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Overdue for Change: Social Security at Age 87


Muda69
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https://www.cato.org/blog/overdue-change-social-security-age-87

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This past Sunday, Social Security – the single largest federal government program – turned 87 years old. The world has changed, but this massive federal program has not kept up with the times. Change is overdue.

When President Franklin D. Roosevelt signed Social Security into law on August 14, 1935, he referred to it as “a law which will give some measure of protection to the average citizen and to his family…against poverty‐ridden old age.” From a modest income support program, targeted toward individuals who lived beyond the age of life expectancy, Social Security now redistributes more than $1 trillion annually from working Americans toward those in retirement, despite the much greater wealth owned by retirees. And the program’s annual spending is projected to double to nearly $2 trillion over the next decade.

 

 

It will come as no surprise to anyone paying even the slightest bit of attention to how government works, that even modestly conceived programs tend to bloat far beyond their intended purpose. And as one of the longest running federal programs, Social Security has had plenty of time to transform from an old‐age poverty program to a politically convenient entitlement. Congress should not delay on making the following commonsense changes:

Increase the Social Security eligibility age

Over Social Security’s lifespan, life expectancy at birth in the United States has increased by nearly 20 years. Yet, Social Security’s full retirement age has increased by only two years (from 65 to 67—to be fully phased in by 2027), and the early retirement age has not budged at all – despite significant improvements in health and lifespan. By encouraging individuals to retire sooner than they otherwise would, Social Security reduces labor force participation, which suppresses growth.

Congress should raise the early and full Social Security eligibility ages by 3 years each (to 65 and 70) and index both to increases in longevity. These are both small and common‐sense reforms that preserve the original goals of the Social Security system and reduce its burden on current and future taxpayers.

Focus old‐age income support on those with limited means

Social Security provides income support to older Americans, regardless of need. This makes Social Security an entitlement program, rather than an old‐age poverty program. The median net worth of working Americans aged 35–44 was $91,300 in 2019, based on the Fed’s latest Survey of Consumer Finances. Meanwhile median net worth among those 65 and older was nearly three times that. To the extent that the government provides income subsidies to retirees, it should focus them on those retirees with limited means to support themselves.

Congress should means‐test Social Security, returning to the program’s stated purpose of antipoverty protection in old age.

Reduce Social Security’s drag on the economy and budget

Contrary to wishful popular opinion, the Social Security trust fund is a liability, not an asset.

The $2.8 trillion in IOUs designated for the Social Security trust fund are part of the $30.7 trillion gross national debt (so‐called intergovernmental debt). Congress immediately spent any surpluses the IRS collected (including from payroll taxes on workers’ wages) and deferred the cost of paying for Social Security to future taxpayers. Intergovernmental debt is quite the misnomer in this context. We’re really talking about intergenerational debt, since it is current and future taxpayers who are on the hook for present government spending, including any debts government agencies incurred between each other (such as spending the taxes intended for Social Security on other government programs).

The trust fund is a legal accounting entity that holds no real economic assets. It only matters because there is a statutory provision that Social Security can continue running cash‐flow deficits for as long as the trust fund accounting mechanism tracks a positive value.

It makes sense then to disregard the so‐called trust fund and any interest it accrues, and only consider Social Security’s current cash in‐ and outflows to understand the program’s drag on the economy and the federal budget. By that accounting, Social Security spent $1001.9 billion in 2021, while collecting $875.4 billion ($838.2 billion from payroll taxes and $37.2 billion from taxes on benefits), for a 2021 Social Security deficit of $126.5 billion. Covering this Social Security cash‐flow deficit added to the U.S. publicly held debt.

Congress should reduce Social Security spending by making the programmatic reforms specified above as well as other immediate tweaks such as indexing the program’s cost‐of‐living benefit adjustments based on the chained CPI.

Social Security makes up the largest portion of current federal outlays and will continue to grow as more eligible individuals retire and live longer in retirement. Congress needs to grapple with how Social Security benefits are structured and reform the program if it is to meet its original intent without unduly undermining workers’ prosperity and growth in the economy. The longer Congress delays, the more costly the adjustments lawmakers will need to make, and the less time and resources American workers will have to prepare, by saving and investing to best meet their own needs, now and in their old age.

 

 

Basically the Boomers are bankrupting the country, and they hold a huge percentage of the wealth.  I guess it's ok for their children and grandchildren to pay for their largesse.

 

Edited by Muda69
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23 minutes ago, Muda69 said:

Increase the Social Security eligibility age

23 minutes ago, Muda69 said:

Focus old‐age income support on those with limited means

24 minutes ago, Muda69 said:

Reduce Social Security’s drag on the economy and budget

 

All of these proposals are terrible. 

Better idea- eliminate the cap on FICA. 

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26 minutes ago, DanteEstonia said:

 

All of these proposals are terrible. 

Better idea- eliminate the cap on FICA. 

Best idea -eliminate social security altogether.

 

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49 minutes ago, DanteEstonia said:

Considering the economic turmoil that the USA has had in the last 20 years, how about we don't.

An economic turmoil partially created by Social Security.

BTW I and my family have done pretty well economically over the past 20 years. I have zero complaints.  How about you?

 

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On 8/20/2022 at 11:46 PM, DanteEstonia said:

Lol wut?

https://fee.org/articles/the-coming-financial-collapse-of-social-security/

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...

The long term financial crisis of Social Security is not the only problem justifying the abolition of the system. The program’s payroll taxes are now so high that even if all the promised benefits are somehow paid, these benefits would still represent low, below-market returns, on the thousands of dollars today’s young workers must pay into the system each year for their entire careers. For most young workers the benefits would represent a real rate of return of around 1 percent or less, and to many the return would be close to zero, or even below zero. These workers could now receive much higher returns and benefits investing through the private sector. Average-income workers could accumulate over half a million dollars in today’s terms by retirement, and more than a million for two-earner-average-income families, for the same sums now paid into Social Security. This makes the inevitable inability of Social Security to pay even the currently promised inadequate benefits all the more troubling.

The Social Security benefit structure is also rife with inequities, paying some workers much less in returns on their tax dollars than others. Indeed, many workers are forced to pay for benefits under Social Security that they can never even qualify for or receive. Most fundamentally, Social Security deprives workers of the freedom to control the large sums they are now paying into the system each year. The long-term financial problems of Social Security should not be allowed to obscure these many other critical problems.

Social Security’s financial problems, as well as the other problems discussed above, can ultimately be solved only by shifting to a fully funded system of private savings and investment. Such a system would avoid the inherent vulnerability of pay-as-you-go financing and accumulate a vast reserve of economically productive private sector assets to back up benefits. Through such a system, young workers could also obtain the much higher returns and benefits now avail-able to them through the private market, in the process accumulating large family nest eggs in their retirement accounts. Workers would also have control and freedom of choice over the large sums they would pay into and accumulate in such a system. The same market returns would be available to everyone, and workers could tailor their benefit packages to suit their personal needs and preferences. They would never have to pay for benefits they did not need or could not even qualify for.

Such private systems have been adopted in recent years in Chile and, in part, in Great Britain, and have been broadly popular in both countries. There is no reason why such a system could not be adopted in the United States as well.

 

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32 minutes ago, Muda69 said:

The program’s payroll taxes are now so high that even if all the promised benefits are somehow paid, these benefits would still represent low, below-market returns, on the thousands of dollars today’s young workers must pay into the system each year for their entire careers.

That's not the point. "Investments" lose money. See 2008 and 2020.

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4 minutes ago, DanteEstonia said:

That's not the point. "Investments" lose money. See 2008 and 2020.

What is the point then, Dante?  You really believe SS will be there in anything resembling it's current form when you grow old enough to received it's "benefits"?   Why can't you take all the FICA money,  stolen from your pocket throughout your lifetime, and invest it yourself as you see fit?

 

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2 minutes ago, Muda69 said:

 Why can't you take all the FICA money,  stolen from your pocket throughout your lifetime, and invest it yourself as you see fit?

No amount of money "invested" will ever cover all needed income through retirement. 

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4 minutes ago, DanteEstonia said:

No amount of money "invested" will ever cover all needed income through retirement. 

Neither will social security, not anymore.  You will probably get back less than what you paid in over your working lifetime.  At least if I have the choice to invest those monies myself I have a chance to maybe close that gap.

So based on your statement how in the world do people ever retire? There are less and less defined pensions plans out there.

 

 

 

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2 hours ago, Muda69 said:

Neither will social security, not anymore.  You will probably get back less than what you paid in over your working lifetime.  At least if I have the choice to invest those monies myself I have a chance to maybe close that gap.

So based on your statement how in the world do people ever retire? There are less and less defined pensions plans out there.

 

 

 

Did you move to South Bend/Trinity?

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10 hours ago, Muda69 said:

So based on your statement how in the world do people ever retire?

IDK, but there are people who have your vision of retirement-

https://www.ktoo.org/2021/10/20/alaska-has-a-teacher-retention-problem-the-state-is-ready-to-pay-someone-to-help-solve-it/

From the article-

Quote

The state’s education department calls the lack of teachers in Alaska an emergency issue and says the pandemic is only making things worse. It’s willing to pay up to $300,000 to figure out how to attract—and keep—more teachers in the state.

Teachers and the union support the move, but they say the number one reason they’re leaving is pretty obvious.

James Harris is Alaska’s 2017 Teacher of the Year, but he doesn’t live or teach in Alaska anymore.

He took his skills and his family to Washington state a few years ago. There were a lot of reasons, he said, but the big one is retirement.

“Unfortunately, the retirement system in Alaska, it was set up in a way that there was just absolutely no way for me to retire with any kind of dignity,” he said.

Harris began teaching in Alaska in 2006, the first year after the state’s Legislature cut teacher pensions known as “defined benefits.” Alaska is the only state in the union that doesn’t offer teachers a pension or social security benefits.

Teacher turnover has hovered above 20% for the last decade. That puts Harris among the one in five teachers that leaves each year.

He said he hoped state leaders would provide funding for education and educators, but eventually decided he couldn’t wait any longer.

Corrine Marks teaches high school English in Juneau and trains teachers-to-be at the University of Alaska Southeast. She also thinks that the loss of defined benefits is the reason behind so many teachers leaving the state.

She has about 30 people in the program right now. Teachers from Alaska are more likely to stay here, but she still sees turnover.

“I’ve had more teachers come and go just here in Juneau, which is an easy place to stay, comparatively, right? Because they have nothing holding them here,” she said.

Marks plans to retire here, so she can collect her pension.

New teachers get retirement benefits in Alaska; they just aren’t pensions. They usually come in the form of contributions to a retirement account. After teaching for five years, Alaska teachers can take those retirement accounts with them if they leave the state.

Union leaders say that leads to “teacher tourism,” where out-of-state teachers have a five-year Alaska adventure and then take their experience home for the rest of their careers — after Alaska has invested in training them.

“I’ve been working on the pensions issue since the state Legislature first ruined it in 2005,” said state Sen. Jesse Kiehl.

He says dropping the pension was a mistake that’s losing the state money and talent. One study estimates Alaska spends $20 million on teacher turnover each year.

He’s supportive of the state’s effort and says the Legislature bears some of the blame for turnover. It’s up to them to fund education, but they haven’t increased funding for more than five years. That puts stress on the whole system.

Kiehl introduced a bill this year that brings back the opportunity for teachers and other public servants that lost pension in 2006, to earn one again. Not a big one, he said, but it’s an incentive to keep families in Alaska.

“By doing away with a pension, we have created a system where the rational economic choice teacher with five years experience is to leave,” he said.

“Is that really the system we want?

So far, it’s the system Alaska’s been choosing. But this year the education department is investing in someone to lead the state towards a solution to the broader problem of attracting and keeping teachers.

“This is not a problem that we can solve by ourselves,” said Michael Johnson, commissioner of the Department of Education and Early Development. “So the department can’t solve it. Not one entity can solve it, not one district, not the Legislature, not the governor. All of us have to work together.”

He agrees pensions and pay are among the biggest issues, but says there’s more than one challenge to teaching in Alaska. Research bears this out. A working group identified six aspects the state should address to attract and keep teaching talent here, things like working conditions and developing leadership.

“The bottom line for me is that we take this report, we take this word from the task force, and then we do something,” said Johnson.

Applications for the job closed on Oct. 15. The state refused to say how many applicants submitted a proposal. The state plans to issue a contract by Nov. 1.

The retirement system used by Alaska is one you champion. Shouldn't it keep and attract people?

And a warning for all the Indiana teachers- you can suffer the same fate as those in Alaska. 

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12 hours ago, DanteEstonia said:

IDK, but there are people who have your vision of retirement-

https://www.ktoo.org/2021/10/20/alaska-has-a-teacher-retention-problem-the-state-is-ready-to-pay-someone-to-help-solve-it/

From the article-

The retirement system used by Alaska is one you champion. Shouldn't it keep and attract people?

And a warning for all the Indiana teachers- you can suffer the same fate as those in Alaska. 

Given that I also champion the entire dissolution of government funded education I don't really care whether or not Alaska government employees have a defined pension or a 401k.

 

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6 minutes ago, Muda69 said:

Given that I also champion the entire dissolution of government funded education I don't really care whether or not Alaska government employees have a defined pension or a 401k.

Yes you do, because your ideas must be proven before they are implemented. If not having Social Security was better, Alaska would have higher teacher retention rates and would not have a shortage of applicants. Instead, the opposite is happening. 

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1 hour ago, DanteEstonia said:

Yes you do, because your ideas must be proven before they are implemented. 

lol,  wish the vast majority of legislation passed by government these days would follow that mantra.

 

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On 8/23/2022 at 7:45 AM, Muda69 said:

lol,  wish the vast majority of legislation passed by government these days would follow that mantra.

 

The status quo is Social Security, and we now have a test case where people could "TAKE CHarGE Of ThEiR retiRemEnt". And Alaska's experiment failed. 

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42 minutes ago, DanteEstonia said:

The status quo is Social Security, and we now have a test case where people could "TAKE CHarGE Of ThEiR retiRemEnt". And Alaska's experiment failed. 

Why do you write that phrase in that matter?

 

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4 minutes ago, Muda69 said:

What does Spongebob Squarepants have to do with individual takings charge of their own retirement?

"Taking charge of [their own] retirement" is something right-wingers have been spouting about for years. 

Read the article about the meme. 

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36 minutes ago, DanteEstonia said:

"Taking charge of [their own] retirement" is something right-wingers have been spouting about for years. 

Read the article about the meme. 

So as a liberal progressive you believe the vast majority of Americans are too stupid to "take charge of their own retirement".  Got it.

 

 

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1 minute ago, Muda69 said:

So as a liberal progressive you believe the vast majority of Americans are too stupid to "take charge of their own retirement".  Got it.

No, the scientist in me has seen what retirement looks like for people without Social Security. If not having Social security was great, Alaska would not have a teacher shortage. 

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