I have it back in a money market savings account now (although one that's theoretically "safe"). But anyway, I had cash on hand for those sorts of problems.

 

Cash on hand is a great thing.

[ecoli]

re: the OP. allowing SS to keep surplus money would be a start (current laws force the SSA to buy gov't bonds (treasury I think) when they have extra cash). This is partly why the SS went backrupt after the dot-com bust.

 

Even with this, it's still just a ponzi scheme waiting to collapse. If the younger population stops growing we're especially screwed.

[The Bear's Key]

Social Security was a bad idea.

Let's be real a moment. The actual bad idea was not having kept it safeguarded with iron-clad protection against looting.

 

I say this as a bleeding heart liberal

Far as I can see, what's really bleeding is a system harmed (deliberately?) by politicians who likely also desired it gone. i.e. cripple the system....then declare it failed.

 

 

The Looting of Social Security

By early 2007, the amount of money looted from the Social Security trust fund by the Bush administration had surpassed the $1 trillion mark, and Bush continued to loot, and spend, Social Security money at the rate of $500 million per day.

........

The funds were not invested in any existing marketable securities. Instead, the government treated the revenue from the tax increase as if it were new spending authority. The government used every dollar to fund other spending programs and tax cuts, and not a dollar was paid down on the public debt.

 

 

Social Security funds needed to balance books (August 29, 2001)

This year's federal budget surplus has plunged to $153 billion because of the nation's economic doldrums and the Bush administration's tax cut, meaning the federal government will have to cover $9 billion of spending by dipping into Social Security, the nonpartisan Congressional Budget Office projected Tuesday.

 

 

Looting Social Security

....roll back twenty-five years, to the time the game of bait and switch began, under Ronald Reagan. The Gipper's great legislative victory in 1981--enacting massive tax cuts for corporations and upper-income ranks--launched the era of swollen federal budget deficits. But their economic impact was offset by the huge tax increase that Congress imposed on working people in 1983: the payroll tax rate supporting Social Security--the weekly FICA deduction--was raised substantially, supposedly to create a nest egg for when the baby boom generation reached retirement age.

.....

Ever since, working Americans have paid higher taxes on their labor wages--12.4 percent, split between employees and employers. As a result, the Social Security system has accumulated a vast surplus--now around $2.5 trillion and growing. This is the money pot the establishment wants to grab, claiming the government can no longer afford to keep the promise it made to workers twenty-five years ago.

 

Actually, the government has already spent their money. Every year the Treasury has borrowed the surplus revenue collected by Social Security and spent the money on other purposes--whatever presidents and Congress decide, including more tax cuts for monied interests. The Social Security surplus thus makes the federal deficits seem smaller than they are--around $200 billion a year smaller.

........

Federal budget analysts try to

brush aside these facts by claiming the government is merely "borrowing from itself" when it dips into Social Security. But that is a substantive falsehood. Government doesn't own

this money. It essentially acts as the fiduciary, holding this wealth in trust for the "beneficial owners," the people who paid the taxes.

[ecoli]

@Bear Key - so do you think without looting SS would be a flawless system?

 

Obviously, it has drained it of funds faster, but I think even without looting, the system is doomed to failure because it's required the population to keep growing.

[Mr Skeptic]

If it was doomed to failure, the looting might actually be a good thing, as it makes it fail earlier while it is smaller, or at least makes it abundantly clear that bad things are going to happen and someone needs to do something about it.

 

Even with people taking more out than they put in, this can be sustainable given a growth of population, wealth, or both. Borrowing against the future in a sense. Dangerous and morally questionable, sure, but not necessarily unsustainable.

[D H]

I have a 401k. It's my retirement plan. Not Social Security. Social Security was a bad idea. I say this as a bleeding heart liberal.

My nominal retirement date is less than a decade away. My real retirement date, thanks to my 401k 301k plan is a lot further off. This is helping turn my 301k turn back into the 201k plan that I had a year ago:

 

 

==================================================================

 

Back to the original topic:

 

Social Security has been a fraud from day one. When it was originally proposed, most people died by age 65. There was no lockbox then, and there is no lockbox now. If there were, what would it mean?

 

In the long run, 401k plans and their kin have helped people retire because the stock market has done amazingly well. That option is not available to Social Security. Putting the money in a lockbox at zero percent interest would be incredibly stupid. The only option available to the government is to loan the money to the government itself -- and that is essentially what has been done. The problem is not that a lockbox doesn't exist. The problem is lack of proper accounting. Social Security has been collecting more than it pays out, and this surplus artificially makes the national debt appear smaller than it is.

[jackson33]

I have a 401k. It's my retirement plan. Not Social Security. Social Security was a bad idea. I say this as a bleeding heart liberal. [/Quote]

 

bascule; I'm not aware of which form 401k, your participating in, but if an employer is involved, your may still be ahead of the game. At any rate, one plan floated by the current administration was to take part to all 401's, replacing with Government Bonds. I haven't heard much on this lately, but don't kid yourself, short of keeping you wealth, in cash, gold or silver, stuffed in some mattress, a socialist Government has instant access to it. I do NOT believe it will come to this....

 

 

What happens when decisions made by those in power cause the market to collapse... such as when your government fails to properly regulate banks and mortgages, or when investment funds are over leveraged and risk remains systemic... [/Quote]

 

iNow; One form of Tax Increase', proposed in some bill, was to tax stock transfers values (value of the stock), forget the figure, but would be devastating to the markets. You might want to rethink regulating banks, since it MAY be those regulations, that jump started the current problem (mortgage regulation, qualification LIMITATION)

 

re: the OP. allowing SS to keep surplus money would be a start (current laws force the SSA to buy gov't bonds (treasury I think) when they have extra cash). This is partly why the SS went backrupt after the dot-com bust.[/Quote]

 

ecoli; As mentioned before, there is no surplus money today and the SSA has no control over the Congress. However configured, all receipts from payroll taxes go straight into the general fund. To even purchase bonds (otherwise known as paying off debt) they would have to borrow money, making no sense.

 

SS, is a Federal Obligation, part of Government and as of today is not bankrupt, Government is indeed deep in debt.

 

 

DH; I'm a little curious, what the Euro has to do with your 401k? If you live in Texas, that should be a good thing or your dollar worth more. In any case, the recent decline in the Euro, will be short lived as the biggest comparable strong currency is the US$, which is having it's own problems. The Euro, which was on a terror up to Dec. 09, will likely be back there with in the next year, probably 1.60/$.

 

Houston, as I understand it is doing pretty good, economically speaking, but when it becomes time to retire, there will still be places you could move to, maintaining the same life style, for a lot less money, some not that far from Houston.

 

Far as I can see, what's really bleeding is a system harmed (deliberately?) by politicians who likely also desired it gone. i.e. cripple the system....then declare it failed. [/Quote]

 

The Bear's; I don't think so (no one wants or wanted to declare SS a failure), but your correct in that Congress, over the past 45 years, has done much to bring about the current problem and trying to place the problems on Republicans, much a stretch. This site gives you all the revisions, additions, since the first year of the program....

 

Medicare was added in 1965 by the Social Security Act of 1965, part of President Lyndon B. Johnson's "Great Society" program. Social Security was changed to withdraw funds from the independent "Trust Fund" and put it into the General Fund for additional congressional revenue.[/Quote]

 

http://en.wikipedia.org/wiki/Social_Security_(United_States)

[D H]

At any rate, one plan floated by the current administration was to take part to all 401's, replacing with Government Bonds. I haven't heard much on this lately, but don't kid yourself, short of keeping you wealth, in cash, gold or silver, stuffed in some mattress, a socialist Government has instant access to it. I do NOT believe it will come to this....

That is Teresa Ghilarducci you are talking about, not the Obama administration. While she did testify in front of Congress at the invite of some dumber-than-cows democratic congresscritters, her ultra-radical ideas are going nowhere (yet). While congresscritters of all ilk are in general dumber than cows, the Obama administration is not that dumb (yet).

 

 

DH; I'm a little curious, what the Euro has to do with your 401k? If you live in Texas, that should be a good thing or your dollar worth more.

THe DJIA recently fell to under 10,000 in part due to worries about the collapse of the Euro. At the moment of my writing this post, the DJIA has once again risen above 10,000, partly due to reassurances from the European Union that they will not let Greece, Spain, Italy, and Ireland go bankrupt.

 

Look at it this way: Even though the funk-o-nomics that precipitated the 2008 economic collapse were largely a US phenomenon, the collapse spread world-wide. What happened in the US in 2008 was not restricted to the US. Similarly, if the European Union collapses, the ramifications will be world-wide.

[jackson33]

Although unknown to most Americans, Teresa Ghilarducci is the intellectual godmother for the Democrats' plans to radically change how Americans save for retirement. Ms. Ghilarducci, an economist at The New School for Social Research, called for the abolition of the tax breaks given to employers for 401k plans and instead proposed the mandatory enrollment of American employees in Government Retirement Accounts (GRA's) that are funded by a 5% mandatory payroll deduction in her book, When I'm 64: The Plot Against Pensions and the Plan to Save Them, published last year. [/Quote]

 

http://kingfish1935.blogspot.com/2008/10/who-is-teresa-ghilarducci.html

 

 

DH; I really didn't pay much attention to the idea, at the time but do believe the Administration would favor the idea. I'll take your word for it, Congress is not...

 

On the Euro; I know, have been following this closely. American products in Europe do better with a higher Euro or the reverse. As for the chain reaction theory, I also agree and am concerned to just what's going in China, we all need that 10% increased GDP, they estimated, now in question. We could argue 2008, but will leave this for another day.

[The Bear's Key]

@Bear Key - so do you think without looting SS would be a flawless system?

 

Obviously, it has drained it of funds faster, but I think even without looting, the system is doomed to failure because it's required the population to keep growing.

There is one investing rule that my agent continually drills into people, regardless the market scenario: create a diverse portfolio, resist the temptation to withdraw profits, just let the funds sit and mature -- even during bad times.

 

Can it apply in the situation of government funds? I'm not entirely sure, but definitely there's always a smart way to do things, and a (very) dumb way. And/or corrupt.

 

The process needs to be wide open, especially that much $$ involved and being "safeguarded".