Social Security and the federal debt

[Kyle]

And I get super worn out with people all like, "Oh, that little bit of money our overlords launder and piss away wouldn't make a difference." I'd love to see your family budget because in FACT this bit plus that bit plus some more bits add up to a great deal of money.

 

[Tilted]

The only distinction with Medicare and SS tax receipts is accounting. It all goes in a pile, gets spent and a record is kept of what is owed for SS and Medicare. As the Republicans say, an "IOU" - which the Democrats dismiss. Because it's neither officially, but it IS, essentially, because we manage to PAY them every year while running a deficit overall.

It's kind of like having your paycheck direct deposited into savings and checking - with overdrafts automatically drawn from savings. Every month you pay the bills, but it's always more than the amount in checking, so the overdrafts kick in. You tell yourself you're not taking from savings, because you don't move the money, but it happens anyway.

What the Republicans have observed for DECADES is - see, FICA works like this - 7.65% of your income is taken out - and your employer ALSO pays 7.65% - for a total of 15.3%. TRY and imagine HOW MUCH retirement savings you would have, if SS worked like you THOUGHT it worked - if that 15.3% didn't go into a big slush pile but into an investment plan FOR YOU.

I'll tell you what would happen - you'd be freaking rich by retirement. Uncle Sam takes essentially 15.3% of your income, spends most of it, and promises to give you a fraction of it 50 years later. And NOTHING if you die first. Sucks, doesn't it? If it was YOUR money, you could at least leave it to your children.

What the GOP has proposed - is to gradually or partially invest those dollars. The Dems have pointed to the worst collapses in the market is an indicator that the market is not a safe place. Well neither is Uncle Sam. At least the market, over long periods of time, makes money. Actually, the stock market has been the most profitable place for your money over any 30 year stretch in history. It loses big some years, gains others, but ALWAYS outstrips the government in payment.

Yes, the OASI Trust Fund is just a big IOU in the sense that an IOU is what money is. It's what savings are. If you have saved money, you have an IOU (or IOUs). Currency itself is a generic IOU from society at large. (Of course, stored as currency would - in this context - be a completely impractical way for the savings to be held.) And the other ways of holding money are just as IOUs from particular entities. If you put money in a bank account or CD, you've loaned it to someone else. To the extent you have savings, you have IOUs. The same is true for the Social Security program. The question is, who or what is the money going to be loaned to. For a number of reasons, the most practical answer is the federal government.

Money can also be invested, of course, instead of saved. But that's impractical in this context for a number of reasons - not least of which, in my opinion, is that I don't want the government owning private entities and effectively playing an even greater role in picking private winners and losers. I don't want more communism, I want less.

The problem with the Social Security program (aside from it existing to begin with) not having enough savings to carry it far into the future doesn't stem from it having mismanaged the money it saved. The problem stems from it not having saved much money to begin with. For the most part that hasn't been what it was meant to do or what it did. For the most part what it did, and meant to do, was spend the money it brought in as it brought it in. It took money from certain people and gave it to others. To the extent it did save a little money (i.e. collect a little more than it needed), it has actually done fairly well when it comes to return on that money. The great majority of the money currently in the Trust Fund comes from interest rather than operational savings.

Yes, people could (or should be able to) do quite well if they put aside 15% of their income every year to invest and/or save. They should be able to, fairly easily, build a nice nest egg over time. But that scenario isn't comparable to what happens with Social Security - to the point of Social Security. For it to be, they'd have to be taking 15% of their income every year and giving most of it to others who, ostensibly, need it more at the time. Then they could invest or save the 1% that's left. They wouldn't be able to build as much of a nest egg in that scenario.

The major problem with Social Security is the program itself - what it tries to do is the problem. The reality that whatever (relatively) little bit of excess operational funds it's had have been put into treasury securities isn't the real problem. And there's just no good way of transitioning out of this boondoggle, into a private system for the masses to provide for their own retirement, without a lot of pain to a lot of people who vote. Ergo, politically, it's going to be very difficult. What do we do with the older people - approaching retirement or just recently retired - who thought they were going to largely be taken care of through Social Security and haven't already provided for their own retirement security? Who is going to provide the funds needed for them? Again, Social Security is and always was a present day wealth redistribution system. It was never a retirement savings program. You aren't getting your own money, which the government put aside for you, back.

For my own part, I'd be okay with blowing the whole thing up starting today. But I'm lucky, there's a whole lot of people for whom that would be quite problematic.

 

[Tilted]

I have always assumed that there will be no SS for me when I "retire". It's a pyramid scheme that was always unsustainable and destined to collapse. It's always pissed me off to see how much money the government confiscates while lying to me and saying I'll get it back in my old age.

And I get super worn out with people all like, "Oh, that little bit of money our overlords launder and piss away wouldn't make a difference." I'd love to see your family budget because in FACT this bit plus that bit plus some more bits add up to a great deal of money.

Part of the reason half of FICA taxes are paid by employers is to hide how much is being taken from people. If their nominal wage is $20 an hour, I suspect most people - to the extent they think about it - see it as $1.50 an hour being taken for Social Security and (Part A of) Medicare. Speaking practically though, they're being paid $21.50 an hour with $3.00 an hour being taken. And if we consider required workman's comp insurance, they're being paid even more with even more being taken. And then, of course, there's federal, state, and local income, sales, and property taxes. It's obscene.

So much of the financial aspect of our lives is collective rather than individual. Financially we're more Borg than human.

 

[Tilted]

Are you talking about Medicare or Medicaid?

Medicaid is a joint Fed-State program that isn't funded by FICA, the Fed picks up about 2/3 total cost.

Medicare funding comes from FICA employee contributions, employer contributions and participant premiums and co-payments.

What gets me is the Medicare Advantage where the Fed contracts out the coverage to private insurance companies (that in lots of cases give better coverage and a reduction (or elimination) participant premium and co-pays). And apparently they are making money off of it or they wouldn't be doing it.

Medicare Part A is funded from FICA. Medicare Parts B and D, to the extent they aren't user-funded, are funded from the general fund just as most federal welfare programs are.

 

[SamSpade]

Something like 40% of Americans depend on SS as their ONLY retirement. Another portion it is a huge piece of it. So on the surface - that IS what it is. For them, that’s reality. Doesn’t matter how the money is handled.

Every working man, woman and - well - they ALREADY have 15% of their income taken. Sort of. Everyone is ALREADY paying into that plan. Call it SS. Call it another tax. Call it silly accounting legerdemain. It functions as a retirement plan. And it WORKED as long as there were a LOT MORE paying in than being paid.

But NOW - it isn’t going to work. What WILL? A real retirement plan. And it will absolutely pay better.

So yeah, scrap it. Slowly. Find a way to compel investment in a plan. Because people will always be reckless and do nothing.

Just ask the 40%.

 

[22AcaciaAve]

You could scrap SS, but scrapping it would require grandfathering people who have paid into it, and then people would have to continue to pay into it without getting anything back until it ended. Or, the government would have to cover the back end until everyone grandfathered was dead. And that would still be taxpayer money covering it. And then you still have the same problem that caused SS to be created in the first place.

There's no easy solution, and while it sounds good to say everyone should be free to invest all of there money the way they see fit, it really doesn't work. Some will plan and save for retirement and others will totally fail to plan for what happens when they can no longer work. Since society is not likely to just tell those people to live under a bridge, the government, meaning the tax payers, will end up supporting them one way or the other. Economic historians have actually said SS saved the government a lot of money over what the alternative would have been.

And besides that, killing SS is absolute political suicide. It hasn't been called the third rail of politics over the last several decades for nothing.

 

[PeoplesElbow]

Something like 40% of Americans depend on SS as their ONLY retirement. Another portion it is a huge piece of it. So on the surface - that IS what it is. For them, that’s reality. Doesn’t matter how the money is handled.

Every working man, woman and - well - they ALREADY have 15% of their income taken. Sort of. Everyone is ALREADY paying into that plan. Call it SS. Call it another tax. Call it silly accounting legerdemain. It functions as a retirement plan. And it WORKED as long as there were a LOT MORE paying in than being paid.

But NOW - it isn’t going to work. What WILL? A real retirement plan. And it will absolutely pay better.

So yeah, scrap it. Slowly. Find a way to compel investment in a plan. Because people will always be reckless and do nothing.

Just ask the 40%.

Having been financially responsible their entire lives my mom could live entirely off social security. Dad was a machinist, didn't make a ton, always drove shitty cars, we never went out to eat much, and I was told "thats too expensive" and "you don't need that", but I was never without something, often times I would get what I wanted for Christmas so I just had to wait. House paid off in 11 years, never had a car payment etc. The one bad financial move my dad made was buying whole life insurance instead of term.

 

[Sneakers]

Having been financially responsible their entire lives my mom could live entirely off social security.

My parents were the same way. They didn't make a lot, but we had everything we needed and were treated well at birthdays and Christmas. They retired very comfortably.

I've done the same. Now that I'm retired, the SS money is just for toys. I wouldn't really miss it if it disappeared, but like PE said, I've paid into it since I was 16 and sure as hell not like to have it taken away now. With a lackluster job market (people not choosing to work), the amount of cash flow into SS is diminished. Young people need to be a lot more pro-active in money management and savings if SS is going to fold. Personal responsibility for your future.

 

[Merlin99]

As other's have already pointed out, there is no lockbox. (I'm not even sure what that would mean in this context. It seems like little more than a disingenuous buzzword thrown around for political purposes.) And sense a significant portion of the federal debt is money owed to the Social Security Trust Funds, and Social Security represents a huge portion of federal spending and taxation, it makes sense to report that debt both inclusive of and exclusive of the money owed by the general treasury to the Social Security program. The same goes for reporting of annual federal deficits; it makes sense to report them both accounting for and not accounting for the net transfers between the general treasury and the Social Security program.

There's long been a lot of innacurate information spread and mistaken assumptions made regarding the way Social Security and Medicare work. Consequently the general understanding of those programs is, based on my experience, pretty poor. So hopefully you won't mind if I offer a broad-strokes explanation of how they actually do (and have) work(ed) when it comes to finances and accounting.

At the very beginning of the Social Security program there was no separate trust fund. Money coming in or going out was lumped in with general treasury funds (though there was tracking of what money was ostensibly owed to the SS program). But that was quickly - as in still in the 30s - changed such that there was a separate trust fund for SS.

Importantly, from the beginning, excess SS funds were required by law to be put into federal securities or otherwise in securities fully backed by the United States. In other words, excess SS money was required to be loaned to the general treasury. (That actually made and continues to make sense. What other option is practical and advisable? We can have that conversation if you want.) Also importantly, the program wasn't conceived as or structured such that it would be one that built up a substantial nest egg. It was a mostly pay-as-you go program that collected tax revenues from certain people and used those funds to pay benefits to certain other people - i.e., a present day wealth transfer program. It wasn't meant to collect and save money for the future, so there wasn't ever going to be a huge pile of cash to be loaned to the general treasury. As recently as the mid-80s the amount saved by the program (and currently loaned to the general treasury) was less than 20% of the amount it paid annually in benefits.

During the Reagan Administration this was changed. We realized the program - even leaving aside the generally problematic nature of the ill-advised program - was going to run into major financial problems because of changing demographics. Bluntly, there would soon be too many older people not working and needing to be supported by too few younger people working. The program was originally designed to support a very small number of retired people with a very large number of working people. The original SS retirement age was greater than the average life expectancy at the time. But people were living longer and, no doubt in part due to the SS program, still expecting to retire at around 65. And at some point the wave of Baby Boomer retirements was going to make the financial realities untenable. The balance between beneficiaries and contributors was going to be too far out of whack.

So, among other changes, we raised tax rates more than was needed to roughly align SS income with expenses so that the fund could build a nest egg. With those changes it would start to matter more that the the program's savings were required to be loaned to the general treasury. (But again, what other option is there?)

Around 2010 non-interest income for the program started falling below expenses, but because its interest income (from the funds loaned to the general treasury) was substantial by that point the size of the Trust Fund continued to increase. Interest made up the difference and then some for about 10 years. But now the program is starting to run a deficit, even accounting for the interest it receives from the general treasury. The $3 trillion or so in the Trust Fund is starting to shrink - hence the impending problem.

This train wreck was set up almost a century ago when the program was first implemented. It could have been more easily avoided, or significantly delayed, if we'd have had the political will to do so a decade or three ago. But we didn't. Very few people want their taxes raised. Very few people want their benefits cut. Very few people want to have to wait longer to start receiving those benefits. And the people who would likely be most negatively impacted by the needed changes tended to vote at higher rates than the rest. So there's been little political will to switch tracks. Now we're just about at the in-the-tunnel-and-can-see-headlights-approaching stage where options are quickly becoming more limited and any escape will be more painful.

On another note, I assume you meant to refer to Medicare rather than Medicaid. That being the case, I'd point out that only Part A of Medicare is funded by FICA taxes. For Parts B and D, to the extent they aren't user-financed, they are funded from the general treasury. In that sense they are little different from other welfare programs.

Thank you,

My parents were the same way. They didn't make a lot, but we had everything we needed and were treated well at birthdays and Christmas. They retired very comfortably.

I've done the same. Now that I'm retired, the SS money is just for toys. I wouldn't really miss it if it disappeared, but like PE said, I've paid into it since I was 16 and sure as hell not like to have it taken away now. With a lackluster job market (people not choosing to work), the amount of cash flow into SS is diminished. Young people need to be a lot more pro-active in money management and savings if SS is going to fold. Personal responsibility for your future.

how about the option of a 40% lump sum payout (40% of what you put in)

 

[Sneakers]

Thank you,

how about the option of a 40% lump sum payout (40% of what you put in)

I'd have to think about that...run the numbers.

 

[Monello]

Having been financially responsible their entire lives my mom could live entirely off social security. Dad was a machinist, didn't make a ton, always drove shitty cars, we never went out to eat much, and I was told "thats too expensive" and "you don't need that", but I was never without something, often times I would get what I wanted for Christmas so I just had to wait.

Sounds like how I grew up. 7 kids with a single bread winner & SAH mom. I didn't go to bed hungry, but I certainly didn't have any weight to spare. Not like now, I have a good bit saved up for a long winter.

 

[Kyle]

I didn't go to bed hungry, but I certainly didn't have any weight to spare.

if it were anything like where I grew up… All the bicycling, climbing, running, jumping, digging, sports, or fighting, helped with that too.

 

[HemiHauler]

Is no one willing to eschew Socialist Insecurity altogether and take control of their own retirement? I grew up in a household where we were taught that the best way to make the government irrelevant in our lives is to do better for ourselves than the government can do for us.

Don’t care one whit if I don’t get back what I’ve “paid in”. All us kids were sent to private schools - not one complaint about the portion of property taxes paid that goes to public school. That is what personal responsibility looks like.

Do better for yourselves than government can do for you — no matter the cost.

I’ll file to suspend as long as I can.

 

[SamSpade]

Is no one willing to eschew Socialist Insecurity altogether and take control of their own retirement?

That's kind of what I've been aiming at, except for one thing - there will always be those who have honestly done not a damned thing to do it, and have had every every opportunity to do so. I've already commented that 40% of people, SS is ALL of it - and another 10 to 20, it's most of it. And I know PLENTY of people who have no retirement; at least one who thinks paying off the house will be enough.

I realize it's a safety net and that encourages people to NOT plan, but it's a pittance. And when people DON'T plan, the misery of that vacuum ends up falling on the state ANYWAY. It's the same reasoning that provides public health care - if you don't compel people, you end up paying for it anyway.

 

[Clem72]

Yup. Why do you think they're trying to kill off all the old people?

If we weren't sending billions to Ukraine and every other corrupt shithole, and paying for every ****ing Mexican's rent and groceries and education, and and and, there would be plenty of money for SS/Med.

But hey, let's all go to the Kennedy Center that we paid for.

If we have to pick one or the other, I choose the Mexicans. I don't like Ukrainian food and Mykola is shet at house framing.

 

[Clem72]

Is no one willing to eschew Socialist Insecurity altogether and take control of their own retirement? I grew up in a household where we were taught that the best way to make the government irrelevant in our lives is to do better for ourselves than the government can do for us.

Don’t care one whit if I don’t get back what I’ve “paid in”. All us kids were sent to private schools - not one complaint about the portion of property taxes paid that goes to public school. That is what personal responsibility looks like.

Do better for yourselves than government can do for you — no matter the cost.

I’ll file to suspend as long as I can.

The problem is two-fold. A not insignificant number of people either won't or can't do it better themselves, and a not insignificant number of people are unwilling to let others die in a ditch (even if those people dug the ditch and setup their tent there).

 

[HemiHauler]

That's kind of what I've been aiming at, except for one thing - there will always be those who have honestly done not a damned thing to do it, and have had every every opportunity to do so. I've already commented that 40% of people, SS is ALL of it - and another 10 to 20, it's most of it. And I know PLENTY of people who have no retirement; at least one who thinks paying off the house will be enough.

I realize it's a safety net and that encourages people to NOT plan, but it's a pittance. And when people DON'T plan, the misery of that vacuum ends up falling on the state ANYWAY. It's the same reasoning that provides public health care - if you don't compel people, you end up paying for it anyway.

And to that end, that’s why I don’t bemoan not filing to receive it. Frankly, my whole working life, I reckoned I’d be means-tested out. Given how close I am to being eligible to receive, I don’t think that will happen at this point.

The problem is two-fold. A not insignificant number of people either won't or can't do it better themselves, and a not insignificant number of people are unwilling to let others die in a ditch (even if those people dug the ditch and setup their tent there).

I’m talking about not taking benefits once you reach the age for distribution; I’m not suggesting there’s a way to opt out of the system. One can file to suspend as long as they want. Once you reach the age of 70 though benefits can decrease so if this is something one is considering, you have until 70 to make that decision.

 

[vraiblonde]

If we have to pick one or the other, I choose the Mexicans. I don't like Ukrainian food and Mykola is shet at house framing.

The beauty of the thing is that you don't have to pick one or the other - you can pick neither. Or in the case of the Democrat run government, both and American citizens who pay for it can GFT.

 

[stgislander]

Speaking of the federal debt. I wonder how Joe and the Dems will spin this.

CBO director informs House Republicans that the US debt situation is dire: sources

Congressional Budget Office director Phillip Swagel told members of the House Republican Study Committee that the $31.4 trillion national debt presented a dire challenge.

www.foxnews.com

 

[Hijinx]

Speaking of the federal debt. I wonder how Joe and the Dems will spin this.

CBO director informs House Republicans that the US debt situation is dire: sources

Congressional Budget Office director Phillip Swagel told members of the House Republican Study Committee that the $31.4 trillion national debt presented a dire challenge.

www.foxnews.com

It's been dire for the last ten years it's about time someone recognized that